The R10-billion investment by Mercedes-Benz in its East London factory stimulates an entire value chain. This should please government, especially the Department of Trade and Industry, as it speaks to the beneficiation of raw materials in South Africa, including iron ore used for making steel.
Renai Moothilal, executive director of the National Association of Automotive Component and Allied Manufacturers (Naacam), says the Mercedes investment is “excellent news”.Local component manufacturers who have been awarded business for the company’s next generation C-Class vehicles will greatly benefit. Meanwhile, Mercedes will also be transferring technology and skills that add to SA’s competitiveness.
But new US trade tariffs might potentially affect the sale of vehicles made in SA and exported there. Local component manufacturers who export directly to the US are likely to see their products rendered less competitive.
Moothilal suggests that contracts will be lost in future, “which will have a devastating impact not only on those assemblers, but right across the supply chain”.
For now, though, the outlook for SA’s vehicle industry is optimistic, after recent major investments by original equipment makers such as Volkswagen and Toyota.
Moothilal says government’s Automotive Production and Development Programme is playing a valuable role in this respect, but product localisation has not been optimal so far. To this end, the state’s yet to be finalised Automotive Masterplan from 2020 onward needs to address this, while maintaining the business case for vehicle assembly.