Vroom for improvement: car industry on the up, but more markets needed
SA must increase export activities to close the gap, while a government production target presents more problems
The SA motor industry needs new overseas markets but also new foreign investment in local manufacturing if it is to fulfil its potential as a global export hub, says Norman Lamprecht, executive manager of the Automotive Industry Export Council.
He was speaking on Friday at the launch of the council’s 2019 Automotive Export Manual, which showed that the industry’s trade deficit narrowed by more than 7% in 2018 as vehicle and component exports set new records.
For the gap to close completely, however, the industry will have to continuously increase its export activities. The government wants the industry to double annual vehicle production of about 600,000 vehicles to 1.2 million by 2035. With the domestic new-vehicle market expected to show no more than steady growth in the coming years, most of the extra volumes produced will have to find foreign buyers. The SA motor industry already exports more than 50% of its production.
While Lamprecht is confident the industry can meet its goals – “the road is paved with opportunities for growth and development” – he said the existing seven major vehicle manufacturers cannot do it on their own. “We can’t expect each one of them to simply build twice as much as they do now. We need more foreign motor companies to invest in SA production.”
The motor industry’s trade deficit – the value difference between imports and exports – shrank from R43.5bn in 2017 to R40.3bn in 2018. Record exports of R178.8bn were outweighed by imports of R219.1bn.
The latter figure, however, included aftermarket spare parts, many of them brought in by independent importers. Without those, direct international trade involving local motor companies and their component manufacturers showed a R16.8bn surplus, more than 50% better than the previous year’s R10.3bn.
More than two-thirds of industry exports – R127.5bn – came from the shipment of 351,139 cars and commercial vehicles, which was a new record. The value of components exports grew 2% to R51.3bn.The local industry exported products to 155 countries and territories in 2018. They ranged from major destinations such as Germany, the UK and Japan, to low-budget markets such as Malta, Antarctica and the Tokelau islands, a remote group of atolls midway between New Zealand and Hawaii.As usual, Germany – with its major manufacturers Mercedes-Benz, BMW and Volkswagen all producing vehicles in SA – was the biggest trading partner. Total two-way trade of R119bn was slightly in Germany’s favour: SA exported goods worth R57.6bn and imported R61.4bn.Germany alone was almost equal to the next four trading partners: Japan (R30.3bn), Thailand (R25.3bn), the UK (R24.4bn) and the US (R22.1bn). The only one of those with which SA had a trade surplus was the UK, which is the biggest market for SA-made vehicles. In 2018, the industry shipped 119,578 cars and bakkies there.
Brexit uncertainty over the UK’s future relationship with the EU, whose member countries import SA vehicles duty free, is worrying, Lamprecht said. “We have looked at all the scenarios but until something happens, we can’t act. What this demonstrates is the importance of finding new export markets to reduce risk.”
After the UK, the biggest markets for SA vehicles were Japan (44,027), Germany (25,513), France (23,400) and Australia (21,594).
Lamprecht said the motor industry contributed 14.3% of the total value of all SA exports in 2018. Vehicle and component production accounted for 29.9% of total manufacturing output values.