South Africa Automotive Export Manual - Naacam · all the country’s economic sectors. The automotive industry is the biggest contributor to manufacturing output and is one of the

Manual

AutomotiveExport

South Africa

2016

1

AUTOMOTIVE EXPORT MANUAL – 2016 – SOUTH AFRICA PUBLICATION

The Automotive Export Manual – 2016 – South Africa publication is an annual publication produced and compiled by the Automotive Industry Export Council (AIEC) – the recognised source of South African automotive trade data. The 2016 publication, as well as the previous nine publications since 2007, provides a comprehensive guide on the export and import performance of the South African automotive industry under the previous Motor Industry Development Programme (MIDP) and current Automotive Production Development Programme (APDP). The aim of the manual is to identify and report on the major automotive export destinations, the major countries of origin, the main automotive export trade blocs, the most important automotive products being exported and imported, the top growth markets and products as well as the impact of the trade arrangements enjoyed by South Africa on automotive trade patterns.

2

ACKNOWLEDGEMENTS

The information and analysis in this report were produced and compiled by Dr Norman Lamprecht on behalf of the Automotive Industry Export Council. The contributions and assistance by NAAMSA, NAACAM and the Department of Trade and Industry are hereby gratefully acknowledged. The data processing and editing by Dr Alet Tolmay and design and outlay of the publication by Dr Selma Schiller are also acknowledged with appreciation.

AIECP O Box 40611

Arcadia0007

Tel: +27 12 807 0086Fax: +27 12 807 0481

Website: www.aiec.co.za

3

CONTENTS

South Africa – key performance indicators............................................................................................................................ 5

The Automotive Industry Export Council ............................................................................................................................... 7

South African new vehicle market features ........................................................................................................................... 9

South Africa and its automotive clusters ..............................................................................................................................13

Operating environment of the South African automotive industry ...........................................................................18

South Africa’s automotive policy regime ..............................................................................................................................20

Methodology – automotive export and import data ......................................................................................................25

Exports to countries .....................................................................................................................................................................26

Exports to regions .........................................................................................................................................................................31

Exports of vehicles ........................................................................................................................................................................48

Automotive components – exports by country .................................................................................................................51

Automotive components – exports by product ................................................................................................................61

Imports by country of origin .....................................................................................................................................................70

Imports of vehicles .......................................................................................................................................................................72

Automotive parts and components – imports ...................................................................................................................74

Main automotive trading partners .........................................................................................................................................76

The automotive industry’s trade balance .............................................................................................................................80

Potential opportunities via trade and co-operation arrangements ...........................................................................83

South African automotive industry growth prospects ....................................................................................................87

Key motor industry contact details.........................................................................................................................................89

4

ABBREVIATIONS

AGOA African Growth and Opportunity Act

AIEC Automotive Industry Export Council

AIS Automotive Investment Scheme

APDP Automotive Production Development Programme

BLNS Botswana, Lesotho, Namibia and Swaziland

BRICS Brazil, Russia, India, China and South Africa

CBU Completely Built-up

CKD Completely Knocked Down

COMESA Common Market for Eastern and Southern Africa

CPI Consumer Price Index

DTI The Department of Trade and Industry

EAC East African Community

EU European Union

FDI Foreign Direct Investment

FOB Free on Board

FTA Free Trade Agreement

GDP Gross Domestic Product

IDZ Industrial Development Zone

MERCOSUR Mercado Común del Sur – Common Market of South America

MIDP Motor Industry Development Programme

NAACAM National Association of Automotive Component and Allied Manufacturers

NAAMSA National Association of Automobile Manufacturers of South Africa

NAFTA North American Free Trade Area

OEM Original Equipment Manufacturer (Vehicle Manufacturer)

OICA International Organisation of Motor Vehicle Manufacturers

SA South Africa

SACU Southern African Customs Union

SADC Southern African Development Community

SARS South African Revenue Service

WTO World Trade Organisation

5

SOUTH AFRICA – KEY PERFORMANCE INDICATORS

The following table highlights the significant social and economic contribution by the domestic automotive industry in the context of the South African economy for 2015 versus 2014.

Key performance indicators – 2015 vs 2014Indicator Performance

2014 2015

Consumer Price Index (CPI) 6,1% 4,6%

South Africa’s Gross Domestic Product (GDP) R3 797,1 billion R3 991,0 billion

Broader automotive industry contribution to GDP 7,2% 7,5%

Vehicle and component production as % of South Africa’s manufacturing output 30,2% 33,5%

Average monthly employment by vehicle manufacturers 29 715 31 260

Automotive component sector employment 82 790 82 100

Capital expenditure – vehicle manufacturers R6,9 billion R6,6 billion

Capital expenditure – component sector R2,7 billion R2,8 billion

Total South African new vehicle sales 644 259 units 617 749 units

Total South African vehicle production 566 131 units 615 658 units

South Africa’s vehicle production as % of Africa’s vehicle production 68% 64%

South Africa’s global vehicle production ranking 24th 21st

South Africa’s global vehicle production market share 0,63% 0,68%

Vehicle ownership ratio per 1 000 persons 176 180

Total automotive export earnings R115,7 billion R151,5 billion

Automotive export value as % of total South African export value 11,7% 14,6%

Number of export destinations 148 140

Number of export destinations with export values more than doubling year-on-year 25 30

Top automotive country export destination in rand value terms Germany Germany

Total South African vehicle exports 276 936 units 333 802 units

Total value of vehicle exports R70,0 billion R101,9 billion

Top vehicle export destination in volume terms UK UK

Total value of automotive component exports R45,7 billion R49,6 billion

Top automotive export component category in rand value terms Catalytic converters Catalytic converters

Top automotive trading partner in rand value terms Germany Germany

Top automotive trading region in rand value terms EU EU

Top country of origin for total automotive imports in rand value terms Germany Germany

Top country of origin for vehicle imports India IndiaSource: AIEC, Econometrix, NAACAM, NAAMSA/Lightstone Auto, OICA, SARS

South Africa represents a globally integrated market-oriented economy with a Gross Domestic Product (GDP) of R3 991,0 billion, at current prices, in 2015. The manufacturing sector is important to support sustainable growth in the country and it possesses the highest growth and employment multipliers of

6

all the country’s economic sectors. The automotive industry is the biggest contributor to manufacturing output and is one of the most dynamic parts of the segment. The broader automotive industry, through its well-integrated value chain from downstream to upstream activities, contributed 7,5% to the country’s GDP in 2015. The vehicle and automotive component manufacturing industries accounted for 33,5% of the country’s total manufacturing output, while record automotive export earnings of R151,5 billion in 2015, up substantially by 30,9% from the R115,7 billion in 2014, comprised a significant 14,6% of South Africa’s total export earnings.

In contrast to many other industries, South African automotive firms have proven to be resilient against adverse economic conditions due to the high level of integration with domestic component suppliers, a stable policy framework and export diversification. Despite a number of macro-economic headwinds faced in the domestic economy, exports of automotive products constitute the major economic success in the country. In 2015 automotive exports expanded whilst domestic vehicle demand declined by 4,1% on a year-on-year basis. China’s economic slowdown and the associated decline in commodity prices, together with the country’s worst drought in 20 years, will continue to exact a heavy toll on the domestic economy in 2016, and automotive exports will become even more pertinent. The South African automotive industry, however, is well placed geographically to benefit from the growth in Africa and well positioned to gain momentum as the world economy recovers.

For currency comparison purposes, the following table reveals the movements of the rand against the currencies of the South African automotive industry’s main trading partners, namely, the EU, the US and Japan, from 2011 through to 2015.

Currency indices for the rand versus major trading partners (Foreign currency: rand – annual averages)

Currency 2011 2012 2013 2014 2015

Euro 10,08 10,55 12,82 14,40 14,14

Index 2011 100 105 127 143 140

US$ 7,25 8,21 9,65 10,84 12,75

Index 2011 100 113 133 150 176

Japan (100 Yen) 9,12 10,29 9,87 10,26 10,53

Index 2011 100 113 108 113 115Source: South African Reserve Bank

The exchange rate of the rand against the US dollar has depreciated significantly during 2015. Pricing pressures exerted on vehicle manufacturers sourcing products out of Japan and Europe would have been less over the 2015 period than those sourcing products from the US or those financing their imports in US dollars. The South African Reserve Bank (SARB) is responsible for formulating and implementing monetary policy. Its primary objectives are keeping inflation within a targeted range of 3% to 6% and maintaining a stable, competitive currency. CPI for 2015 was 4,6%. The SARB’s Monetary Policy Committee increased the repo rate by a further 25 basis points in November 2015 following a 25 basis points increase in July 2015. This brought the prime lending rate to 9,75% in 2015. The announcement came against the background of expected inflationary pressures due to the lagged effect of the severe drought in the country on food prices and a weakening rand exchange rate.

7

THE AUTOMOTIVE INDUSTRY EXPORT COUNCIL

The Automotive Industry Export Council (AIEC) serves as the umbrella body for the South African automotive industry’s export promotion and development activities and represents an important link between the industry and the Department of Trade and Industry (Dti). The AIEC represents the interests of seven major motor vehicle manufacturers/exporters, namely BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen as well as manufacturers/exporters of trucks and buses, and about 500 automotive component suppliers in South Africa. Importantly, the AIEC is the only means of access available to about 300 small enterprises that are not part of the main stream, in respect of trade enquiries, invitations to events and other service offerings, amongst others. Membership of the AIEC is free.

The AIEC is administered by the NAAMSA offices in Pretoria and the activities and administration are coordinated by the AIEC Board. The AIEC Board of Directors consists of Mr Roger Pitot (Advisor – NAACAM – Chairperson), Mr Nico Vermeulen (Director – NAAMSA), Dr Norman Lamprecht (Executive Manager – NAAMSA) as well as two ex-officio members from the Department of Trade and Industry, Mr Mzwakhe Mbatha and Mr Adriaan Adams.

Mr Roger PitotAdvisor

NAACAM - Chairperson

Dr Norman LamprechtExecutive Manager

NAAMSA

Mr Nico VermeulenDirectorNAAMSA

Mr Mzwakhe MbathaEx-officio MemberDTI

Mr Adriaan AdamsEx-officio Member

DTI

8

One of the AIEC’s key service offerings to stimulate export growth and deepen the export base is to facilitate participation in major automotive events abroad. National Pavilions at international events are regarded as the flagship tool utilised for the promotion of the domestic automotive industry’s world class capabilities. During 2015, financial assistance under the Dti’s Export Marketing and Investment Assistance (EMIA) scheme allowed automotive manufacturing exhibitors to participate in the Automechanika Middle East, United Arab Emirates (UAE) National Pavilion from 2 to 4 June 2015, as well as facilitating participation in the South African National Pavilion at Midest, France which ran from 17 to 20 November 2015.

The automotive National Pavilions approved for the 2016/2017 financial year include the Automechanika Middle East National Pavilion in the UAE from 8 to 10 May 2016 (www.automechanikadubai.com), the Automechanika Frankfurt National Pavilion in Germany from 13 to 17 September 2016 (www.automechanikafrankfurt.com), as well as the South African National Pavilion at Midest, France from 6 to 9 December 2016 (www.midest.com). The South African automotive events in the 2016/2017 financial year include the South African Festival of Motoring from 31 August to 4 September 2016 at the Kyalami Grand Prix Circuit and International Convention Centre, Johannesburg (www. safestivalofmotoring.com) and the South African Automotive Week from 11 to 13 October 2016 at Gallagher Estate, Johannesburg (www.saaw.co.za). More information on the Automotive Industry Export Council can be accessed at www.aiec.co.za.

The industry associations representing and providing a host of services to the manufacturing and retail side of the automotive industry in South Africa include the National Association of Automobile Manufacturers of South Africa (NAAMSA), the National Association of Automotive Component and Allied Manufacturers (NAACAM) and the Retail Motor Industry Organisation (RMI).

NAAMSA represents the collective, non-competitive interests of the new vehicle manufacturing industry in South Africa and comprises 22 companies involved in the production of passenger cars and commercial vehicles which collectively employ over 31 000 people. NAAMSA also represents the interests of a further 21 companies involved in the importation and distribution of new motor vehicles in South Africa. More information on NAAMSA and its activities can be accessed at www.naamsa.co.za.

NAACAM represents the interests of the automotive component manufacturers in the country. The association has 125 members, of which 100 first-tier suppliers, with 220 regional manufacturing sites, in addition to 23 associate members who provide mainly logistics, information technology and financial services to members. Employment in the component sector, including the enterprises not members of NAACAM, comprised 82 100 people in 2015. More information on NAACAM, including the profiles and contact details of the major automotive component suppliers in South Africa, can be accessed at www.naacam.co.za.

The RMI represents the retail motor trade side of the automotive industry, which includes 7 500 members across 14 trade associations that are serviced out of six offices around the country. South Africa had a vehicle parc (number of registered vehicles) of 11,71 million at the end of December, 2015, of which 6,85 million or 58,5% comprised passenger cars. More information on the RMI can be accessed at www.rmi.org.za.

9

SOUTH AFRICAN NEW VEHICLE MARKET FEATURES

South Africa produces a broad range of vehicles, including passenger cars, light commercial vehicles, medium commercial vehicles, heavy commercial vehicles, extra heavy commercial vehicles and buses. The industry in South Africa currently has one of the most competitive trading environments in the world and in 2015 offered no fewer than 55 brands and 2 872 passenger car model derivatives for consumers to select from. This affords car buyers the widest choice to market-size ratio anywhere in the world. Similarly, on the light commercial vehicle side, for the same period, there were 31 brands with 625 model derivatives to choose from. The vehicle-ownership ratio in South Africa is in the order of 180 vehicles per 1 000 persons.

Year-on-year new vehicle sales in South Africa declined for the second successive year in 2015, with a drop of 4,1% in the overall market compared to 2014. Total sales for the year amounted to 617 749 units compared to the 644 259 units retailed in 2014. In 2015 the passenger car segment reflected the biggest decline with a fall of 6,0%, while there was a decrease of 3,2% in sales of trucks and buses. Light commercial vehicles showed a modest increase of 0,5% over 2014. The downturn in domestic new vehicle sales could be attributed to various factors, such as a slowdown in the economy, increases in interest rates, pressure on consumers’ disposable income and inflationary pressures brought on by a deteriorating rand resulting in increasing retail prices above inflation. Sales via dealer networks comprised 79,7% of sales in 2015, while the rental industry was again a major contributor and accounted for 12,5% of total new vehicle sales. The motor industry’s sales-related turnover grew by only 3,6% in 2015, to reach R235 billion for the year. The outlook for 2016 is unfavourable and the underlying negative economic circumstances are likely to suppress demand for new cars and commercial vehicles. The consumer demand-sensitive new car market, which is the most responsive barometer of changes to growth in the economy, is anticipated to decline by around 9% in volume terms. New commercial vehicle sales are expected to perform slightly better with expected declines of between 3% and 5% in volume terms.

Toyota SA Motors has maintained its overall market leadership in 2015 for the thirty-sixth year running, with a market share of 19,9%, followed by Volkswagen Group of SA, Ford Motor Company of Southern Africa and Associated Motor Holdings. The following graph reveals the market shares of the top 10 OEMs or importers in the country in 2015.

Overall new vehicle market share – 2015 Source: NAAMSA/Lightstone Auto

Toyota, 19,9%

VW/Audi, 15,9%

Ford Motor Company, 12,7%

AMH, 9,6%

GM, 9,5%

Nissan, 7,8%

Mercedes-Benz, 5,3%

BMW Group, 3,8% Renault, 3,2%

Honda, 1,8%

Other, 10,5%

10

In 2015, the Toyota Hilux sold 35 684 units and was the top-selling vehicle model range overall in South Africa. The VW Vivo headed the passenger car market, ahead of its Polo stablemate. Light commercial vehicles and more affordable cars dominated South Africa’s new vehicle market in 2015. Nine of 2015’s top 10 selling passenger car and light commercial vehicle models were manufactured locally. The top 10 most popular models sold in 2015 included five locally manufactured light commercial vehicle models, namely the Toyota Hilux, Ford Ranger, Nissan NP200, Chevrolet Utility and the Isuzu KB, and four locally manufactured passenger cars, namely the VW Polo Vivo, VW Polo, Toyota Corolla/Corolla Quest and the Mercedes-Benz C-Class, with the budget Toyota Etios, imported from India, being the only exception.

The popularity of diesel engine models has been increasing steadily over recent years and in 2015, the market share for new diesel passenger car and light commercial vehicle sales accounted for 32,1% of total light vehicle sales, up from 30,8% in 2014. Hybrid petrol and diesel vehicle sales comprised 502 units in 2015 while electric car sales, including the Nissan Leaf, BMW i3 and BMW i8, showed a substantial increase, albeit off a low base, to 79 units in 2015. The following table reveals the split between sales of new petrol and diesel light vehicles in South Africa from 2011 through to 2015.

Petrol versus diesel passenger cars and light commercial vehicles – 2011 to 2015

2011 2012 2013 2014 2015

Diesel cars & diesel light commercials 133 240 156 512 182 833 188 890 188 077

Petrol cars & petrol light commercials 418 389 445 499 435 425 424 049 398 492

Total cars & light commercials 551 629 602 011 618 258 612 939 586 569

Diesel vehicles as % of total 24,2% 26,0% 29,6% 30,8% 32,1%Source: NAAMSA/Lightstone Auto

In contrast to the challenging domestic trading environment, vehicle production remains on a firm footing and substantially higher new vehicle exports should continue to support the industry’s production levels and South Africa’s balance of payments through 2016 and beyond. The following table reveals the number of passenger cars and light commercial vehicles manufactured over the past five years.

Production of passenger cars and light commercial vehicles – 2011 to 2015PASSENGER CARS LIGHT COMMERCIAL VEHICLES

Market Exports as a % of total

Market Exports as a % of total Domestic Exports Total Domestic Export Total

2011 124 736 187 529 312 265 60,1 108 704 84 125 192 829 43,6

2012 120 417 151 659 272 076 55,7 121 638 123 443 245 081 50,4

2013 113 356 151 893 265 249 57,3 127 051 121 345 248 396 48,9

2014 122 610 154 920 277 530 55,8 137 044 118 585 255 629 46,4

2015 112 566 228 459 341 025 67,0 140 310 102 664 242 974 42,3Source: NAAMSA/Lightstone Auto

Total domestic production, largely due to increased vehicle exports, is anticipated to rise by over 4,0% in volume terms, from the 615 658 units produced in 2015, to about 640 000 vehicles in 2016. South Africa exported 56,7% of its light vehicle (passenger cars and light commercial vehicles) production in 2015. The performance of exports will remain a function of the performance and direction of global markets, as well as OEM policies which will continue to support South African vehicle production as long as it remains

11

competitive. Signs are emerging of an improvement in the global economy. Recovering sales in the US and the EU, and continued growth in Asia represent the main drivers behind global sales. Demand for vehicles in African markets, although declining in 2015 mainly due to regulatory changes in some countries, is expected to show above-average growth in future.

Passenger car models manufactured in South Africa in 2015 included the following:

BMW 3-Series 4-door General Motors Chevrolet SparkMercedes-Benz C-Class 4-doorToyota Corolla 4-door new and previous series (designated Quest) and FortunerVolkswagen Polo new and previous series (designated Vivo)

Light commercial vehicle models manufactured in South Africa in 2015 included the following:

Ford Ranger General Motors Chevrolet Utility and Isuzu KBNissan NP200, NP300 HardbodyToyota Hilux and Quantum

Truck and bus volumes at 30 535 units, when seen against the total industry volume of 617 749 units, represent only a small percentage, which nevertheless is vital to the domestic economy, as the bulk of transport in the country is by road. A combination of macro-economic factors, which include a weak exchange rate, pressure of inflation and interest rates, as well as low business confidence levels, contributed to a decline in local truck sales during 2015. The bus market showed the biggest percentage decline when comparing the 1 119 units sold in 2015 to the 1 253 units sold in 2014, which represents a decrease of 10,7%, however, this does not represent a big unit volume. The biggest 2015 loser in volume terms, by 559 units, from 11 017 units in 2014 to 10 458 units in 2015, was the medium truck segment, indicating that small businesses are taking strain. The heavy commercial vehicle market gained a modest 2,8% up from the 5 441 units in 2014 to 5 593 units in 2015, while extra heavy commercial vehicle sales dropped by 3,4% from 13 840 units in 2014 compared to 13 365 units in 2015, declining by 475 units.

With the South African economy predicted to grow by less than 1% during 2016, it is anticipated that the domestic truck market is in for another challenging year. Aspects such as fuel efficiency, uptime, payload productivity and the overall lifecycle costs of trucks are becoming more crucial for cost-conscious fleet owners. New truck and bus exports also declined by 20,5% from the 1 414 units exported in 2014 to exports of 1 124 units in 2015. As the main export region, African markets are experiencing significant distress, especially as oil revenue and commodity prices continue to decline. Notwithstanding this, one of the top priorities for the truck and bus sector is to continue expanding into Africa.

12

The following table reveals the number of medium, heavy, extra heavy commercial vehicles and buses assembled over the past five years.

Assembly of medium and heavy commercial vehicles and buses – 2011 to 2015

MEDIUM AND HEAVY COMMERCIALS

MarketExports as a % of total

Domestic Exports Total

2011 26 656 803 27 459 2,9

2012 27 841 1 076 28 917 3,7

2013 30 924 1 206 32 130 3,8

2014 31 558 1 414 32 972 4,3

2015 30 535 1 124 31 659 3,6Source: NAAMSA/Lightstone Auto

In 2015, the following medium, heavy and extra heavy commercial vehicle companies were represented in South Africa:

Associated Motor Holdings (AMH) BabcockBell Equipment BusmarkFAW Trucks Fiat GroupFord Motor Company FreightlinerFuso GMSA/Isuzu TrucksHino IvecoJMC MANMarcoPolo Mercedes-Benz SANC2 Trucks Southern Africa Peugeot Citroen SAPowerstar Renault TrucksScania TATAToyota Volkswagen Group SA Volvo Group Southern Africa

In 2015, the following bus companies were represented in South Africa:

GMSA/Isuzu Trucks IvecoMAN Mercedes-BenzScania TATAVDL Bus & Coach Volvo Group Southern Africa

Medium and heavy commercial vehicles are regarded as productive assets and essential capital inputs in the economy. Therefore, the level of protection on these vehicles has been set at 20% ad valorem, which is lower than the level on light commercial vehicles and passenger cars which attract an import duty of 25% ad valorem. Assembly operations of trucks and buses are characterised by the duty-free importation of all the drive-line components, which include the engines, transmissions, drive-axles and gearboxes. However, tyres, which are manufactured domestically, attract a 15% import duty.

13

SOUTH AFRICA AND ITS AUTOMOTIVE CLUSTERS

14

South Africa’s established infrastructure and its sophisticated accounting, banking, medical and legal environments leverage the country as the ideal platform for foreign businesses to establish a presence and venture into the rest of Africa. The country is already home to the headquarters of a number of major multi-nationals in the industrial, energy and financial sectors. South Africa has 11 official languages but English is the preferred language of business. The country and its nine very diverse provinces are well positioned to play a leading role in harnessing the full potential of African economies. South African government policies seek, amongst others, to increase the country’s role in regional development and economic integration of the African continent through industrialisation and trade. The country’s increasing manufacturing competencies will increase the diverse export trade with the rest of Africa and the world.

In respect of the South African automotive industry, support exists at two levels. National support, in the form of the APDP and the Automotive Supply Chain Competitiveness Initiative (ASCCI), plays an important role in addressing common industry challenges in the context of the national economy. Focus and support to the industry are provided via mechanisms that are effected at national level, such as duties, tax incentives, competitiveness issues and national engagements, amongst others. Regional support mechanisms, by contrast, offer the opportunity to address the specific needs of the industry residing in specific geographic areas, and have the advantage of leveraging the benefits of geographical proximity.

South Africa’s automotive industry clusters are located mainly in three provinces, namely Gauteng, KwaZulu-Natal and the Eastern Cape, although there has been some migration over provincial borders to other provinces. The provinces vary substantially in size, wealth, geography, ethnicity, population and performance. Per capita GDP is highest in Gauteng and lowest in the Eastern Cape. The OEMs are at the centre of the clusters and, along with their suppliers, are supported across the economic landscape at national, provincial and municipal levels.

Gauteng

Gauteng is South Africa’s economic powerhouse and is regarded as the natural destination for international investors wishing to establish a springboard into Africa. The province is the smallest of the country’s nine provinces but is the country’s financial and industrial economic centre and home to 13,2 million or 24,0% of the country’s population of 54,96 million people. Johannesburg is the provincial capital and the main point of entry for the country, as most overseas visitors enter South Africa through OR Tambo International Airport. Pretoria is the administrative capital of South Africa and houses most of the foreign embassies in the country. The province produces around a third of the national GDP, generates the highest per capita income, and accounts for 40% of South Africa’s manufacturing output, construction activity and financial services. Gauteng houses three OEMs and the highest number of the country’s automotive component suppliers.

The Gauteng Growth and Development Agency (GGDA) is responsible for the promotion of trade and investment and project implementation in the province, and via its two automotive specific subsidiaries, the Automotive Industry Development Centre (AIDC) and the Automotive Supplier Park (ASP), provides support to the automotive industry. The Gauteng Investment Centre (GIC), housed in Sandton and managed by the GGDA, represents a one-stop business services facility to domestic and foreign investors, and provides access to investment services and support from various tiers and agencies of government. The province also hosts various national government departments, the Council for Scientific and Industrial Research (CSIR) - one of the largest scientific and technology, research and development (R&D) and implementation organisations in Africa - as well as the City Deep logistics hub - the premier container depot in the country, the largest inland port in Africa and the fifth-largest in the world.

15

Gauteng – key automotive features – 2015Key automotive features Gauteng

OEMs (manufacturing plants) BMW SANissan SA

Ford Motor Company of Southern Africa

Medium, heavy, extra heavy commercial vehicle and bus companies Associated Motor Holdings (AMH), Babcock, Busmark 2000, Fiat Group, Ford, Freightliner, Fuso, Iveco SA, JMC SA, MAN Truck & Bus, MarcoPolo, NC 2 Trucks Southern Africa, Peugeot Citroen SA, Powerstar SA, Renault Trucks,

Scania, TATA Motors, VDL Bus & Coach and Volvo Group Southern Africa

Number of automotive component companies 200

Motor vehicle parc as % of South Africa’s total vehicle parc of 11,71 million vehicles

38,6%

Passenger car sales as % of total 2015 passenger car sales of 412 670 units

35,3%

LCV sales as % of total 2015 LCV sales of 174 544 units 31,2%

MCV/HCV sales as % of total 2015 MCV/HCV sales of 30 535 units 36,2%

Light vehicle production by OEMs in the province as % of total 2015 light vehicle production of 583 999 units

30,9%

Light vehicle exports by OEMs in the province as % of total 2015 exports of 333 802 units

33,3%

Source: NAACAM, NAAMSA/Lightstone Auto

KwaZulu-Natal

KwaZulu-Natal, with its capital Mzunduzi (Pietermaritzburg) and a population of 10,9 million people, represents the second largest economy in the country after Gauteng, and is one of the country’s most popular holiday destinations. Durban is South Africa’s second-largest city and the country’s busiest port. Richards Bay is South Africa’s busiest bulk port, with at its centre, the Richards Bay Industrial Development Zone (IDZ), a purpose-built and secure industrial estate. The ports of Durban and Richards Bay handle about three-quarters of the country’s tonnage. The province benefits from its diversification efforts across various sectors. Manufacturing – dominated by pulp and paper, chemicals, automotive and food and beverages – is the largest sector in the province, followed by finance, trade, tourism and agriculture. The King Shaka International Airport and the Dube TradePort at La Mercy provide easy access to Durban and also to international markets. The Dube TradePort has been earmarked for the development of a Special Economic Zone (SEZ) and is Africa’s first purpose-built aerotropolis. It is the only facility in Africa that brings together an international airport, a cargo terminal, warehousing, offices, a retail sector, hotels, and an agricultural area. Located 30 km north of Durban, Dube TradePort is positioned between the two biggest sea ports in southern Africa and is linked to the rest of Africa by road and rail. The province, hence enjoys the strategic and competitive advantage of being a global gateway for trade into Africa and to the world.

Trade and Investment KwaZulu-Natal and Tourism KwaZulu-Natal are responsible for promoting trade, investment and tourism in the province, with Durban Investment Promotion Agency (DIPA) concentrating on Durban. These institutions are supplemented by the new Durban KwaZulu-Natal Convention Bureau which has been established to promote both the city and province as top conference destinations in Africa.

16

KwaZulu-Natal – key automotive features – 2015Key automotive features KwaZulu-Natal

OEMs (manufacturing plants) Toyota SA Motors

Medium, heavy, extra heavy commercial vehicle and bus companies Bell Equipment Co SA, Hino, MAN Truck & Bus and Toyota SA Motors



13,5%


12,9%




22,9%


17,1%


Eastern Cape

With its capital Bisho, the Eastern Cape, comprising 6,9 million or 12,6% of the country’s population, is well served logistically with airports situated in Port Elizabeth, East London, Mthatha and Bisho, and with ports situated in Port Elizabeth, Coega and East London. The province has been earmarked as a key growth area for economic development. The automotive sector remains the province’s leading exporter. There has, however, been steady growth in sectors such as agro-processing, energy, and general manufacturing. The allocation of two of South Africa’s five industrial development zones (IDZs) to the province is confirmation of the potential generated by the shipping traffic that operates between Europe, Asia and the Far East. The Coega IDZ is the largest IDZ in the country and is the main catalyst for Eastern-Cape socio-economic development and the gateway to global markets. The East London IDZ, one of the country’s leading specialised industrial parks, is located in Buffalo City, the municipal area which also incorporates Bisho, the province’s capital. The East London IDZ has also established an Automotive Supplier Park. Its location provides investors with connections to major markets, both domestically and across the globe. A new R2 billion state-of-the-art container terminal has been opened at the new port of Ngqura, forming part of the Coega IDZ, near Port Elizabeth.

The Automotive Industry Development Centre (AIDC), the Eastern Cape Development Corporation (ECDC), the Nelson Mandela Bay Metropolitan Municipality and the Cacadu District Municipality are among the several organisations promoting the Eastern Cape as a preferred destination for trade and investment. Three Spatial Development Initiatives (SDIs) – Fish River, Wild Coast and East London/Coega – are also located in the Eastern Cape.

17

Eastern Cape – key automotive features – 2015Key automotive features Eastern Cape

OEMs (manufacturing plants) Volkswagen Group SAMercedes-Benz SA

General Motors Southern AfricaFord Motor Company of Southern Africa engine plant

Medium, heavy, extra heavy commercial vehicle and bus companies FAW Trucks, General Motors/Isuzu, Mercedes-Benz SA and Volkswagen Group SA



6,6%


3,8%




45,9%


48,8%


18

OPERATING ENVIRONMENT OF THE SOUTH AFRICAN AUTOMOTIVE INDUSTRY

Global vehicle production in 2015 rose by 1,1% to reach a record of 90,88 million vehicles, up from the 89,78 million units produced in 2014. Nineteen countries topped the one million mark in 2015, which is regarded as an internationally significant vehicle production level. South African vehicle production increased to a record 615 658 vehicles in 2015, up from the 566 131 units produced in 2014 – a gain of 49 527 vehicles or 8,7%. The country subsequently improved its global ranking to 21st (24th in 2014) in the world with a market share of 0,68%. In respect of LCVs South Africa was ranked 14th with a market share of 1,3% in terms of global LCV production, and in respect of passenger cars the country was ranked 24th with a market share of 0,5% in terms of global passenger car production. With regards to OEMs’ performance globally, Toyota maintained its market leadership position in 2015 ahead of VW and GM. Global vehicle sales increased by 2,0% to 89,68 million vehicles in 2015 compared to the 87,92 million units sold in 2014. South Africa, with 617 749 new vehicles sold in 2015, was ranked 22nd in the world in terms of global vehicle sales with a market share of 0,69%. Despite the decline in the pace of growth in Chinese vehicle production and sales in 2015, at 24,6 million units produced and 24,5 million units sold, China still produced and sold more vehicles than the US and Japan combined. This trend is clearly emphasising the shift from the traditional west to the emerging east in terms of vehicle production and consumption.

It is the norm globally for governments to offer both financial and non-financial support to their automotive industries, with most countries offering a range of support measures to vehicle manufacturers. Governments actively attempt to attract automotive investments via policy and support measures because of the huge investment required to set up a plant, as well as in recognition of the benefits that automotive investments generate in terms of economic growth, employment, fiscal contributions, technology transfer and the multiplier effect on the broader economy. The South African automotive industry has become increasingly integrated into the global automotive environment and is now playing in the international league. The MIDP, implemented in 1995, and its successor, the APDP, implemented in 2013, represent some of the most innovative and successful programmes to retain a domestic vehicle and component manufacturing industry, which has continued to contribute positively to the South African economy and society. In South Africa, the automotive sector is the mainstay of the national industrial base. Accounting for 7,5% of GDP (breakdown – 4,8% manufacturing and 2,7% retail), 33,5% of manufacturing output and 14,6% of all South African exports in 2015, the industry demonstrates what can be accomplished when constructive collaboration between stakeholders takes place.

However, competitiveness remains the biggest challenge for the automotive industry in South Africa. Strong global linkages, along with supplier development and competitiveness improvements, remain critically important to support the sustainable future development of the South African automotive industry. The domestic market is generally not large enough to generate sufficient economies of scale for world-class competitiveness/production, consequently exporting needs to be viewed as a necessary step towards international competitiveness. Competitiveness improvement is the key driver to unlock growth opportunities in the domestic automotive industry, based on the shift towards vehicle manufacturing in low-cost countries. Many of the challenges confronting the South African supplier industry are a reflection of difficult conditions in the global automotive industry, characterised by a relentless focus on cost reductions and efficiency improvements. The only way to address these issues is through the extension of world-class manufacturing standards and improved competitiveness to all suppliers in South Africa.

In this regard, the Automotive Supply Chain Competitiveness Initiative (ASCCI), established in December 2013, has as its ultimate objective to build a successful and sustainable domestic automotive industry by

19

actively developing supply chain competitiveness at a national level. The creation of ASCCI was initiated jointly by the Dti, OEMs (represented by NAAMSA), suppliers (represented by NAACAM), and organised labour (represented by NUMSA) in the industry. ASCCI is an important programme that complements the APDP in supporting this strategic manufacturing sector. Where the APDP is intended to incentivise production and investment in the domestic automotive industry, the purpose of ASCCI is to support the development of a sustainable local value chain by upgrading competitiveness and building greater levels of local value addition. One main objective is to implement the national strategic imperative of sustained and progressive competitiveness improvement, while other key focus areas of the initiative include improving component supplier operational capabilities, increasing levels of localisation and achieving increased levels of manufacturing value addition in the country. The initiative is in support of the APDP’s vision to manufacture around one million vehicles per annum by 2020 and should have a positive impact on employment creation, enabling supplier capabilities and an increase in value addition, thus ensuring the long-term sustainability of the South African automotive industry. ASCCI highlights not only the need for focused interventions, but also the value of co-operation between stakeholders in the industry in making these initiatives a success.

South Africa’s strategic location and the potential of Africa as a future market for exports, as well as the security that the APDP provides for investors, all combine to offer an attractive proposition to global OEMs so that ongoing investments in the country’s vehicle-manufacturing base continue. Furthermore, with OEMs announcing plans to manufacture new models in South Africa, it creates opportunities for multi-national component suppliers to follow these investments. In line with the APDP’s vision of deepening and broadening the component supply base in the country, domestic component manufacturers also stand to benefit and ASCCI may play a role in developing domestic suppliers in areas that involve technologies that are not currently available in the country.

South Africa’s strategic location and the potential of Africa as a

future market for exports, as well as the security that the APDP

provides for investors, all combine to offer an attractive proposition to global OEMs so that ongoing

investments in the country’s vehicle-manufacturing base

continue.

20

SOUTH AFRICA’S AUTOMOTIVE POLICY REGIME

Governments need business to invest in order to realise their economic goals. On the other hand, business needs governments to provide a conducive environment for investment. This requires, inter alia, structured engagements between government and business. The partnership between government and the automotive sector in South Africa has a long and productive history. Certainty and stability in the official policy regime, over the past 20 years, have contributed to a number of noteworthy achievements by the vehicle manufacturing and associated industries, including higher levels of vehicle production and vehicle exports, massive investments by multi-national automotive companies in manufacturing facilities in South Africa, significant model rationalisation, employment stability, and an increasingly positive contribution by the industry to South Africa’s balance of payments.

The APDP underpins the vision that the long-term development of the sector will be best served through significant increases in production volumes and accelerated growth of the domestic component industry. At the same time, enhancing firm-level competitiveness must remain a key objective. The APDP was formulated on the basis of extensive consultation with industry stakeholders and represents a carefully structured set of provisions to support the future growth and development of the industry by balancing the interests of consumers, the broader automotive industry and government’s objectives. The APDP was fully implemented by January 2013 with a view to steer the automotive industry towards producing in excess of one million vehicles per annum by 2020 with the attendant expansion of the domestic supplier base.

Since the development of the original APDP framework in 2008, there have been dramatic changes in the global and domestic economy, raising a concern that there could be limitations in the programme that may lead to failure to achieve the objectives set for the industry. An early review of the programme commenced in 2014 and the recommendations on the outcome of the APDP Review were announced in November 2015. The most notable changes to the programme included that OEMs may qualify for incentives under the programme based on reduced volumes of 10 000 units per plant per annum, instead of the original 50 000 units per annum, as well as a freezing of catalytic converter incentives in 2017, instead of a continuing reduction. The original framework of the APDP will be outlined below, followed by a summary of the key findings and proposals of the 2014 Review.

The APDP consists of four pillars that drive the programme:

1. Import Duty

2. Vehicle Assembly Allowance (VAA) (rebate mechanism)

3. Production Incentive (PI) (rebate mechanism)

4. Automotive Investment Scheme (AIS) (cash grant)

The four key elements of the APDP may be described as follows:

Tariffs: Import duties on vehicles and automotive components will remain at 2012 levels (25% on light vehicles and 20% on original equipment components) through to 2020. A preferential agreement will result in imported vehicles from the EU paying only 18% duty. These tariffs are meant to provide protection to justify continued domestic vehicle manufacturing.

21

Vehicle Assembly Allowance (VAA): This support is in the form of duty-free import credits issued to vehicle manufacturers based on 20% (2013) of the ex-factory vehicle price, reducing to 19% in 2014 and in 2015 to 18% for all light motor vehicles produced domestically. The equivalent value of this to the OEMs is the allowance multiplied by the duty rate. This represented 4% of the ex-factory vehicle price in 2013 to be reduced to 3,6% in 2015. This support is effectively providing a lower duty rate for domestic vehicle manufacturers’ import requirements and should provide enough encouragement for high volume vehicle production in line with the target of doubling domestic production.

Production Incentive (PI): In 2013 this support started at 55% of the designated local value addition, reducing progressively by 1% annually to 50%, in the form of duty-free import credits. The equivalent value will be the incentive multiplied by the component/vehicle duty rate, so this represents 11% (on components) of value-added in 2013, and will reduce to 10% by 2018. There will be an additional amount for “vulnerable products” which will earn a PI of 80% in 2013 and 2014, reducing thereafter by 5% annually to 50% in 2020. Value-added has been defined in simple terms as the manufacturer’s selling price less the value of non-qualifying material and components. For OEM supply, the incentive will flow through the supply chain to the OEM and, in the case of component exports or replacement parts, to the component manufacturer. The value-add support is planned to encourage increasing levels of local value addition along the automotive value chain with positive spin-offs for employment creation. A 25% standard value is regarded as local value-added on the following qualifying raw materials originating in the Southern African Customs Union (SACU) which have been beneficiated to suit automotive specifications:

• Aluminium • Brass• Leather• Platinum Group Metals (PGMs)• Stainless steel• Steel

With regard to vulnerable products, these high material content products will receive additional support to avoid a sudden and significant loss of export business. In this regard, 40% of the standard material(s) listed above and applicable to the following list of products will be regarded as local value-added:

• Alloy wheels • Aluminium products (engine and transmission components, heat exchangers and tubes, suspension

components and heat shields)• Cast iron components (engine/axle/brake/transmission and related types of components)• Catalytic converters• Flexible couplings• Leather interiors• Machined brass components • Steel jacks

The 40% level will be reduced by 5 percentage points per annum from 1 January 2015 to reach 25% from 1 January 2017 onwards.

Automotive Investment Scheme (AIS): The AIS represents the only industry support that is of physical cost to the fiscus in the form of a non-taxable cash grant. The total investment approved since inception of the AIS amounts to R28,5 billion, while the sum total of incentives approved since inception amounts to R7,8 billion. Since inception, 276 projects have been approved under the AIS, creating 11 953 jobs.

Effective July 2009, this investment scheme replaced the Productive Asset Allowance (PAA). The amended AIS guidelines, including the People-Carrier AIS, effective from July 2014, provide clarity on the non-

22

taxability of the grant, as well as on the eligibility of automotive tooling companies to apply for the same benefits as those enjoyed by component manufacturers under the scheme. The AIS provides for a non-taxable cash grant of 20% of the value of qualifying investment in productive assets by light motor vehicle manufacturers, and increased support of 25% of the value of qualifying investment in productive assets by component manufacturers and tooling companies, as approved by the Dti. In addition, by achieving certain performance objectives, companies will be able to earn an additional 5% or 10%. This support is available to encourage investments by OEMs and component manufacturers in a manner that supports productive capacity upgrading. A competitiveness improvement cost grant of 20% of qualifying costs will also be available for automotive component manufacturers. The objective of this benefit is to enhance the competitiveness of component manufacturers through the improvement of processes, products, quality standards and related skills development through the use of business development services. The grant is a function of expenditure incurred by component suppliers to improve competitiveness and must be linked to a new or replacement model of a light vehicle manufacturer.

In February 2014, the Dti commissioned a review of the APDP with a mandate to make recommendations to secure optimal outcomes to the sector and economy whilst retaining long-term policy certainty for investment. The review was aimed at considering the effectiveness of current support measures for the industry, identifying shortcomings and recommending possible changes or enhancements to the programme. The final proposals were arrived at after several interactions with industry stakeholders at various levels, culminating in a consideration by Cabinet. The findings and key proposals may be summarised as follows:

Findings: The 2020 target of producing 1,2 million vehicles per year is unlikely to be achieved due to a variety of reasons, such as the fact that the global economy is still recovering from the effects of the 2008/9 financial crisis. Secondly, it will also be extremely difficult to achieve significant expansion and deepening of the domestic supplier base under the prevailing conditions.

Key proposals: In an effort to sustain and grow the industry whilst steering it towards the APDP vision of high volume vehicle production, the following proposals will be implemented:

a) A post-APDP support framework will be developed during the course of 2016 in order to provide a certain policy environment for automotive manufacturing in South Africa after 2020.

b) The volume threshold for vehicle production will be reduced from 50 000 units to 10 000 units per plant per annum in order to allow new entrants into the domestic industry.

c) The Volume Assembly Allowance (VAA) will be offered on a sliding scale based on volume commencing at 10% for 10 000 units to 18% at 50 000 units from January 2016.

d) A suitable capital incentive (AIS) level will be provided for new entrants at the less than 50 000 per annum threshold.

e) The production incentive for catalytic converters will be frozen at the 2017 level of 65% rather than continue the phase down.

f ) The qualification for component suppliers to earn APDP benefits will be tightened in order to avoid these being earned on non-core automotive products, and priority afforded to those products that add value in the value chain.

g) Lastly, Cabinet has mandated an approach to National Treasury for higher investment support for automotive tooling as a means of encouraging further component localisation. Overall national budget constraints are noted in this context.

Strategic direction: Government remains committed to the further development of the automotive industry in line with the National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP). Long-term development of the sector will be achieved through high vehicle production volumes and associated local value addition.

23

Other policy imperatives: A post-APDP automotive master plan will be developed and will also seek to promote meaningful transformation of the industry through the inclusion of previously excluded groups in the entire automotive value chain. The current situation is characterised by extremely low participation of black persons in the automotive industry. This is prevalent through all parts of the sector’s value chain including distribution, retail and after sales/service. It is government’s view that the levels of support afforded to the industry in South Africa need to be reflected through an appropriately transformed sector.

Implementation plan: The necessary regulatory amendments and administration system for the programme will be set up and will be in line with the need for a strong monitoring and evaluation system, but will not be unduly burdensome to stakeholders.

Amendment Date

Regulatory amendments On or before April 2016

It is recognised that the APDP on its own will not be able to achieve the 2020 vision of the APDP without the support and co-ordination of a number of distinct factors, including the alignment between all stakeholders. NAAMSA compiled a “Roadmap to automotive industry sustainability” which includes and outlines the following building blocks or key strategic interventions, amongst others, needed to deliver on the APDP objectives:

The global nature of the automotive industry requires the profitable and timely delivery of quality products at competitive international prices. Failure to do so will ultimately force multi-national automotive corporations to locate elsewhere. As part of the industry’s Roadmap to 2020, and in support of the APDP vision, industry initiatives and pro-active activities are taking place in many areas to address these challenges. Close collaboration and active participation by all role-players in the industry are of the utmost importance, particularly the Dti, which should champion a number of the building blocks.

The APDP applies to light vehicles (passenger cars and light commercial vehicles) only, although components produced for heavy commercial vehicles also qualify for the Production Incentive (PI). In parallel with the launch of the APDP, other significant developments on other complementary fronts include the design of the Electric Vehicle Roadmap and the medium and heavy commercial vehicle (MCV/HCV) development strategy. The medium and heavy commercial vehicle sector and bus sector have also received increased attention. The rationale behind this is the fact that the MCV/HCV sector is labour intensive in terms of

SUCCESSFUL REALISATION OF 2020 APDP VISION:BUILDING BLOCKS / REQUIREMENTS

APDP VISION 2020: PRODUCTION OF 1 MILLION VEHICLES

Stability in officialautomotive policy

Stable industrialrelations

environment

Progressive, sustainedsupplier competitiveness

improvement

Effectivebeneficiation

strategy

Reductions ininfrastructure,logistics and

other input costs

Market growththrough reviewof vehicle taxes

Introduction ofEuro V fuel

qualityIncentives

for low / zeroemissionvehicles

Support forstrategic sectors Development

finance atpreferential

rates

Preferentialprocurement

24

assembly, while a more active sector could also broaden South Africa’s component manufacturing industry. It is believed that this could be an opportunity for the component sector to grow its base and create additional employment. Recent progress includes the Automotive Investment Scheme (AIS) for this sector which was published in November 2014 and was backdated to April 2014. The intention is to use AIS support to drive the future growth and development of the MCV/HCV sector and to promote additional localisation and employment creation. A number of opportunities are also being exploited to revitalise and grow bus production in the country through the roll-out of the Bus Rapid Transport Systems in the metros and the implementation of the revised state preferential procurement framework.

The intention is to use AIS support to drive the future growth and development

of the MCV/HCV sector and to promote additional

localisation and employment creation.

25

METHODOLOGY – AUTOMOTIVE EXPORT AND IMPORT DATA

The methodology utilised and applied in the 2016 publication remains unchanged from the previous publications in order to enable meaningful comparisons. All values are presented in nominal prices. The trade data in this publication is reflected for South Africa. A significant change in the South African trade statistics, as approved by the Minister of Finance on 14 November 2013, was that South African trade with member countries of the Southern African Customs Union (SACU), comprising of Botswana, Lesotho, Namibia and Swaziland (BLNS), would now be included in South Africa’s trade data to provide a more accurate reflection of the country’s trade. BLNS country trade data had previously not been included in the country’s trade statistics because of the free interchange of goods between member countries from a customs point of view within SACU. The automotive industry’s trade performance has subsequently been revised with BLNS country data, with retrospective effect, where applicable, in the 2014, 2015, as well as in the 2016 publication.

The trade data in the Automotive Export Manual – 2016 – South Africa publication is based on the detailed Customs and Excise statistics for products eligible under the APDP, obtained from the South African Revenue Service (SARS). The Customs and Excise export values reflect free on board (FOB) values in nominal terms. The export values of the latest year (2015) are used to rank the countries in order of priority, from the most to the least important export country destination. The same principle is applied so as to prioritise the export data regarding regions, vehicles and component categories. There are 263 country export destinations listed by SARS. For purposes of relevance, one million rand (R1 million) is used in the Automotive Export Manual – 2016 – South Africa publication as a cut-off level (measure) to determine the top 140 South African export country destinations. For ease of reference and for comparison purposes, the data with respect to the component categories, where applicable, is placed in alphabetical order. Percentages are rounded off.

The main purpose of this publication is to discern and highlight export and import trends, to prioritise export country destinations, to prioritise countries of origin, to identify opportunities via potential growth country and region destinations, to measure the impact of the country’s trade arrangements on automotive trade patterns, as well as to identify growth in products exported to specific country destinations. The publication also serves as a guide to track the export and import performance of the South African automotive industry under the new APDP. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components, therefore certain categories, such as automotive tooling, may contain a small percentage of non-APDP components.

26

EXPORTS TO COUNTRIES

South Africa’s track record as a reliable manufacturer and supplier of high-quality vehicles and automotive components to world markets is well established. Transformation of trade through global value chains is bringing far-reaching change to companies and economies worldwide. From an automotive perspective, the South African automotive industry forms an important part of international supply chains by being increasingly integrated into the global automotive environment. The focus of the domestic automotive industry is to build on existing exports and to escalate the importance of exploring and exploiting new export opportunities. The South African automotive industry’s traditional trading partners have been Europe, Japan and North America, which remain important as they are long-standing relationships that come with technology, knowledge transfer and they offer markets that are not without further possibilities. However, in recent years, Africa and Asia have become important destinations for South African automotive products, as these economies have grown and trade ties have strengthened. The wider geographical exposure also mitigates the impact of domestic or regional cyclical economic conditions by diversifying risk.

The following table reveals that the South African automotive industry is strengthening its global export footprint with the export values to 30 countries more than doubling on a year-on-year basis in 2015. The reach in respect of the number of destinations of total automotive exports (vehicles and automotive components) from South Africa remain high. The number of export destinations, for values in excess of R1 million, reached 140 in 2015, with 24 countries recording export values in excess of R1 billion and 64 countries recording export values in excess of R100 million. First-world markets remain the main destinations for South African vehicles and automotive components. However, diversification into new emerging markets is a continuing trend and underlines the automotive industry’s competitiveness drive and a widening of the country’s traditional trading base. The latter is highlighted by new export destinations appearing in the industry’s export list of countries every year, as well as the specific destinations to which the export values more than doubled on a year-on-year basis. From 2014 to 2015, the total export values more than doubled in the case of 30 countries, which include: Brazil, India, United Arab Emirates, Hong Kong China, Ethiopia, Qatar, Estonia, Ireland, Slovenia, Lebanon, Pakistan, Philippines, Bahrain, Togo, Iceland, Eritrea, Panama, Bolivia, St Helena, Sri Lanka, Nicaragua, Dominican Republic, Cyprus, Guatemala, Belize, Yemen, Bosnia & Herzegovina, Netherlands Antilles, Maldives and Kyrgyzstan.

EXPORTS

27

Total automotive export value and ranking by country – 2014 vs 2015Country 2014

R million2014

Ranking2015

R million2015

Ranking

Germany 21 651,5 1 34 992,1 1

USA 17 145,0 2 20 946,9 2

Belgium 8 157,9 4 13 162,2 3

Namibia 8 322,1 3 9 440,0 4

Japan 6 616,8 5 7 809,5 5

UK 5 497,4 6 7 436,0 6

Australia 3 939,3 8 5 257,1 7

Botswana 4 386,1 7 4 815,7 8

Spain 2 338,0 11 4 073,4 9

France 1 543,5 16 2 696,2 10

Mozambique 2 937,6 9 2 639,2 11

Zambia 2 541,4 10 2 485,3 12

Brazil* 1 091,8 18 2 430,3 13

Zimbabwe 1 959,7 12 2 208,0 14

Thailand 1 025,0 22 1 648,7 15

Kenya 909,4 25 1 451,5 16

India* 561,0 30 1 416,8 17

Canada 1 324,8 17 1 400,2 18

Nigeria 1 766,9 14 1 385,8 19

Swaziland 1 547,6 15 1 280,7 20

United Arab Emirates* 495,7 35 1 203,6 21

Democratic Republic of Congo 1 035,4 21 1 140,4 22

Saudi Arabia 635,8 29 1 139,8 23

Algeria 923,3 24 1 047,2 24

24 COUNTRIES ABOVE R1 BILLION

Argentina 1 056,2 19 990,8 25

Lesotho 823,8 27 960,6 26

Ghana 494,2 36 871,1 27

Hungary 520,4 33 851,9 28

Singapore 1 813,9 13 829,7 29

Czech Republic 864,0 26 783,7 30

Angola 1 047,9 20 700,5 31

Tanzania 531,4 31 653,7 32

Taiwan 522,2 32 611,6 33

Korea Republic South 508,0 34 566,1 34

Turkey 438,6 39 534,1 35

Malawi 448,4 38 530,3 36

Netherlands 936,3 23 515,2 37

Hong Kong, China* 208,1 45 506,4 38

Poland 789,2 28 441,9 39

Mexico 224,6 44 413,9 40

EXPORTS

28

Ethiopia* 101,6 60 389,4 41

Uganda 186,6 48 344,8 42

Sweden 178,7 51 339,7 43

Mauritius 256,8 43 303,7 44

Malaysia 271,1 42 302,5 45

New Zealand 375,2 40 293,0 46

Romania 170,2 53 271,2 47

Gibraltar 182,5 50 270,0 48

Italy 204,1 46 236,0 49

Russia 467,7 37 230,6 50

Qatar* 88,3 64 218,7 51

Portugal 142,5 56 209,0 52

China 354,8 41 208,1 53

Gabon 186,0 49 203,9 54

Kuwait 102,0 59 194,6 55

Austria 173,1 52 188,1 56

Estonia* 73,4 67 179,9 57

Greece 98,4 61 154,5 58

Madagascar 188,3 47 136,7 59

Sudan 78,7 65 133,9 60

Djibouti 67,3 68 132,0 61

Norway 95,1 62 128,6 62

Switzerland 91,0 63 127,6 63

Ireland* 39,3 79 123,9 64

64 COUNTRIES ABOVE R100 MILLION

Ivory Coast 151,4 55 99,0 65

Tunisia 45,0 74 89,7 66

Senegal 60,6 71 87,1 67

Rwanda 63,0 69 79,1 68

Oman 108,5 58 72,9 69

Slovenia* 20,7 93 71,0 70

Lebanon* 25,4 88 68,8 71

Pakistan* 5,5 118 60,4 72

Chile 120,2 57 59,6 73

Philippines* 14,9 97 54,9 74

Finland 31,0 85 52,1 75

Guadeloupe 36,0 82 51,1 76

Republic of Congo 36,8 81 50,2 77

Israel 31,2 84 46,7 78

Cameroon 46,7 73 46,5 79

Bahrain* 11,9 103 42,4 80

Togo* 9,9 107 41,2 81

Mali 42,5 76 40,6 82

Indonesia 42,0 77 39,2 83

EXPORTS

29

Egypt 60,0 72 38,5 84

Iceland* 12,2 102 37,3 85

Eritrea* 4,7 121 35,3 86

Seychelles 37,8 80 33,9 87

Denmark 29,6 87 33,9 88

Burkina Faso 25,0 89 33,7 89

Martinique 23,6 90 33,2 90

Panama* 13,1 101 32,6 91

French Guiana 18,5 95 31,9 92

Reunion 23,4 91 31,2 93

Trinidad & Tobago 32,1 83 30,2 94

Bolivia* - - 26,9 95

Bulgaria 156,2 54 26,5 96

Sierra Leone 61,6 70 24,0 97

St Helena* 8,6 109 21,5 98

Sri Lanka* 6,1 113 20,5 99

Liberia 76,4 66 19,7 100

Guinea 22,8 92 18,8 101

Ecuador 30,0 86 15,5 102

Nicaragua* 0,2 - 14,5 103

Kazakhstan 8,8 108 13,5 104

Benin 10,3 105 12,5 105

Colombia 9,9 106 12,2 106

Dominican Republic* 4,6 124 12,1 107

Mauritania 43,5 75 12,0 108

Cyprus* 4,1 126 9,7 109

Jamaica 7,6 110 9,4 110

Peru 7,5 111 9,2 111

Vietnam Republic 4,6 123 8,8 112

Burundi 13,4 98 8,4 113

Guatemala* 2,0 134 8,4 114

Belize* 1,0 145 7,8 115

Jordan 11,7 104 5,5 116

Barbados 4,4 125 5,2 117

Morocco 13,4 99 4,7 118

Brunei 19,5 94 4,5 119

Fiji 2,1 133 3,9 120

New Caledonia 2,3 131 3,2 121

Central African Republic 5,9 114 3,2 122

Somalia 13,3 100 2,8 123

Equatorial Guinea 5,1 119 2,8 124

Comoros 5,5 117 2,6 125

Yemen* 0,3 - 2,3 126

Bangladesh 1,8 136 2,3 127

EXPORTS

30

Bosnia & Herzegovina* - - 2,2 128

Gambia 2,2 132 1,9 129

Mayotte 1,0 146 1,8 130

Netherlands Antilles* 0,2 - 1,8 131

Maldives* 0,2 - 1,5 132

Iran 1,5 138 1,5 133

Chad 1,2 142 1,4 134

Cape Verde Islands 1,1 144 1,4 135

Honduras 1,8 137 1,3 136

Grenada 1,0 147 1,2 137

Kyrgyzstan* - - 1,1 138

Luxembourg 6,4 112 1,1 139

Niger 3,3 127 1,0 140

140 COUNTRIES ABOVE R1 MILLIONSource: AIEC, SARS*Countries with export values more than doubling year-on-year

EXPORTS

31

EXPORTS TO REGIONS

South Africa is an active member of the World Trade Organisation (WTO) and has strong bilateral ties with a substantial number of the world’s largest economies. The country benefits from a strong network of trade agreements with a number of major partners and blocs, both within the region and further afield. The country continues to seek beneficial trade arrangements with individual countries and trading blocs. In light of the current trade arrangements enjoyed by South Africa, the country is extremely open to many of its largest import partners, in particular from the EU, the domestic automotive industry’s main trading partner. Automotive trade with the EU amounted to R146 billion or 49% of South Africa’s total automotive trade of R297,7 billion in 2015. However, new trade and business links in Africa, Asia, the Middle East, South America and, importantly, the new emerging automotive giants, China and India, both members of BRICS along with South Africa, are being forged. Regional integration is an African priority and South Africa is well positioned to capitalise on opportunities on the continent as Africa is the fastest-growing continent after Asia. Currently, only R34,6 billion or 11,6% of South Africa’s total automotive trade is conducted with partners on the continent. However, Africa is where most opportunities lie, due primarily to demographic pay-offs, technological innovations and energy developments. There are still strategic barriers to greater penetration of South African exporters in the rest of the continent, including infrastructure and trade barriers, but these would be easing over time.

The tables on the following pages reveal the South African automotive industry’s trade patterns with major trading blocs, including the European Union (EU), the North American Free Trade Area (NAFTA), Africa, the Southern African Development Community (SADC) and the Common Market of South America (Mercosur).

EXPORTS

Regional integration is an African priority

and South Africa is well positioned

to capitalise on opportunities on the continent as Africa is the fastest-growing continent after Asia.

32

European Union

Europe remains the South African automotive industry’s most important trading partner, accounting for R67,1 billion or 44,3% of total automotive exports of R151,5 billion and R78,9 billion or 54,0% of total vehicle and automotive component imports of R146,2 billion in 2015. Since the EU also accounts for more than half of the country’s vehicle exports in volume terms, developments in the region have a direct and measurable impact on the domestic automotive industry’s overall performance. The trade framework between South Africa and the EU is well entrenched and will be further enhanced in 2016 with the ratification and implementation of the Economic Partnership Agreement (EPA) between the EU and SADC group.

South Africa’s trade relations with the EU have been governed by the Trade, Development and Co-operation Agreement (TDCA) which became effective on 1 January 2000. The agreement is based on preferential import duty rates for certain products having been deemed to originate in the partner country. South Africa had granted duty-free status to 86% of its EU imports by 1 January 2012, while the EU had provided duty-free status to 95% of South Africa’s exports since 1 January 2010. The automotive part of the TDCA was only concluded on 15 December 2006. As a result, the 3% import duty on original equipment components and the 4,5% duty on aftermarket parts were reduced to duty-free on 15 December 2006, while the 10% import duty on passenger cars was reduced to 3,5% on 15 December 2006, to 1,5% on 1 January 2007 and fell away completely in January 2008. As far as commercial vehicles were concerned, South African commercial vehicle exports to the EU were already duty-free and unaffected by the agreement.

South Africa returned the compliment with a 7% preference to the EU on passenger cars and light commercial vehicles and an 8% preference on medium and heavy commercial vehicles and buses. Original equipment components received no preference, but a large number of aftermarket automotive parts qualified for lower import duties. In order to qualify for zero tariffs into the EU, South African vehicles and components must contain at least 60% local content in respect of the rules of origin. The definition of local content includes South African raw materials, labour, parts, transport, manufacturing costs and profit margins, as well as the value of components and sub-components originally sourced from Europe.

On 15 July 2014, the Southern African Development Community (SADC) and the EU initialled the European Partnership Agreement (EPA), which is a reciprocal trade arrangement, and once ratified, will replace the trade components of the current TDCA which has governed relations between the EU and the Southern African Customs Union (SACU). The six countries making up the Southern African Development Community (SADC) EPA group comprise Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa. In future Angola may join too. Overall the EPA represents a commercial improvement over the TDCA, and will translate into better trade performance. South Africa opted to enter the EPA negotiations in a bid to seek improvements in the TDCA and to further harmonise trade relations within the region as well as further African integration, given that there are also EPA discussions under way with regional blocs in West, East and Central Africa. The new deal preserves coherence within SACU, particularly with regard to maintaining the common external tariff, and improves the country’s access to the EU market.

The following table reveals that total automotive exports (vehicles and components) to the EU amounted to R67,1 billion in 2015, a substantial improvement of R23,3 billion or 53,2% compared to the R43,8 billion export value in 2014. Exports in Euro terms also increased by a significant 55,8% year-on-year. Rising demand by the region’s top five markets, Germany, UK, France, Italy and Spain benefitted vehicle exports to the EU, which increased from 116 077 units in 2014 to 173 796 units in 2015. Exports to the 13 new member countries forming part of the expanded EU comprised R2,64 billion or 3,9% of the R67,1 billion export value in 2015 compared to the R2,6 billion export value in 2014.

EXPORTS

33

Exports to the EU by product category – 2011 to 2015Component 2011 2012 2013 2014 2015

TOTAL (R million) 38 577,4 34 030,7 35 096,2 43 801,2 67 113,9

TOTAL (average Euro million) 3 827,1 3 225,7 2 737,6 3 041,8 4 746,4

Air conditioners 17,7 22,1 22,1 31,2 38,9

Alarm systems 35,0 29,6 39,0 22,2 14,2

Automotive tooling 104,0 160,6 161,5 202,3 229,1

Axles 125,7 92,5 186,6 146,0 195,2

Batteries 35,5 28,7 68,8 103,0 70,2

Body parts / panels 25,8 22,1 30,9 59,4 91,1

Brake parts 37,4 21,7 21,7 33,2 29,3

Car radios 30,0 36,1 0,5 1,1 1,1

Catalytic converters 16 013,7 12 389,9 13 288,6 14 124,0 13 904,5

Clutches / shaft couplings 143,8 140,1 169,8 196,9 221,5

Engines 6,1 16,3 7,5 9,2 75,2

Engine parts 741,0 834,0 1 019,3 1 366,8 1 109,5

Filters 165,3 131,7 157,0 164,3 171,3

Gaskets 29,6 34,2 42,7 41,7 41,3

Gauges / instruments / parts 45,2 42,9 44,7 94,9 62,3

Gear boxes 68,8 14,8 4,5 18,3 4,7

Automotive glass 256,0 210,6 324,9 380,4 307,2

Ignition / starting equipment 22,2 15,4 21,7 35,6 19,5

Jacks 14,2 22,8 10,6 0,9 5,8

Lighting equipment 139,2 131,4 154,7 145,0 136,8

Radiators / parts 642,3 577,3 672,6 690,3 685,4

Road wheels / parts 401,4 251,5 123,7 81,7 121,8

Seats 0,6 0,3 0,5 1,6 3,7

Seat belts 1,1 0,7 0,4 1,3 0,6

Stitched leather seats / parts 2 157,3 1 693,4 1 499,3 1 244,1 916,6

Shock absorbers / suspension parts 373,8 366,5 386,6 388,6 324,6

Silencers / exhausts 1 790,4 1 326,8 839,7 214,3 236,8

Springs 21,5 7,8 7,3 6,3 3,3

Steering wheels / columns / boxes 110,0 123,9 131,8 13,1 11,1

Transmission shafts 230,5 247,0 217,1 286,0 194,1

Tyres 624,3 392,5 274,4 443,6 425,5

Wiring harnesses 61,1 63,9 75,9 94,5 92,0

Other parts 1 423,5 1 250,0 1 240,7 1 472,5 1 983,1

Light vehicles 12 619,2 13 327,2 13 841,6 21 653,5 45 376,1

Medium / Heavy vehicles 64,2 4,4 7,5 33,4 10,5

Source: AIEC, SARS

EXPORTS

34

Top export destinations in the EU with export value – 2015

EXPORTS

35

NAFTA (North American Free Trade Area)

The North American Free Trade Area consists of the USA, Canada and Mexico and represented South Africa’s second largest trading region in 2015. Exports to NAFTA amounted to R22,76 billion or 15,0% of total automotive exports of R151,5 billion in 2015.

South Africa is a beneficiary of the USA’s Generalized System of Preferences (GSP), which was instituted on 1 January 1976 and grants duty-free status to some goods. Since 2001, trade with the US has significantly increased due to the African Growth and Opportunity Act (AGOA), which is an extension of the GSP and allows duty-free access of additional products into the US. The cornerstone of AGOA is the expansion of development and trade with Africa, providing diverse opportunities to grow and integrate the continent into the global economy. South Africa, together with 38 other sub-Saharan African countries, has been designated as eligible countries in terms of the Act. Under AGOA, 98% of South African exports to the US enter the country without tariffs or quotas. A major portion of the country’s exports to the US are manufactured goods, such as vehicles, which have assisted in enhancing manufacturing in South Africa. Duty rates into the US normally range from 2,5% on passenger cars to 25% in respect of commercial vehicles. The effective commencement date of the duty-free access provisions in terms of AGOA was 1 January 2001 to last until 30 September 2008, which was subsequently extended until 30 September 2015.

A 10-year extension to the African Growth and Opportunity Act (AGOA) was passed which was due to expire at the end of September 2015. AGOA had been the foundation of America’s trade relationship with Africa for 15 years. Its renewal for a 10-year period represented the longest-ever extension in the programme’s history. South Africa, however, faced an out-of-cycle review which assessed the country’s continued eligibility under Section 104 (a) of the Act which deals with a beneficiary’s progress towards being a market-based economy with open, rules-based trading and minimal government interference. The out-of-cycle review, owed primarily to concerns over restrictions on American poultry exports as well as health and safety restrictions on other meat products, has subsequently been concluded. South Africa’s AGOA eligibility, along with the eligibility of all other beneficiaries, would remain subject to a yearly review over the 10-year extension period for AGOA to mid-2025. It is important to note that the AGOA legislation has always included an annual eligibility review for beneficiary countries.

There are considerable mutual benefits to be derived from two-way trade in vehicles and components, for both the US and South Africa. Moreover, growing two-way trade contributes positively to sustaining employment in the US supplier and vehicle manufacturing industries, as well as that in South Africa and sub-Saharan African countries. The South African automotive industry is increasingly involved in regional integration and the building of capacity in other African countries. Both the US and countries involved under AGOA have the potential of generating significant economic benefits from trade as AGOA countries continue to develop, modernise and industrialise.

The following table reveals that in 2015, exports to NAFTA, at R22,76 billion, increased by 21,8% compared to the R18,69 billion exported in 2014. Despite the substantial weakening of the rand against the US dollar in 2015, exports to NAFTA in US dollar terms also increased by 3,4%. Vehicle production and sales in NAFTA, dominated by the US, increased by 3% and 6,2% year-on-year, respectively. The domestic automotive industry benefitted from this upward trend and the increase in the export value could mainly be attributed to the increase in light vehicle exports to the US from 42 230 units in 2014 to 48 669 units in 2015. Vehicle exports to the US in 2015 comprised mainly of the left-hand drive BMW 3-series as well as the new generation Mercedes-Benz C-Class models. The 35,4% year-on-year increase in automotive component exports to NAFTA could mainly be attributed to expanded catalytic converter exports to the region.

EXPORTS

36

Exports to NAFTA by product category – 2011 to 2015Component 2011 2012 2013 2014 2015

TOTAL (R million) 20 912,1 20 900,7 19 138,2 18 691,1 22 756,9

TOTAL (average US$ million) 2 884,4 2 545,8 1 983,2 1 724,3 1 784,9

Air conditioners 0,2 0,1 0,1 3,1 6,5

Alarm systems 1,9 2,8 2,9 1,5 3,3


Axles 119,3 80,9 40,6 125,0 80,9

Batteries - 0,3 0,1 0,6 0,1

Body parts / panels 3,0 3,4 1,3 3,4 0,5

Brake parts 1,6 3,7 2,6 2,0 2,6

Catalytic converters 2 263,0 2 416,1 2 399,7 3 241,0 4 355,2


Engines 44,2 13,4 6,5 3,5 15,4

Engine parts 807,0 791,9 675,1 814,7 924,0

Filters 20,1 39,5 25,0 3,5 1,9

Gaskets 1,5 1,9 2,9 6,6 9,8


Gear boxes 31,0 41,4 33,7 49,4 59,6


Ignition / starting equipment 2,9 10,2 4,0 4,1 4,6

Jacks 39,4 34,0 17,3 1,4 1,5


Radiators / parts 199,9 163,4 194,4 248,4 300,3

Road wheels / parts 13,3 5,7 5,5 19,4 48,2

Seats 0,4 4,8 0,1 0,5 0,8

Seat belts 0,3 - - - -

Stitched leather seats / parts 16,0 16,7 16,1 11,2 8,9

Shock absorbers / suspension parts 9,0 22,5 3,6 43,7 57,6

Silencers / exhausts 221,9 257,8 262,2 165,0 179,3

Springs 0,5 0,8 0,4 0,3 0,5

Steering wheels / columns / boxes 27,5 31,7 47,5 14,2 2,9


Tyres 106,7 128,9 58,5 48,4 136,5


Other parts 339,6 736,9 258,9 260,5 598,0

Light vehicles 16 336,9 15 928,8 14 951,1 13 471,2 15 684,9

Medium / Heavy vehicles 116,1 3,4 - 0,7 3,7

Source: AIEC, SARS

EXPORTS

37

Top export destinations in NAFTA with export value – 2015

EXPORTS

38

Africa

Africa remains a priority focus for the South African automotive industry and the continent accounted for R34,1 billion or 22,5% of South Africa’s total automotive exports in 2015, up by R2,5 billion or 7,8% from the R31,6 billion in 2014.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production in Africa grew by 14,0% from 842 368 units in 2014 to 960 527 units in 2015, with the continent’s market share comprising 1,1% of global vehicle production in 2015. South Africa, with 615 658 units, accounted for 64% of Africa’s total vehicle production, while mainly Morocco, with 288 329 units, and Egypt, with 36 000 units, accounted for the balance. Total new vehicle sales in Africa declined by 8,8% from the peak of 1,7 million units recorded in 2014 to 1,55 million units in 2015. New passenger car sales totalled 1,126 million units and commercial vehicle sales 425 000 units. South Africa and northern African countries constituted the main markets. Used car imports are not allowed in South Africa and in northern African countries but comprise the bulk of sales in the rest of the countries on the continent.

Africa’s inadequate infrastructure is one of the main factors inhibiting trade, integration and economic development. Within sub-Saharan Africa there are 15 landlocked countries, with an average distance of 1 000km to the sea. This means that these countries are reliant on infrastructure networks to conduct trade and grow their industries and economies. The current poor state of transport links between African countries continues to stifle trade and expansion opportunities on the continent. In addition, the slowdown in China’s economy and the associated ending of the commodity super cycle are having a major influence on the immediate growth prospects for Africa. However, Africa’s youthful population, rapid urbanisation and vast natural resources continue to make it an attractive destination. The vehicle ownership ratio in Africa at present is only in the order of 44 vehicles per 1 000 persons. Demand for vehicles is highly income elastic and the continent therefore represents huge opportunities in terms of consumption, as the buying power of the African consumer is on the rise and the continent’s middle class is increasing exponentially.

The following table reveals the top 10 new vehicle markets in Africa in 2015 versus 2014.

Top 10 new vehicle markets in Africa – 2014 vs 2015 Countries and 2015 ranking Total new vehicle sales

2014Total new vehicle sales

2015Passenger cars

2015Commercial vehicles

2015

1. South Africa 644 259 617 749 412 670 205 079

2. Egypt 349 100 332 100 258 400 73 700

3. Algeria 246 400 181 400 134 100 47 300

4. Morocco 122 060 131 910 120 875 11 035

5. Libya 45 000 54 100 38 500 15 600

6. Tunisia 50 900 48 500 36 100 12 400

7. Reunion 25 757 27 697 22 288 5 409

8. Nigeria 53 900 26 400 18 800 7 600

9. Kenya 13 500 14 100 2 900 11 200

10. Mauritius 10 600 10 700 6 400 4 300

Total new vehicle sales 1 699 621 1 550 256 1 125 533 424 723Source: NAAMSA/Lightstone Auto, OICA

EXPORTS

39

It is important for the South African automotive industry to forge close links with automotive programmes currently under development in Africa. Strong regional industrial economies would enhance manufacturing opportunities in the relevant countries, providing a platform for intra-regional trade and economic partnerships of mutual benefit. Such industrial partnerships in the automotive industry are the norm rather than the exception, such as in South-East Asia, NAFTA, as well as Mexico and Brazil. It is likely that an Africa automotive industry-wide initiative could emerge in the near future. Such an initiative will make it possible for African countries to supply each other with original equipment components, as well as aftermarket parts and vehicles, while also exporting these to other regions. This should undoubtedly be Africa’s ambition. South Africa, with its know-how and built-for-Africa vehicles is ideally placed to benefit from the increased demand for vehicles, assembly kits and automotive components on the continent. South Africa’s proximity compared to other emerging markets and its understanding of business conditions and practices in other African countries places it in the favourable position of being the ideal partner for assistance in establishing a vehicle assembly operation, in return for some kind of preferential treatment while the component sector is being developed there. The wealth of management experience in the country and understanding of the issues that an African production site entails could ensure the optimising of operations and costs in both countries.

The following table reveals South African automotive exports to the African continent. Annual comparisons should take account of the following – the 2013, 2014 and 2015 total automotive export data to Africa provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to Africa, excluding BLNS country data, increased by 6,3% from the R16,56 billion in 2014 to R17,60 billion in 2015, while total automotive exports, including BLNS country data, increased by 7,8% from the R31,62 billion in 2014 to R34,09 billion in 2015. Although the export values to sub-Saharan countries reflected year-on-year increases, vehicle exports of the domestic industry’s top destinations in Africa, namely to Algeria and Nigeria, reflected a substantial decline due to new vehicle import regulatory changes being implemented on new vehicle imports since 2014. Vehicle exports to 40 African countries declined from 61 839 units in 2014 to 42 594 units in 2015.

EXPORTS

South Africa’s proximity compared to other emerging markets and its understanding of

business conditions and practices in other African countries places it in the favourable position

of being the ideal partner for assistance in establishing a vehicle assembly operation, in return

for some kind of preferential treatment while the component sector is being developed there.

40

Exports to Africa by product category – 2011 to 2015Component 2011 2012 2013* 2014* 2015* 2013** 2014** 2015**

TOTAL (R million)Including BLNS country data

19 997,2** 25 862,2** 30 194,5** 31 621,2** 34 090,2**

TOTAL (R million) Excluding BLNS country data

11 588,9* 17 796,9* 17 887,9* 16 562,5* 17 598,8*

Air conditioners 12,6 18,6 18,1 36,4 23,5 30,1 45,6 42,3

Alarm systems 14,7 21,4 21,6 51,8 45,2 36,6 85,3 77,7

Automotive tooling 99,7 314,8 291,1 283,7 540,3 396,8 442,1 688,6

Axles 20,9 42,9 61,4 57,9 51,3 87,3 87,0 128,3

Batteries 106,3 146,7 166,6 203,7 190,2 209,8 278,3 285,2

Body parts / panels 23,6 80,8 77,6 22,8 38,2 144,9 122,5 126,7

Brake parts 33,6 54,4 70,6 75,4 79,2 145,7 165,9 182,1

Car radios 5,8 9,9 8,2 9,7 7,5 24,2 20,4 22,1

Catalytic converters 63,8 90,2 86,1 88,3 99,5 107,0 104,3 118,3

Clutches / shaft couplings 20,9 31,9 29,6 39,4 36,7 72,5 85,9 95,6

Engines 104,7 194,2 187,3 238,8 333,2 238,8 319,9 443,0

Engine parts 182,5 339,5 334,1 469,1 475,7 585,0 732,4 791,5

Filters 110,4 162,4 154,7 202,5 179,3 207,7 294,5 273,6

Gaskets 33,1 59,1 79,1 83,4 90,4 106,7 114,8 133,7

Gauges / instruments / parts 164,6 210,5 244,7 311,2 358,9 312,8 403,8 480,0

Gear boxes 19,3 31,6 41,2 25,8 35,8 74,3 82,6 79,0

Automotive glass 11,9 13,4 15,7 17,9 17,2 54,6 64,1 73,4

Ignition / starting equipment 61,1 73,3 64,5 105,3 96,6 136,2 192,2 207,1

Jacks 14,3 15,0 24,0 31,7 23,1 26,9 36,3 28,0

Lighting equipment 25,6 34,5 42,6 44,4 47,8 53,8 71,6 89,6

Radiators / parts 22,2 32,4 29,5 26,7 28,8 58,4 59,8 73,5

Road wheels / parts 21,3 70,8 68,3 30,4 36,8 110,3 68,9 82,4

Seats 2,0 3,7 4,3 8,9 8,4 9,7 16,1 18,1

Seat belts 1,5 1,5 1,7 2,5 2,8 4,2 4,9 5,9

Stitched leather seats / parts 10,0 2,4 4,7 7,2 4,3 11,0 17,0 54,1

Shock absorbers / suspension parts 31,7 33,1 33,8 37,3 45,8 58,5 63,9 79,3

Silencers / exhausts 4,6 8,7 5,7 8,3 5,4 15,5 16,6 14,5

Springs 4,7 6,8 10,2 6,8 7,8 16,9 13,4 13,6

Steering wheels / columns / boxes 5,9 11,0 12,1 10,8 11,0 20,1 22,9 23,8

Transmission shafts 219,7 267,2 322,9 426,8 389,6 448,6 573,8 542,7

Tyres 685,6 810,8 725,3 941,8 762,6 1 352,6 1 616,3 1 455,0

Wiring harnesses 2,8 12,3 12,2 17,4 21,5 33,2 159,2 139,4

Other parts 1 768,4 2 517,2 2 846,8 3 385,8 3 204,5 5 325,8 6 384,6 6 273,4

Light vehicles 6 917,7 10 857,2 10 598,9 7 555,5 8 487,9 16 958,1 15 176,8 17 091,8

Medium / Heavy vehicles 761,4 1 216,7 1 192,7 1 697,1 1 812,0 2 719,9 3 677,5 3 856,9Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

EXPORTS

41

Top export destinations in Africa with export value – 2015

EXPORTS

42

Southern African Development Community (SADC)

South Africa’s automotive exports to SADC comprised 80,1% or R27,3 billion of its R34,1 billion automotive exports to the African continent. Contributing factors to the significant trade with the country’s neighbours include the geographical proximity of these markets, which are relatively easily accessible by road or by rail, as well as the establishment of a free trade area within SADC.

South Africa’s participation in SADC, comprising 15 sub-Saharan African countries, allows access to a market of approximately 300 million people and an estimated regional GDP of US$600 billion. SADC operates as a free trade area. The 15 SADC countries include: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. South Africa joined the SADC in August 1994. The SADC Protocol on Trade was signed on 24 August 1996 and came into force on 25 January 2000. Currently, Angola and the Democratic Republic of Congo remain outside the agreement.

The SADC FTA was launched in 2008 when 85% of tariff lines became duty-free. The remaining 15% of tariff lines were deemed sensitive and were accorded a longer liberalisation timeframe up to 2012, except for Mozambique, which would have completed its tariff phase-down with respect to imports from South Africa by 2015. The intention is that the agreement encourages economies of scale, creating competitive SADC-wide industries and thereby increasing intra-regional trade and enhancing foreign investment into the region. By 2012, about 98% of SADC merchandise trade was subject to zero tariffs. The phase-down offers are country-specific on the principle of reciprocity, for example, tariff preferences will be extended only to member states that have submitted their instruments of implementation.

In advancing integration in both SACU and SADC, it is clear that trade integration must be combined with determined efforts to build diversified production capacity in the region. A strong departure point for all member states in SADC to increase trade and value integration would be to address challenges relating to cross-border road transport, including inadequate infrastructure, inefficient regulatory and corridor management systems as well as delays impacting on the cost of products being traded in the region. Potential significant logistics costs savings could be realised with focused cross-border road transport and trade facilitation initiatives that have the potential to reduce delays on regional corridors. A reduction in delays would result in increased trade volumes and earnings per corridor, as well as the improved facilitation of trade, regional integration and economic development. In SADC, the focus currently is on consolidating the achievements of the free trade area, and working to extend African integration through the pursuit of the tripartite FTA including SADC, the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA).

The following table reveals South Africa’s automotive exports to SADC. Annual comparisons should take account of the following – the 2013, 2014 and 2015 total automotive export data to SADC provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to SADC, excluding BLNS country data, increased by only 0,2% from the R10,80 billion in 2014 to R10,83 billion in 2015. Total automotive exports, including BLNS country data, increased by 5,6% from R25,86 billion in 2014 to R27,32 billion in 2015. Several SADC countries have consistently remained amongst the South African automotive industry’s top export destinations over the past two decades, and the increase in export sales of commercial vehicles and aftermarket replacement parts reflects this continuing trend.

EXPORTS

43

Exports to SADC by product category – 2011 to 2015Component 2011 2012 2013* 2014* 2015* 2013** 2014** 2015**


14 331,4** 17 521,8** 21 865,2** 25 860,3** 27 318,0**

TOTAL (R million) Excluding BLNS country data

5 930,9* 9 456,4* 9 558,6* 10 801,4* 10 826,6*

Air conditioners 11,8 16,2 12,0 32,8 19,5 24,0 42,0 38,3

Alarm systems 10,4 14,5 14,5 31,6 32,4 29,5 65,0 64,9

Automotive tooling 68,3 145,3 157,1 201,5 193,7 262,8 359,8 342,0

Axles 19,5 40,8 59,5 37,0 48,8 85,4 66,1 125,8

Batteries 105,2 145,5 164,2 200,8 185,6 207,4 275,4 280,6

Body parts / panels 21,7 74,2 72,7 18,9 34,2 140,0 118,6 122,7

Brake parts 28,3 43,5 56,1 62,3 65,6 131,2 152,9 168,5

Car radios 5,4 6,6 7,6 7,9 6,5 23,6 18,7 21,1

Catalytic converters 57,4 75,6 64,9 72,2 76,1 85,8 88,2 94,9

Clutches / shaft couplings 17,1 25,3 24,0 33,2 32,0 66,9 79,7 90,9

Engines 79,6 161,6 178,2 225,6 325,8 229,7 306,8 435,6

Engine parts 152,8 277,2 277,9 394,5 410,7 528,8 657,8 726,5

Filters 101,4 144,5 137,0 168,4 155,7 190,0 260,3 250,0

Gaskets 26,7 48,1 70,2 73,8 79,2 97,8 105,2 122,5

Gauges / instruments / parts 112,5 159,4 181,9 228,1 279,7 250,0 320,6 400,8

Gear boxes 18,6 28,2 38,0 24,3 31,7 71,1 81,1 74,9

Automotive glass 9,6 10,4 11,9 14,3 13,6 50,8 60,6 69,8

Ignition / starting equipment 55,7 67,0 56,5 93,8 82,2 128,2 180,8 192,7

Jacks 11,1 12,6 19,5 26,3 18,7 22,4 30,9 23,6

Lighting equipment 20,6 26,0 35,6 35,9 40,3 46,8 63,2 82,1

Radiators / parts 18,8 27,9 25,8 22,9 24,9 54,7 56,1 69,6

Road wheels / parts 20,3 66,2 65,8 28,8 32,0 107,8 67,2 77,6

Seats 1,9 3,2 3,6 8,2 6,2 9,0 15,4 15,9

Seat belts 1,4 1,2 1,4 2,1 2,4 3,9 4,6 5,5

Stitched leather seats / parts 1,4 2,2 4,2 5,7 4,1 10,5 15,4 53,9

Shock absorbers / suspension parts 30,8 31,4 31,5 36,0 43,9 56,2 62,7 77,4

Silencers / exhausts 3,9 7,5 5,3 6,0 4,6 15,1 14,2 13,7

Springs 4,5 4,4 8,9 6,0 7,2 15,6 12,6 13,0

Steering wheels / columns / boxes 5,3 9,2 7,8 9,3 9,0 15,8 21,4 21,8

Transmission shafts 153,2 198,5 243,1 360,7 342,4 368,8 507,7 495,5

Tyres 450,5 596,2 555,0 750,4 603,6 1 182,3 1 424,9 1 296,0

Wiring harnesses 2,3 10,8 11,6 16,0 20,7 32,6 157,8 138,6

Other parts 1 438,6 2 093,6 2 386,8 2 808,2 2 705,6 4 865,8 5 807,0 5 774,5

Light vehicles 2 130,0 3 724,1 3 440,0 3 129,0 3 354,6 9 799,2 10 750,3 11 958,5

Medium / Heavy vehicles 734,3 1 157,5 1 128,5 1 628,9 1 533,4 2 655,7 3 609,3 3 578,3Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

EXPORTS

44

Top export destinations in SADC with export value – 2015

EXPORTS

45

Mercosur (Mercado Común del Sur - Common Market of South America)

Mercosur was created by Argentina, Brazil, Paraguay and Uruguay in 2001, with Mexico and Venezuela recently being accepted to join Bolivia and Chile as associate members. Trade with Mercosur remains relatively small in the context of South Africa’s overall trade regime, although Brazil was one of the 30 countries to which South African automotive exports more than doubled on a year-on-year basis, mainly due to increased vehicle exports from 2 348 units in 2014 to 6 443 units in 2015 to the country.

A preferential trade agreement (PTA) between SACU and Mercosur was signed in December 2004. The aim of the agreement was to strengthen existing relations, promote the expansion of trade, and establish the conditions for the creation of a free trade agreement between Mercosur and SACU. The previously concluded “Framework Agreement for the Creation of a Free Trade Area between Mercosur and the Republic of South Africa” provides for actions aimed at increasing trade, including the mutual granting of tariff preferences. The understanding also makes provision for, amongst others, additional protocols on the automotive sector and customs cooperation, as well as further negotiations to broaden and deepen the Agreement, including further exchanges of trade preferences. Discussions are continuing on issues such as the rules of origin, sanitary and phyto-sanitary regulations, customs procedures and additional products. Future negotiations may involve the granting and winning of tariff concessions in respect of automotive products.

In October 2012, the Brazilian government approved by decree a new programme, Inovar-Auto, to encourage vehicle technology innovation. Inovar-Auto fosters industrial competitiveness by encouraging OEMs to produce more efficient, safer, and technologically-advanced vehicles, while promoting the national automotive industry. Inovar-Auto is both a carrot and a stick, with the twin goals of pushing OEMs to manufacture vehicles in Brazil and luring consumers to buy more fuel-efficient vehicles. The programme has introduced large increases in taxation on all cars, especially imports, although manufacturers conforming to a lengthy set of regulations can ensure that their products avoid the charges. Inovar-Auto added a 30% tax to industrial products, except those built in Mexico or the Mercosur countries. Moreover, the increase was in addition to a 30% import duty applicable on vehicles. The 30% tax increase can be negated if a manufacturer complies with a series of targets, each of which earns tax credits. The effect of the programme has been to push OEMs into manufacturing locally. Inovar-Auto has been running since the start of 2013 and is valid until 2017. The tax increase will mostly be felt by those automotive component manufacturers and OEMs without plants in Brazil, or those that only assemble vehicles in the country with a high level of imported parts.

In 2015 Brazil was ranked ninth in the world in terms of global vehicle production. The country dropped two places in the global rankings as production volumes decreased by 22,8% from 3,15 million units produced in 2014 to 2,43 million units produced in 2015 due to the recessionary economic climate in the country. Vehicle production in Argentina also declined by 13,5% from the 617 329 units produced in 2014 to 533 683 units produced in 2015.

The following table reveals that total automotive exports (vehicles and components) to Mercosur consisted of a limited range of products and comprised only R3,48 billion or 2,3% of South Africa’s total automotive exports of R151,5 billion in 2015. Of the total automotive exports to the region in 2015, the bulk was destined for Brazil, accounting for R2,43 billion, and Argentina, accounting for R990,8 million of exports.

EXPORTS

46

Exports to Mercosur by product category – 2011 to 2015Component 2011 2012 2013 2014 2015

TOTAL (R million) 998,8 1 503,2 2 047,0 2 270,6 3 481,7

Air conditioners - 0,1 0,1 0,1 -

Alarm systems 3,9 3,8 2,1 0,5 0,1


Axles 0,3 0,2 0,2 1,5 14,7

Batteries - - - 0,2 0,6

Body parts / panels - 0,9 0,8 5,0 0,5

Brake parts - 1,0 0,5 0,1 0,4

Car radios - - - 0,9 -

Catalytic converters 9,6 129,7 228,1 243,4 174,6


Engines 532,7 248,9 2,7 0,5 -

Engine parts 57,6 216,8 279,6 215,2 232,8

Filters 3,1 2,7 3,8 2,2 1,7

Gaskets 1,3 0,3 1,0 0,5 0,9


Gear boxes - 0,1 0,6 0,1 -


Ignition / starting equipment - 0,1 0,3 0,1 0,1

Jacks 0,7 0,1 - - -


Radiators / parts 52,0 52,7 0,7 0,1 17,4

Road wheels / parts - 56,3 207,9 152,1 92,7

Stitched leather seats / parts 0,1 0,9 0,1 2,1 3,4

Seat belts 0,2 - - 0,1

Seats - - 0,2 0,2

Shock absorbers / suspension parts - 0,1 - 0,2 -

Silencers / exhausts 12,5 12,7 20,4 27,1 14,8

Steering wheels / columns / boxes 5,0 0,8 8,7 0,1 -

Springs 3,9 - 0,2 -


Tyres 221,7 114,8 90,2 14,0 0,6


Other parts 40,7 475,1 1 012,0 540,3 399 2

Light vehicles 1,8 47,1 54,5 939,3 2 427,7

Medium / Heavy vehicles 1,4 - 0,9 0,9 7,2

Source: AIEC, SARS

EXPORTS

47

Top export destinations in Mercosur with export value – 2015

EXPORTS

48

EXPORTS OF VEHICLES

Vehicle exports play a key role in the industry’s strategy going forward under the APDP, with its vision to double vehicle production in the country to around one million vehicles per annum by 2020. The majority of vehicles manufactured in South Africa is exported and in 2015 vehicle exports accounted for 54,2% of total vehicle production, the highest export level recorded to date. Passenger car exports comprised 229 691 units or 68,8%, light commercial vehicles 102 987 units or 30,9% and medium and heavy commercial vehicles and buses 1 124 units or 0,3 % of the record total of 333 802 units exported in 2015. South African manufactured left- and right-hand drive passenger cars and light commercial vehicles were exported to 85 destinations in 2015. The efficiencies required to successfully achieve the level of export penetration into the growing number of export markets have had significant benefits for South African consumers with the affordability of new vehicles having improved significantly over the past decade.

The production of light vehicle models in South Africa has been rationalised significantly under the automotive policy regimes, resulting in a reduction from 42 platforms, 20 years ago to 13 platforms at present. This has contributed to substantially higher volumes per model produced, generating economies of scale benefits. Consequently, the complexity in the component sector has been reduced, although the number of added derivatives for export markets has partially negated the benefits. During 2015, five models achieved production volumes in excess of 40 000 units, of which one model achieved a production volume in excess of 100 000 units. A key challenge that remains in the industry is to raise localisation which would result in benefits such as improved supplier efficiencies, logistics costs savings, avoiding currency volatility, domestic job creation, skills development, and technology transfers. Importantly, the domestically-based OEMs perceive increasing local sourcing and local value addition levels in South African manufactured vehicles as a prerequisite for establishing a more sustainable vehicle production base.

The following table reveals that the UK, followed by the US, Australia and Japan were South Africa’s top destinations for light vehicle exports in 2015. Mercedes-Benz, with its new C-Class model, was the pace-setter in terms of exported vehicles in 2015. Exports to the EU reflected a significant improvement, increasing by a substantial 57 719 units or 49,7% from 116 077 units in 2014 to 173 796 units in 2015, thus exceeding the 100 000 mark for the second successive year. The decline of vehicle exports into Africa could be attributed to the substantial decline in export volumes to the domestic industry’s top destinations in Africa over recent years, namely Algeria and Nigeria, due to new vehicle import regulatory changes, as well as the downturn in the economies of many African countries relating to falling oil and commodity prices.

EXPORTS

The majority of vehicles manufactured in South Africa is

exported and in 2015 vehicle exports accounted for 54,2% of total vehicle production, the highest export level

recorded to date.

49

Top 10 destinations and regions for light vehicles (passenger cars and light commercial vehicles) exported – 2011 to 2015

Country 2011 2012 2013 2014 2015

Total (R billion) 42,3 48,7 57,7 66,3 98,0

Ranking of exportersNumber 1 to Number 5

ToyotaVW

BMWMBSANissan

ToyotaVW

MBSABMWFord

ToyotaBMW

VWMBSAFord

ToyotaBMW

VWFord

MBSA

MBSAVW

BMWToyota

Ford

UK 43 688 41 111 40 763 57 739 101 704

USA 68 948 66 219 63 457 42 230 48 669

Australia 8 612 14 325 14 975 28 346 29 846

Japan 22 475 17 226 24 869 25 097 15 828

France 13 549 11 558 11 461 11 175 14 824

Russia 1 455 6 082 5 158 6 587 9 301

Germany 8 362 7 060 5 121 6 738 8 695

Algeria 24 191 24 281 29 917 15 356 7 886

Brazil - - - 2 348 6 443

Kenya 2 825 3 044 3 504 3 120 4 533

Other 77 549 86 010 75 973 76 786 84 949

EU 98 044 87 620 79 811 116 077 173 796

NAFTA 68 948 66 219 63 457 48 408 53 804

AFRICA 67 442 79 228 77 589 60 189 41 446

Total (units) 271 654 276 916 275 198 275 522 332 678Source: NAAMSA/Lightstone Auto, SARS

EXPORTS

50

Exports of medium and heavy commercial vehicles and buses, in relation to passenger cars and light commercial vehicles, have been relatively insignificant in terms of volumes, although the thousand unit export level was exceeded for the fourth year in a row and this trend is set to continue. The main export destinations for trucks and buses have consistently been South Africa’s neighbouring countries in the SADC region.

Top destinations and regions for medium, heavy commercial vehicles and buses exported – 2011 to 2015

Country 2011 2012 2013 2014 2015

Total (R billion) 1,0 1,3 2,8 3,7 3,9

Ranking of exportersNumber 1 to Number 5

UD TrucksMAN

ScaniaPowerstar

Iveco

UD TrucksScania

MANIveco

VW

MANScania

UD TrucksIveco

GM/Isuzu Trucks

MANScaniaIveco

UD TrucksGM/Isuzu Trucks

MANVolvo Group

ScaniaGMSA/Isuzu Trucks

Iveco

Zimbabwe 316 246 262 315 282

Kenya 105 127 175 191 219

Mozambique 60 145 168 153 213

Tanzania 59 109 214 159 143

Zambia 91 303 174 392 126

Malawi 129 105 107 42 64

Uganda - - - 8 42

Angola 23 25 94 130 20

Mauritius - 2 1 7 7

Saudi Arabia - - - - 4

Other 20 14 3 7 4

EU - - 8 10 -

AFRICA 803 1 063 1 198 1 404 1 116

Total (units) 803 1 076 1 206 1 414 1 124Source: NAAMSA/Lightstone Auto, SARS

EXPORTS

51

AUTOMOTIVE COMPONENTS – EXPORTS BY COUNTRY

The automotive component sector in South Africa consists of multiple sub-sectors, each with different cost drivers, supply chain challenges and key market requirements. In order to penetrate the export market successfully, domestic component suppliers need to be internationally competitive. The first-tier automotive component suppliers in South Africa comprise around 75% foreign-owned multi-national corporations while the domestic companies are represented mostly within the second- and third-tier levels that supply the sub-components to first-tier suppliers which in turn supply to OEMs. The lower-tier national component suppliers are typically smaller companies needing greater assistance from government to become a sustainable and internationally competitive part of the supply chain. Multiple areas of collaboration exist between South African component manufacturers and outside partners for market access, technology transfer, process know-how, joint production or strategic alliance, amongst others.

Contributing factors that supported automotive component exports in 2015 included a weakening rand exchange rate, in particular against the US dollar, year-on-year vehicle production gains in the industry’s top export destinations, the domestic component suppliers’ production flexibility advantages, as well as South Africa’s trade arrangements with the EU, SADC and the US. The following table reveals that the main destinations for automotive component exports remain first-world markets, although emerging markets are starting to feature as important export destinations, indicating progress in the South African component manufacturers’ ability to compete globally. In this regard, significant increases in component exports to Thailand, India and Taiwan are a case in point.

EXPORTS

Multiple areas of collaboration exist between

South African component manufacturers and outside partners for market access,

technology transfer, process know-how, joint production

or strategic alliance, amongst others.

52

Automotive component export value and ranking by country – 2014 vs 2015Country 2014

R million2014

Ranking2015

R million2015

Ranking

Germany 12 486,9 1 13 681,9 1

USA 4 721,0 2 6 518,9 2

Namibia 2 660,9 4 2 790,7 3

UK 2 862,5 3 2 624,1 4

Spain 1 979,6 5 2 226,7 5

Botswana 1 894,5 6 2 017,9 6

Thailand 1 020,5 11 1 638,3 7

India 560,3 18 1 413,5 8

Mozambique 1 611,2 7 1 402,5 9

Zambia 1 526,0 8 1 373,3 10

Zimbabwe 985,8 12 1 084,7 11

Democratic Republic of Congo 922,8 13 1 018,0 12

Argentina 1 054,9 10 902,8 13

Japan 309,7 25 813,9 14

Czech Republic 807,4 15 782,4 15

Korea Republic South 505,6 19 565,5 16

Swaziland 561,2 17 552,0 17

Belgium 1 064,6 9 518,6 18

Turkey 415,3 21 488,2 19

Lesotho 347,1 24 487,5 20

Netherlands 916,0 14 483,3 21

Hungary 367,7 22 480,8 22

Angola 465,5 20 450,6 23

Ghana 164,2 36 443,0 24

Canada 273,8 28 326,7 25

Poland 735,1 16 319,5 26

Australia 301,0 27 312,0 27

France 361,0 23 285,5 28

Tanzania 230,9 30 263,7 29

United Arab Emirates 175,1 35 249,8 30

Mexico 224,3 32 226,9 31

China 303,2 26 204,6 32

Kenya 207,0 34 198,7 33

Malawi 225,1 31 195,8 34

Taiwan 14,4 - 192,5 35

Nigeria 210,8 33 174,0 36

Saudi Arabia 39,5 - 142,9 37

Brazil 232,2 29 127,9 38

Source: AIEC, SARS

EXPORTS

53

The following tables reveal the automotive component export details for the 38 export destinations recording an export value above R100 million or 0,2% of the total automotive component export value of R49,64 billion in 2015.

(1)Country Germany R13 681,9 million

1Catalytic converters

R8 931,8

2Engine parts

R974,4

3Stitched leather seats /

partsR581,2

4Radiators / parts

R430,4

5Shock absorbers / suspension parts

R322,0

6Tyres

R270,5

7Clutches / shaft couplings

R202,0

8Axles

R190,8

9FiltersR131,0

10Transmission shafts /

cranksR120,1

(2)Country USA R6 518,9 million


R4 063,0

2Engine parts

R922,5

3Radiators / parts

R227,9

4Silencers / exhausts

R177,5

5Tyres

R133,5

6Automotive tooling

R116,7

7AxlesR80,8

8Gear boxes

R59,4


R57,6

10Gauges / instruments /

partsR52,2

(3)Country Namibia R2 790,7 million

1Tyres

R261,9

2Engine parts

R152,5

3Automotive tooling

R105,5


partsR79,2

5Batteries

R54,0


cranksR47,8

7Ignition / starting

equipmentR43,1

8Body parts / panels

R39,7

9Engines

R37,3

10FiltersR36,9

(4)Country United Kingdom (UK) R2 624,1 million


R1 787,6


partsR120,9

3Automotive glass

R87,9

4Engine parts

R81,3

5Batteries

R65,6

6Automotive tooling

R42,7

7Air conditioners

R36,8


partsR34,6

9GasketsR17,1


R15,4

EXPORTS

54

(5)Country Spain R2 226,7 million


R1 774,4

2Radiators / parts

R127,9

3Road wheels / parts

R54,9

4TyresR51,3

5Automotive tooling

R37,2

6Automotive glass

R30,2


R21,6

8Lighting equipment /

partsR5,7


partsR1,8


partsR1,6

(6)Country Botswana R2 017,9 million

1Tyres

R269,5

2Engine parts

R124,0

3Wiring harnesses

R112,7


cranksR78,3

5Engines

R64,6

6AxlesR64,5


equipmentR49,6

8FiltersR41,6

9Brake parts

R39,2

10Batteries

R33,2

(7)Country Thailand R1 638,3 million

1Engine parts

R819,6


R407,4


cranksR132,4


R16,0

5TyresR5,0


partsR4,3

7Radiators / parts

R3,5

8Brake parts

R3,5


equipmentR2,8


R1,6

(8)Country India R1 413,5 million

1EnginesR871,3


R259,0


R107,5


R73,5

5Automotive tooling

R30,1

6Radiators / parts

R17,9


12,7


cranksR4,7

9TyresR4,6

10Engine parts

R0,5

(9)Country Mozambique R1 402,5 million

1EnginesR106,2

2Tyres

R103,9

3Batteries

R81,4


cranksR72,0

5Engine parts

R70,0

6Automotive tooling

R55,8


partsR43,2


equipmentR23,1

9AxlesR22,4

10FiltersR21,4

EXPORTS

55

(10) Country Zambia R1 373,3 million

1Tyres

R144,3

2EnginesR126,1

3Engine parts

R107,6


cranksR67,9


partsR54,6

6Batteries

R46,8

7Automotive tooling

R44,0

8FiltersR40,5


equipmentR17,9

10Brake parts

R16,3

(11) Country Zimbabwe R1 084,7 million

1Tyres

R150,9

2FiltersR69,7

3Engine parts

R63,1


cranksR55,9

5Batteries

R32,8


partsR29,2


R22,9


equipmentR22,4

9Automotive tooling

R20,8

10Brake parts

R20,6

(12) Country Democratic Republic of Congo (DRC) R1 018,0 million


cranksR111,7


partsR92,3

3Engine parts

R80,4

4Engines

R44,5

5Automotive tooling

R41,7

6GasketsR23,8


R22,0

8TyresR12,8

9AxlesR12,7


equipmentR10,9

(13) Country Argentina R902,8 million

1Engine parts

R231,1


R174,5


R79,7


cranksR44,6


R4,6

6Automotive tooling

R1,6

7Gaskets

R0,3

8AxlesR0,3


partsR0,2


partsR0,1

(14) Country Japan R813,9 million


R112,7

2TyresR5,3


partsR5,0

4Springs

R4,4

5Engine parts

R3,8


R3,6

7Brake parts

R2,6

8Automotive tooling

R2,6


R1,6

10Wiring harnesses

R0,4

EXPORTS

56

(15) Country Czech Republic R782,4 million


R689,6


R43,3

3Automotive tooling

R15,7

4Radiators / parts

R2,8


partsR0,2

6Alarm systems

R0,1


partsR0,1

- - -

(16) Country Korea Republic South R565,5 million


R504,7


R40,8

3Radiators / parts

R5,3

4Engine parts

R1,3

5Automotive tooling

R1,1

6TyresR0,5


partsR0,1

- - -

(17) Country Swaziland R552,0 million

1Tyres

R133,0

2Engine parts

R26,3

3Brake parts

R22,5


cranksR16,5


equipmentR14,0


R13,1


R11,9

8FiltersR11,1


partsR8,3

10Automotive tooling

R7,6

(18) Country Belgium R518,6 million

1Radiators / parts

R97,1

2Automotive glass

R77,6


cranksR48,9

4Automotive tooling

R40,7

5Engine parts

R32,5

6TyresR26,9

7Brake parts

R23,7

8FiltersR20,3


R13,7


R13,2

(19) Country Turkey R488,2 million


R412,4

2Radiators / parts

R38,9


R15,4


cranksR3,3

5Automotive tooling

R3,3

6Engine parts

R3,1

7Engines

R2,9


R1,2

9Gaskets

R0,9

10Springs

R0,4

EXPORTS

57

(20) Country Lesotho R487,5 million


partsR39,5

2TyresR28,1

3Engine parts

R13,0

4Brake parts

R11,6


cranksR10,4

6Batteries

R7,4

7Automotive tooling

R6,1


R4,9

9FiltersR4,6

10Engines

R4,4

(21) Country Netherlands R483,3 million


R326,3

2TyresR54,2

3Radiators / parts

R19,4


equipmentR8,2


cranksR6,7

6Engine parts

R5,2

7Automotive tooling

R3,5


parts R2,8

9Engines

R2,8

10Alarm systems

R2,4

(22) Country Hungary R480,8 million


R293,3


partsR14,2

3Wiring harnesses

R5,9

4FiltersR0,3


partsR0,2

(23) Country Angola R450,6 million

1Tyres

R121,0

2Engine parts

R49,3


partsR34,6


cranksR14,8

5Automotive tooling

R13,5

6FiltersR10,8

7Engines

R4,2

8Brake parts

R4,2


R3,8

10Batteries

R3,6

(24) Country Ghana R443,0 million

1Automotive tooling

R275,6


partsR20,2

3TyresR18,1


cranksR14,4

5Engine parts

R6,6


equipmentR6,3

7FiltersR5,4

8Alarm systems

R3,0


R2,7

10Brake parts

R2,0

EXPORTS

58

(25) Country Canada R326,7 million


R258,5

2Air conditioners

R3,8

3Steering wheels / columns / boxes

R2,7


partsR2,7

5Wiring harnesses

R2,4

6Engine parts

R1,4

7Brake parts

R1,3


cranksR0,9

9Automotive tooling

R0,9


partsR0,8

(26) Country Poland R319,5 million


partsR140,7


R19,9

3Automotive tooling

R18,0

4Automotive glass

R12,0

5Wiring harnesses

R4,9


R4,0


partsR1,7

8FiltersR0,5


equipmentR0,5

10AxlesR0,1

(27) Country Australia R312,0 million


R39,0


partsR28,2

3Automotive tooling

R19,9


cranksR7,9


R7,3

6Radiators / parts

R5,0

7FiltersR4,9

8Springs

R4,5

9Engine parts

R3,8

10Brake parts

R3,7

(28) Country France R285,5 million


R53,5


R44,4

3Automotive glass

R33,7


partsR18,1

5FiltersR13,5

6Automotive tooling

R13,4

7Engine parts

R11,2


partsR6,5

9Gaskets

R3,5

10Radiators / parts

R3,3

(29) Country Tanzania R263,7 million

1TyresR31,2

2Engine parts

R23,9

3Engines

R21,0


R13,4


partsR13,0


cranksR10,6

7Automotive tooling

R9,9


R6,1

9Batteries

R3,8

10Alarm systems

R3,7

EXPORTS

59

(30) Country United Arab Emirates (UAE) R249,8 million

1Tyres

R109,6


partsR15,2


R13,6


equipmentR12,8

5Engine parts

R11,9

6Automotive tooling

R8,3

7Wiring harnesses

R5,0

8Automotive glass

R3,6

9Brake parts

R2,6


R2,4

(31) Country Mexico R226,9 million

1Radiators / parts

R72,1


R33,8

3Automotive tooling

R23,4


R12,1

5Engines

R4,4

6TyresR2,2


cranksR1,6


R1,4


R0,2

10Springs

R0,1

(32) Country China R204,6 million

1Radiators / parts

R39,5


R25,3


R22,5

4Engine parts

R20,2


R16,4

6Engines

R6,7

7Air conditioners

R5,0


cranksR3,5


R3,3

10Automotive tooling

R2,4

(33) Country Kenya R198,7 million

1TyresR62,0

2Engine parts

R16,3

3Automotive tooling

R15,0


partsR6,7


cranksR5,9

6FiltersR3,9

7Alarm systems

R3,3

8Brake parts

R3,2


partsR2,2


equipmentR2,0

(34) Country Malawi R195,8 million

1TyresR34,1

2Engine parts

R8,5

3Batteries

R8,3

4Brake parts

R4,7


cranksR4,6

6FiltersR4,5

7Engines

R3,0

8Alarm systems

R2,9


equipmentR2,8


R2,5

EXPORTS

60

(35) Country Taiwan R192,5 million

1Automotive tooling

R163,3


R25,3

3Automotive glass

R0,7


R0,7


partsR0,3

6Engine parts

R0,2- - - -

(36) Country Nigeria R174,0 million

1Automotive tooling

R25,1


R12,8


partsR11,9

4TyresR11,6

5Engine parts

R11,1

6FiltersR3,5

7Air conditioners

R2,8

8Alarm systems

R2,4


cranksR2,1

10Gaskets

R1,7

(37) Country Saudi Arabia R142,9 million

1Automotive tooling

R111,8

2TyresR4,9


partsR4,6

4Engine parts

R1,0


cranksR0,7

6FiltersR0,8


R0,7- - -

(38) Country Brazil R127,9 million


cranksR18,4

2Radiators / parts

R17,3

3AxlesR14,4


R12,8


R10,2


partsR7,5

7Automotive tooling

R7,0


R4,0


partsR3,2

10FiltersR1,5

EXPORTS

61

AUTOMOTIVE COMPONENTS – EXPORTS BY PRODUCT

South Africa is strategically located along with other subsidiaries to manufacture certain vehicle models for the global market, which means a domestically manufactured vehicle is identical to vehicles manufactured elsewhere. This implies that domestic automotive component suppliers must be able to deliver technology and quality levels that are on par with those found anywhere else in the world, at comparable cost. A diverse range of original equipment components and aftermarket parts are manufactured in the country. The bulk of the domestically manufactured automotive components is sold as original equipment components to the OEMs or as replacement parts, but automotive components companies are also active in the export market, selling their products into international OEM supply chains.

Employment creation and high-level skills development are vital in South Africa and since the majority of the automotive industry employment is generated in the component sector, higher localisation remains an essential focus. The Dti, through the latest iteration of its Industrial Policy Action Plan (IPAP), highlighted the development of a specific support framework for black industrialists. In terms of IPAP 2015, the Black Industrialists Development Programme will be established over the coming year backed by R1 billion incentive funding from the Dti. It will be aimed at promoting industrialisation, sustainable economic growth, and transformation through the support of black-owned entities in the mainstream of the South African manufacturing industry and related manufacturing sectors. Government envisages this as one of the tools for incentivising supplier development and for facilitating a mutually beneficial relationship between big and small companies. This is aligned with the APDP’s vision to deepen and broaden the automotive component supply base in the country.

The following table reveals the automotive component export ranking by product category from 2011 through to 2015. In 2015, automotive component exports, including sales to the BLNS (Botswana, Lesotho, Namibia and Swaziland) countries, increased by 8,7% to R49,64 billion, from R45,68 billion in 2014. South Africa remains a strategic supplier of catalytic converters to the world and by value this component category maintained its dominant export position under the APDP in 2015, as the focus of exporters tend to be on high-value domestically beneficiated, logistics-friendly automotive components. The significant increase in the exports of engines relates to the EA111 engine for the VW Polo and Polo Vivo and the Duratorq TDCi engine for the Ford Ranger, both linked to export programmes, which are manufactured in South Africa, illustrating the country’s manufacturing capabilities.

EXPORTS

South Africa remains a strategic supplier of catalytic converters to the world and by value this

component category maintained its dominant export position under the APDP in 2015, as the

focus of exporters tend to be on high-value domestically beneficiated, logistics-friendly

automotive components.

62

Automotive component export ranking by product category – 2011 to 2015

COUNTRY 2011 2012 2013 2014 2015% of total

export value

Ranking


42 534 39 883 42 176 45 682 49 641

Catalytic converters 19 639 16 347 17 641 19 493 20 326 40,9% 1

Engine parts 2 058 2 875 3 189 3 732 3 941 7,9% 2

Tyres 1 675 1 522 1 842 2 206 2 193 4,4% 3

Automotive tooling 438 782 777 936 1 459 2,9% 4

Engines 819 559 263 364 1 448 2,9% 5

Radiators / parts 1 118 945 1 117 1 172 1 190 2,4% 6

Transmission shafts / cranks 569 771 926 1 102 1 060 2,1% 7

Stitched leather seats / parts 2 190 1 719 1 530 1 286 993 2,0% 8

Gauges / instruments / parts 319 401 435 640 685 1,4% 9

Silencers / exhausts 2 139 1 730 1 225 504 535 1,1% 10

Shock absorbers / suspension parts 430 440 474 518 480 1,0% 11

Road wheels / parts 494 466 455 367 471 0,9% 12

Filters 312 353 407 475 460 0,9% 13

Clutches / shaft couplings 236 225 310 383 430 0,9% 14

Axles 320 252 335 377 421 0,8% 15

Automotive glass 277 230 386 451 389 0,8% 16

Batteries 143 180 280 383 358 0,7% 17

Body parts / panels 140 146 263 269 301 0,6% 18

Wiring harnesses 78 94 118 264 260 0,5% 19

Ignition / starting equipment 103 109 185 255 257 0,5% 20

Lighting equipment 199 198 248 239 237 0,5% 21

Brake parts 82 97 192 225 230 0,5% 22

Gaskets 69 100 160 176 192 0,4% 23

Gear boxes 69 100 122 153 145 0,3% 24

Alarm systems 61 62 87 125 102 0,2% 25

Air conditioners 36 42 55 94 102 0,2% 26

Steering wheels / columns / boxes 155 182 210 51 39 0,1% 27

Jacks 92 103 57 39 36 0,1% 28

Springs 43 33 31 35 28 0,1% 29

Seats 6 11 13 21 26 0,1% 30

Car radios 39 47 26 25 24 0,1% 31

Seat belts 28 24 8 7 7 - 32

Other parts 4 447 5 722 8 809 9 315 10 816 21,8%

Source: AIEC, SARS

The following tables reveal the top five destinations for the automotive product category exports from South Africa from 2011 through to 2015.

EXPORTS

63

Catalytic converters (1)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 19 638,9 16 347,0 17 640,9 19 492,7 20 325,7

Germany 39% 40% 41% 42% 44%

USA 8% 11% 12% 15% 20%

UK 10% 8% 9% 9% 9%

Spain 7% 6% 7% 6% 9%

Czech Republic 4% 5% 5% 4% 3%

Engine parts (2)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 2 058,0 2 875,1 3 188,7 3 732,4 3 941,4

Germany 15% 21% 24% 20% 25%

USA 39% 28% 21% 22% 23%

Thailand 5% 13% 15% 13% 21%

Argentina 1% 4% 6% 5% 6%

Namibia 3% 3% 4% 3% 4%

Tyres (3)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 1 675,2 1 521,5 1 842,1 2 205,8 2 193,0

Germany 26% 12% 10% 12% 12%

Botswana 10% 10% 11% 11% 12%

Namibia 9% 10% 11% 10% 12%

Zimbabwe 8% 11% 8% 8% 7%

Zambia 6% 10% 8% 8% 7%

Automotive tooling (4)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 438,1 782,0 776,8 935,8 1 458,7

Ghana 2% 1% 2% 1% 19%

Taiwan - - - - 11%

USA 16% 3% 5% 3% 8%

Saudi Arabia - 3% 3% 2% 8%

Namibia 1% 7% 9% 14% 7%

Engines (5)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 819,0 558,9 262,8 363,7 1 447,9

India 2% - 1% - 60%

Zambia 5% 16% 36% 29% 9%

Mozambique 1% 3% 11% 15% 7%

Botswana 5% 7% 11% 15% 4%

Germany - - 1% - 3%

EXPORTS

64

Radiators and parts (6)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 1 117,9 945,2 1 116,7 1 172,1 1 190,2

Germany 21% 47% 24% 12% 36%

USA 17% 19% 15% 17% 19%

Spain 13% 12% 11% 10% 11%

Belgium - - 6% 9% 8%

Mexico 1% 2% 3% 4% 6%

Transmission shafts and cranks (7)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 568,8 770,7 925,6 1 102,1 1 060,0

Thailand 3% 9% 10% 8% 12%

Germany 27% 23% 17% 18% 11%

Democratic Republic of Congo 8% 6% 8% 8% 11%

Botswana 12% 9% 8% 7% 7%

Mozambique 4% 4% 5% 8% 7%

Stitched leather seats and parts (8)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 2 189,7 1 718,7 1 530,4 1 285,9 992,7

Germany 88% 74% 68% 59% 59%

Poland 1% 1% 5% 12% 14%

UK - - - 9% 12%

Romania - - - 2% 6%

Lesotho - - - - 4%

Gauges, instruments and parts (9)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 319,4 401,4 435,1 640,3 685,3


Namibia 5% 5% 8% 7% 12%

Zambia 6% 9% 9% 7% 8%

USA 15% 12% 4% 4% 8%


Silencers and exhausts (10)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 2 138,7 1 729,6 1 225,4 503,8 535,3

USA 8% 14% 15% 32% 33%

Germany 27% 28% 36% 18% 18%

France - 1% 1% 4% 8%

Czech Republic 1% 2% 2% 5% 8%

Korea Republic South - 1% 2% 7% 8%

EXPORTS

65

Shock absorbers and suspension parts (11)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 430,4 439,6 474,1 517,7 480,3

Germany 86% 83% 81% 75% 67%

USA 2% 5% 1% 8% 12%

Zimbabwe 3% 3% 4% 5% 5%

Namibia 2% 2% 3% 2% 4%

China 3% 4% 5% 4% 3%

Road wheels and parts (12)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 494,2 466,0 454,8 367,1 471,1

India - 1% - 7% 23%

Argentina - 7% 16% 22% 17%

Germany 52% 29% 13% 14% 13%

Spain 12% 8% 9% 6% 12%

USA 2% 1% 1% 5% 10%

Filters (13)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 312,2 353,0 407,4 474,8 460,1

Germany 38% 27% 29% 25% 28%

Zimbabwe 14% 18% 15% 16% 15%

Botswana 6% 4% 5% 8% 9%

Zambia 6% 8% 7% 8% 9%

Namibia 3% 2% 6% 8% 8%

Clutches and shaft couplings (14)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 235,9 224,8 309,5 382,8 429,8

Germany 56% 56% 49% 46% 47%

Namibia 3% 5% 5% 5% 6%

USA 4% 6% 6% 7% 5%

China 1% 2% 3% 4% 5%

Botswana 9% 6% 4% 4% 5%

Axles (15)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 319,6 251,7 334,8 377,3 421,0

Germany 37% 35% 53% 36% 45%

USA 37% 32% 12% 33% 19%

Botswana 2% 4% 6% 5% 15%

Mozambique - 1% 9% 7% 5%

Brazil - - - - 3%

EXPORTS

66

Automotive glass (16)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 277,3 230,4 386,4 450,6 389,0

UK 24% 29% 27% 24% 23%

Belgium 30% 27% 28% 19% 20%

Germany 17% 7% 13% 12% 11%

France 10% 13% 14% 14% 9%

Namibia 4% 6% 5% 6% 8%

Batteries (17)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 143,2 180,0 280,0 383,4 357,9

Mozambique 41% 38% 30% 25% 23%

UK 19% 11% 20% 25% 18%

Namibia 1% 2% 1% 8% 15%

Zambia 20% 21% 15% 13% 13%

Botswana 10% 6% 11% 9% 9%

Body parts and panels (18)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 139,6 145,8 263,1 269,4 301,3

India 46% 20% 30% 25% 24%

Germany 11% 8% 6% 14% 24%

Namibia 8% 10% 10% 16% 13%

Botswana 14% 12% 7% 12% 10%

Tanzania 1% 2% - - 4%

Wiring harnesses (19)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 77,6 94,0 118,2 264,4 260,2

Botswana 4% 10% 14% 52% 43%

Germany 21% 14% 11% 9% 28%

USA 2% 5% 1% 2% 3%

Malaysia - - - - 3%

Democratic Republic of Congo - 3% 3% 2% 3%

Ignition and starting equipment (20)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 102,8 108,8 184,9 255,2 256,6

Botswana 11% 9% 16% 16% 19%

Namibia 10% 13% 15% 12% 17%

Mozambique 10% 9% 6% 7% 9%

Zimbabwe 14% 17% 9% 8% 9%

Zambia 18% 13% 5% 11% 7%

EXPORTS

67

Lighting, signalling and wiping equipment (21)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 199,3 198,4 248,1 239,0 236,9

Germany 60% 53% 50% 45% 35%

Namibia 1% 2% 1% 6% 11%

France - - 1% 7% 8%

Botswana 3% 2% 2% 4% 5%

UK 2% 10% 6% 5% 5%

Brake parts (22)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 82,4 97,3 192,0 225,2 229,7

Botswana 19% 22% 17% 14% 17%

Namibia 8% 9% 11% 12% 13%

Belgium 30% 18% 10% 10% 10%

Swaziland 12% 10% 9% 10% 10%

Zambia 6% 8% 10% 8% 9%

Gaskets (23)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 69,3 100,2 160,2 176,1 192,0


Mozambique 5% 6% 8% 7% 11%

Namibia 6% 8% 7% 7% 11%

UK 12% 8% 6% 9% 9%

Botswana 14% 7% 6% 6% 6%

Gear boxes (24)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 68,8 99,9 121,9 153,4 144,8

USA 44% 41% 25% 32% 41%

Namibia 10% 11% 10% 13% 14%

Botswana 18% 19% 13% 21% 12%


Zimbabwe 5% 5% 3% 2% 6%

Alarm systems (25)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 60,7 61,5 86,9 124,5 102,3

Namibia 9% 8% 6% 11% 15%

Botswana 10% 9% 9% 13% 11%


Austria 4% 7% 4% 5% 6%

Zimbabwe 7% 10% 4% 4% 5%

EXPORTS

68

Air conditioners (26)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 35,7 42,2 55,4 94,2 102,2

UK 49% 41% 39% 32% 36%

Namibia 10% 10% 6% 7% 9%

Singapore - - - 11% 8%

Botswana 11% 19% 11% 7% 5%

Zambia 5% 9% 7% 4% 5%

Steering wheels, columns and boxes (27)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 154,8 181,8 210,1 50,5 38,9

Belgium 3% 4% 12% 12% 17%

Namibia 1% - 1% 10% 14%

Botswana 2% - 1% 6% 10%

Zimbabwe 1% 2% 1% 8% 8%

Canada - 1% - 1% 7%

Jacks (28)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 92,3 103,3 57,2 39,1 35,5

Zimbabwe 3% 4% 10% 18% 19%

Mozambique 1% 1% 4% 5% 12%

Zambia 5% 4% 9% 22% 12%

Italy - - - - 10%

Algeria - - - - 7%

Springs (29)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 43,2 32,9 31,1 35,2 27,6

Australia 7% 3% - 3% 16%

Japan 8% 8% 14% 13% 16%

Botswana - 4% 7% 7% 8%

Zambia 2% 4% 10% 5% 8%

Namibia 6% 8% 13% 8% 8%

Seats (30)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 5,7 11,4 13,2 21,3 25,6

Botswana 20% 24% 25% 20% 17%

Namibia 12% 12% 12% 9% 13%

Mozambique 7% 9% 9% 18% 10%

Singapore 15% 10% 11% 9% 9%

Zambia 9% 10% 11% 10% 7%

EXPORTS

69

Car radios (31)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 39,2 46,7 25,9 25,4 23,5

Namibia 16% 13% 29% 21% 28%

Botswana 13% 8% 19% 13% 23%

Zambia 3% 3% 5% 16% 12%

Lesotho 5% 7% 8% 2% 7%


Seat belts (32)COUNTRY 2011 2012 2013 2014 2015

TOTAL (R million) 27,6 24,1 7,7 6,8 6,8

Namibia 3% 3% 13% 14% 28%

Democratic Republic of Congo - 1% 4% 6% 12%

Botswana 3% 4% 15% 15% 10%


Zambia 1% 2% 4% 8% 7%

EXPORTS

70

IMPORTS BY COUNTRY OF ORIGIN

Imports of automotive products into South Africa remain a function of the success of the APDP, domestic market demand and currency movements. Imports of vehicles and original equipment components, to accommodate vehicle production, as well as replacement parts for the growing vehicle parc (also defined as the number of registered vehicles) of 11,71 million vehicles, remain high. Exchange rate weakness resulted in increases in new vehicle prices rising above the CPI index in 2015. The rand exchange rate, however, has reacted differently to different countries and this is particularly important with regard to the exchange rates of the source countries for South African imports.

The countries of origin for vehicles and automotive components imported into South Africa generally reflect the global linkages with the head offices of parent companies. The notable exception amongst the top 10 countries of origin in 2015, was China, where most of the imports were for aftermarket parts. Growing import competition in the domestic market and that of low-cost products sourced from a global pool were the order of the day.

The following table reveals the import values and rankings for the 52 countries of origin for vehicles and automotive component imports into South Africa, above the R20 million threshold, for 2014 versus 2015.

Import value and ranking by country of origin – 2014 vs 2015

Country 2014R million

2014Ranking

2015R million

2015Ranking

Germany 52 962,3 1 65 210,4 1

Japan 23 270,1 2 22 052,6 2

Thailand 12 268,4 3 13 793,7 3

China 10 392,0 5 12 585,9 4

USA 11 817,2 4 11 835,5 5

India 10 104,4 6 10 790,3 6

UK 7 273,5 8 8 001,4 7

Korea Republic South 7 321,1 7 7 133,8 8

Spain 5 222,3 9 6 010,8 9

Brazil 4 319,3 10 4 725,2 10

Italy 2 914,7 11 3 214,0 11

Sweden 2 901,3 12 2 685,7 12

Czech Republic 2 548,7 13 2 384,3 13

France 2 398,0 14 2 254,0 14

Poland 1 413,9 16 1 898,4 15

Romania 1 135,6 20 1 689,7 16

Turkey 2 048,8 15 1 609,6 17

Slovak Republic 923,0 23 1 522,2 18

Mexico 1 201,8 19 1 503,9 19

Taiwan 1 060,1 21 1 414,8 20

Hungary 867,4 24 1 396,3 21

Argentina 792,5 25 1 320,7 22

Indonesia 1 220,5 18 1 307,9 23

IMPORTS

71

Netherlands 1 324,8 17 1 068,7 24

24 COUNTRIES ABOVE R1 BILLION

Belgium 943,1 22 915,6 25

Portugal 519,0 29 838,1 26

Austria 783,9 26 838,0 27

Philippines 617,3 27 575,4 28

Switzerland 349,4 31 559,1 29

Malaysia 550,3 28 553,6 30

Canada 382,3 30 391,4 31

Australia 318,9 32 291,2 32

Denmark 153,0 34 189,9 33

Luxembourg 134,1 36 177,9 34

Finland 201,8 33 169,2 35

Israel 134,7 35 148,2 36

Slovenia 125,9 37 134,0 37

Morocco 42,4 46 127,7 38

United Arab Emirates 99,3 38 117,2 39

Estonia 20,3 54 77,7 40

Singapore 89,9 39 74,9 41

Hong Kong, China 67,5 40 72,4 42

Tunisia 49,4 44 70,3 43

Vietnam Republic 59,5 41 65,9 44

Zambia 29,9 48 44,8 45

Ireland 46,1 45 43,4 46

Norway 52,2 42 41,5 47

Russia 18,9 - 28,4 48

Latvia 0,7 - 28,0 49

Zimbabwe 50,2 43 26,1 50

Mozambique 6,7 - 24,2 51

Bosnia & Herzegovina 18,7 - 21,2 52

52 COUNTRIES ABOVE R20 MILLIONSource: AIEC, SARS

IMPORTS

72

IMPORTS OF VEHICLES

Imports of light vehicles (passenger cars and light commercial vehicles) declined by 5,3% from the 353 047 units in 2014 to 334 338 units in 2015, in line with a slowdown in the domestic market. Light vehicle imports comprised 56,9% of total light vehicle sales in 2015, down from 57,6% in 2014. In 2015, total new vehicle imports originated from 29 different countries around the world. The top country of origin in volume terms for passenger cars and LCVs imported into South Africa in 2015 was India with 91 588 units, accounting for 27,3 % of total light vehicles imported. Almost all of the high-volume entry-level models available in South Africa are manufactured overseas, mainly in India. Volkswagen’s Polo Vivo and General Motor’s Chevrolet Spark, which are manufactured in South Africa, are the two exceptions.

The foundation of the South African automotive sector is based on the relationship between imports and domestic production as governed by the automotive policy regime in South Africa. The previous MIDP and current APDP encourage domestic OEMs to manufacture high volumes of selected models linked to export contracts to obtain economies of scale, coupled with low volume models imported to complement domestic market mixes. Every brand has a benchmark product in just about every segment of the market. The domestic model mix is thus arranged to provide the most effective marketing combination of domestically manufactured and imported models to satisfy a consumer-driven market. South African consumers benefit from access to new models, a wide variety of choice and a highly competitive pricing environment.

Although the volume leader in respect of imports was India, the value of Indian imports, however, was nearly half of those imported from Germany, which included the premium brands such as Audi, BMW, Mercedes-Benz and Porsche. The following table reveals that in value terms, Germany, followed by India, Japan, South Korea, the US and the UK were the top countries of origin for vehicles imported into South Africa in 2015.

Top 10 countries of origin for light vehicles (passenger cars and light commercial vehicles) imported – 2011 to 2015

Country of origin 2011 2012 2013 2014 2015

Total value (R billion) 42,0 47,4 60,6 53,7 59,6

Germany 25% 24% 26% 30% 27%

India 9% 11% 14% 15% 15%

Japan 13% 12% 10% 10% 11%

Korea Republic South 16% 15% 11% 10% 9%

USA 8% 9% 7% 9% 8%

UK 8% 10% 9% 7% 8%

Spain 2% 2% 5% 4% 6%

Thailand 4% 3% 5% 3% 3%

Argentina 3% 2% 1% 1% 2%

Slovak Republic 1% 1% 1% 1% 1%

Other 11% 11% 11% 10% 10%

Number of light vehicle imports 312 153 360 723 377 885 353 047 334 338Source: NAAMSA/Lightstone Auto, SARS

IMPORTS

73

A process of homologation must be carried out before any motor vehicle model is introduced into the South African market. The South African Bureau of Standards (SABS) homologation is a procedure intended to ensure that all new vehicle models comply with the relevant South African legislation, standards and specifications, as well as codes of practice, before use by the public on public roads. This eliminates the risk of having to withdraw a sub-standard motor vehicle model from the market and reduces the possibility of resultant legal action against the supplier. A process of homologation is also required for new models of motor vehicle tyres introduced into the South African market.

Used vehicle imports are subject to import control in South Africa. Strict control measures are applied to ensure that only a limited number of legal import permits are issued. In terms of current legislation, used vehicles qualifying for an import permit include those for immigrants, returning South African residents and nationals, specifically adapted vehicles for persons with physical disabilities, inherited vehicles by South African citizens/nationals, vintage and collectors’ passenger vehicles, and racing cars. Without a legal import permit, imported used vehicles cannot be registered on the National Transport Information System (NaTIS). The system also combats stolen and non-complying vehicle registrations. All vehicle manufacturing plants in South Africa have been linked on-line to the system to facilitate the collation of data of vehicles produced. Left-hand drive vehicles are also not allowed into the country. More information in respect of used vehicle imports and relevant application forms can be accessed at www.itac.gov.za.

IMPORTS

In terms of current legislation, used vehicles qualifying for an

import permit include those for immigrants, returning South

African residents and nationals, specifically adapted vehicles

for persons with physical disabilities, inherited vehicles by South African citizens/nationals,

vintage and collectors’ passenger vehicles, and racing

cars.

74

AUTOMOTIVE PARTS AND COMPONENTS – IMPORTS

Original equipment component imports by the OEMs amounted to R79,6 billion in 2015, up by 13,4% from the R70,2 billion in 2014. The increase is in line with record vehicle production of 615 658 units in the country in 2015, coupled with a weakening exchange rate of the rand, mainly against the US dollar. A significant portion of the value of automotive imports comprises original equipment components, which are subsequently exported as part of completely built-up vehicles after local value-adding processes. Capital-intensive-complex components such as engines, gearboxes and interior electronic components are mainly imported by the OEMs and much of the remainder is sourced in the domestic market. The development and deepening of the domestic component supplier base under the APDP is an important focal point as it will reduce the risks associated with exchange rate fluctuations and logistics costs. Higher volumes relating to the doubling of vehicle production in the country under the APDP by 2020 and various supplier competitiveness initiatives could improve the viability of further foreign direct investment, export contracts and localisation efforts in future.

The following table reveals that imports of original equipment components originated mainly from Germany, Japan and Thailand in 2015.

Top 10 countries of origin for original equipment components imported (Chapter 98) – 2011 to 2015

Country of origin 2011 2012 2013 2014 2015

Total (R billion) 43,8 51,4 59,0 70,2 79,6

Germany 37% 35% 35% 38% 47%

Japan 24% 25% 22% 20% 15%

Thailand 9% 12% 14% 12% 12%

Brazil 6% 6% 5% 5% 5%

China 1% 2% 3% 3% 4%

USA 4% 3% 3% 3% 2%

Sweden 3% 3% 3% 3% 2%

UK 3% 2% 2% 3% 2%

Spain 3% 2% 2% 2% 2%

India - 1% 1% 1% 1%

Other 10% 9% 10% 10% 8%Source: AIEC, SARS

The growing variety of models and ever more complex technologies has led to a larger number of players and an increasing number of aftermarket parts in the market. The following table reveals the increasing trend in the import of aftermarket parts to complement the parts not manufactured in the domestic market, and more particularly, to service the increasing imported share of the vehicle parc of 11,71 million vehicles in 2015, for which most parts have to be imported. The growth of cheaper products, imported mainly from China, has exacerbated this trend. Replacement parts imports in 2015 increased by a further R7,3 billion or 15,3% to R55,38 billion from the R48,05 billion in 2014. With the exception of automotive tooling, which is used in the production processes of vehicles and automotive components, the replacement parts imports are not linked to value addition under the APDP.

IMPORTS

75

Top 10 replacement parts imported (R million) – 2011 to 2015Parts category 2011 2012 2013 2014 2015

Automotive tooling 2 369 2 798 4 090 4 095 5 084

Tyres 3 206 3 610 3 990 4 856 4 771

Engine parts 2 960 3 074 3 546 3 879 4 231

Engines 1 181 1 243 1 361 1 707 2 811

Transmission shafts / cranks 1 302 1 414 1 774 1 913 2 065

Stitched leather seats / parts 1 138 1 206 1 543 1 592 1 985

Gauges / instruments / parts 1 244 1 303 1 607 1 622 1 895

Wiring harnesses 558 670 799 1 011 1 870

Brake parts 918 887 1 116 1 212 1 277

Lighting equipment / parts 805 746 933 1 004 1 118

Other 17 207 18 189 22 388 25 156 28 274

Total (R million) 32 888 35 140 43 147 48 047 55 381

Source: AIEC, SARS

The following table reveals that the countries of origin for the aftermarket parts imported were aligned with the main countries of origin for new passenger cars and commercial vehicles. Imports from the traditional markets such as Germany, the US and the UK have declined over recent years while imports from China have increased, indicating the cost competitiveness of this increasingly dominant automotive force.

Top 10 countries of origin for replacement parts imported – 2011 to 2015Country of origin 2011 2012 2013 2014 2015

Germany 24,9% 20,4% 19,9% 19,3% 18,8%

China 14,6% 15,9% 16,0% 16,1% 16,8%

USA 10,0% 10,2% 9,4% 9,6% 9,4%

Japan 8,2% 7,9% 7,1% 6,6% 7,3%

Thailand 3,8% 4,6% 5,0% 4,5% 4,7%

UK 3,5% 4,6% 5,3% 4,1% 3,6%

Italy 3,7% 3,9% 4,0% 3,8% 3,2%

Czech Republic 1,8% 1,8% 1,9% 2,2% 2,4%

India 2,0% 2,2% 2,2% 2,0% 2,3%

Korea Republic South 1,9% 2,6% 2,5% 2,7% 2,3%

Other 25,6% 25,9% 26,7% 29,1% 29,2%

Source: AIEC, SARS

IMPORTS

76

MAIN AUTOMOTIVE TRADING PARTNERS

The South African automotive industry forms an important part of international supply chains, considering the industry’s expanding trade patterns over recent years. South Africa’s main automotive trading partners (exports and imports combined) for 2015 reflected the country’s global linkages with the OEMs’ parent companies in Germany, the US and Japan. The following tables reveal details and rankings of the South African automotive industry’s top 10 automotive trading partners in 2015, and also reflect the top 10 products exported and imported, where applicable. Germany remained the domestic automotive industry’s main trading partner over the past two decades, while Belgium replaced Brazil in the industry’s top 10 trading partners in 2015.

1. Germany (Total trade R100 202,5 million) – 2015

Main products Exports from SAR34 992,1 million Main products Imports into SA

R65 210,4 million

Light vehicles 21 310,3 Original equipment components 37 412,7

Catalytic converters 8 931,8 Light vehicles 16 260,2

Engine parts 974,4 MCV / HCV vehicles 1 135,8

Stitched leather seats / parts 581,2 Engine parts 723,9

Radiators / parts 430,4 Catalytic converters 576,9

Shock absorbers / suspension parts 322,0 Automotive tooling 569,1

Tyres 270,5 Steering wheels / columns / boxes 502,4

Clutches / shaft couplings 202,0 Transmission shafts / cranks 455,7

Axles 190,8 Tyres 443,5

Filters 131,0 Stitched leather seats / parts 365,6

Other 1 647,7 Other 6 764,6

2. United States of America (USA) (Total trade R32 782,4 million) – 2015


R11 835,5 million

Light vehicles 14 424,3 Light vehicles 4 743,9

Catalytic converters 4 063,0 Original equipment components 1 835,0

Engine parts 922,5 Engine parts 765,1

Radiators / parts 227,9 Engines 511,9

Silencers / exhausts 177,5 Transmission shafts / cranks 418,5

Tyres 133,5 Tyres 316,5

Automotive tooling 116,7 Gauges / instruments / parts 282,8

Axles 80,8 Automotive tooling 266,0

Gear boxes 59,4 Axles 111,0

Shock absorbers / suspension parts 57,6 Catalytic converters 101,3

Other 683,7 Other 2 483,5

77

3. Japan (Total trade R29 862,1 million) – 2015


R22 052,6 million

Light vehicles 6 995,4 Original equipment components 11 560,7

Catalytic converters 112,7 Light vehicles 6 324,0

Tyres 5,3 Automotive tooling 1 138,2

Stitched leather seats / parts 5,0 Tyres 378,0

Springs 4,4 Engine parts 326,5

Engine parts 3,8 Ignition / starting equipment 179,4

Silencers / exhausts 3,6 Axles 153,1

Brake parts 2,6 Engines 126,5

Automotive tooling 2,6 Transmission shafts / cranks 124,1

Clutches / shaft couplings 1,6 Brake parts 120,8


4. Thailand (Total trade R15 442,4 million) – 2015

Main products Exports from SA R1 648,7 million Main products Imports into SA

R13 793,7 million

Engine parts 819,6 Original equipment components 9 385,5


Transmission shafts / cranks 132,4 Tyres 312,2

Road wheels / parts 16,0 Stitched leather seats / parts 286,2

Light vehicles 10,3 Automotive tooling 224,0

Tyres 5,0 Wiring harnesses 130,0

Gauges / instruments / parts 4,3 Gauges / instruments / parts 101,8

Radiators / parts 3,5 Car radios 99,5

Brake parts 3,5 Filters 99,3

Ignition / starting equipment 2,8 Road wheels / parts 83,3


5. United Kingdom (UK) (Total trade R15 437,4 million) – 2015


R8 001,4 million



Stitched leather seats / parts 120,9 Engines 504,9

Automotive glass 87,9 Engine parts 170,8

Engine parts 81,3 Automotive tooling 142,1

Batteries 65,6 Gauges / instruments / parts 141,2

Automotive tooling 42,7 Alarm systems 74,1

Air conditioners 36,8 Transmission shafts / cranks 69,8

Gauges / instruments / parts 34,6 Tyres 52,5

Gaskets 17,1 Catalytic converters 44,7

Other 351,6 Other 786,2

78

6. Belgium (Total trade R14 077,8 million) – 2015


R915,6 million

Light vehicles 12 643,6 Light vehicles 456,1

Radiators / parts 97,1 MCV / HCV vehicles 68,5

Automotive glass 77,6 Automotive tooling 24,3

Transmission shafts / cranks 48,9 Original equipment components 23,2

Automotive tooling 40,7 Engine parts 22,9

Engine parts 32,5 Transmission shafts / cranks 21,0

Tyres 26,9 Lighting equipment 12,1

Brake parts 23,7 Gauges / instruments / parts 9,1

Filters 20,3 Catalytic converters 8,2

Clutches / shaft couplings 13,7 Automotive glass 4,7


7. China (Total trade R12 794,0 million) – 2015

Main products Exports from SAR208,1 million Main products Imports into SA

R12 585,9 million

Radiators / parts 39,5 Original equipment components 3 072,3

Silencers / exhausts 25,3 Tyres 1 634,2

Clutches / shaft couplings 22,5 Automotive tooling 973,9

Engine parts 20,2 Engine parts 668,8

Shock absorbers / suspension parts 16,4 Stitched leather seats / parts 337,5

Engines 6,7 Engines 305,1

Air conditioners 5,0 Transmission shafts / cranks 270,2

Transmission shafts / cranks 3,5 Road wheels / parts 264,6

Catalytic converters 3,3 Brake parts 245,9

MCV / HCV vehicles 2,9 Automotive glass 205,0


8. India (Total trade R12 207,1 million) – 2015


R10 790,3 million

Engines 871,3 Light vehicles 8 704,1

Catalytic converters 259,0 Original equipment components 695,0

Road wheels / parts 107,5 Engines 163,2

Body parts / panels 73,5 Automotive tooling 139,9

Automotive tooling 30,1 Gauges / instruments / parts 129,4

Radiators / parts 17,9 Engines 109,9

Clutches / shaft couplings 12,7 MCV / HCV vehicles 96,3

Transmission shafts / cranks 4,7 Transmission shafts / cranks 52,4

Tyres 4,6 Ignition / starting equipment 47,0

MCV / HCV vehicles 3,1 Lighting equipment 36,1


79

9. Spain (Total trade R10 084,2 million) – 2015


R6 010,8 million



Radiators / parts 127,9 Tyres 232,0

Road wheels / parts 54,9 MCV / HCV vehicles 160,8

Tyres 51,3 Brake parts 54,6

Automotive tooling 37,2 Engine parts 51,6

Automotive glass 30,2 Lighting equipment 44,4

Silencers / exhausts 21,6 Automotive tooling 33,2

Lighting equipment 5,7 Stitched leather seats / parts 26,3

Gauges / instruments / parts 1,8 Body parts / panels 22,5


10. Korea Republic South (Total trade R7 699,9 million) – 2015

Main products Exports from SAR566,1 million Main products Imports into SA

R7 133,8 million


Silencers / exhausts 40,8 Original equipment components 474,0

Radiators / parts 5,3 Batteries 182,5

Engine parts 1,3 Tyres 154,6

Automotive tooling 1,1 Automotive tooling 103,9

MCV / HCV vehicles 0,6 Engines 72,0

Tyres 0,5 Engine parts 57,1

Gauges / instruments / parts 0,1 Filters 56,1

Other 11,7 Clutches / shaft couplings 52,8

MCV / HCV vehicles 45,9

Other 608,9

80

THE AUTOMOTIVE INDUSTRY’S TRADE BALANCE

As the leading manufacturing sector in South Africa’s economy, the automotive industry’s export value under the APDP in 2015 amounted to R151,5 billion, which comprised a significant 14,6% (11,7% in 2014) of total South African exports of R1 037,2 billion, while the industry’s imports of R146,2 billion under the APDP comprised 13,4 % (12,1% in 2014) of total South African imports of R1 087,6 billion.

Automotive exports surged to a new record of R151,5 billion or an improvement of 30,9% compared to the R115,7 billion total export value in 2014. Record vehicle exports of 333 802 units in 2015, which exceeded the previous record set in 2008 at 284 211 units by nearly 50 000 units, contributed to the industry’s export performance. The more subdued year-on-year rise of 11,2% in imports, amounting to R146,2 billion, could be attributed to declining new vehicle sales in 2015 for the second successive year, but with exchange rate weakness resulting in sharp increases in the prices of imported vehicles and original equipment components. However, rand exchange rate fluctuations in 2015 had varying impacts. Similarly, at an individual company level, depending on the particular firm’s exposure to imports and exports and the firm’s balance of trade, the impact of exchange rate fluctuations may vary.

The South African vehicle manufacturing industry accounts for only 0,68% of global vehicle production in 2015 and, therefore, the industry remains reliant on global design, technologically sophisticated plant and machinery and on imported high-value components. This has contributed to the outflow of foreign exchange over the past two decades. The following table reveals that the trade surplus under the APDP measurement is R5,3 billion compared to a deficit of R15,8 billion in 2014. This could by and large be attributed to a significant 53,2% increase in vehicle and automotive component exports to the EU, by far the domestic automotive industry’s main export region, increasing from R43,8 billion in 2014 to R67,1 in 2015, coupled with a weakening rand against the US dollar-denominated export destinations. Africa provided by far the biggest trade surplus, more than any other global region with which South Africa conducts automotive business, followed by NAFTA. Elsewhere the country’s automotive trade was in deficit in 2015.

APDP-related trade balance for the automotive industry: 2013 – 2015

Year Imports into SA(R billion)

Exports from SA(R billion)

Net forex usage (R billion)

2013 126,7 102,7 (24,0)

2014 131,5 115,7 (15,8)

2015 146,2 151,5 5,3

EU 78,9 67,1 (11,8)

NAFTA 7,7 22,8 15,1

AFRICA (including SADC) 0,5 34,1 33,6

MERCOSUR 5,2 3,5 (1,7)

OTHER REGIONS 53,9 24,0 (29,9)

2015 146,2 151,5 5,3

Vehicles 61,6 101,9 40,3

Automotive components (excluding aftermarket parts)

84,6 49,6 (35,0)

Source: AIEC, SARSIncluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

81

However, when all automotive products, including vehicles, OE components and aftermarket parts are included, the industry as a whole still reflects a trade deficit, although at R45,2 billion in 2015, this is the lowest deficit in real terms since 2011 (refer to the memo item and following table).

It should be noted that under the APDP, the basis for calculating the duty-free import credits is based on value-added through the supply chain in the automotive manufacturing industry. There are certain eligibility requirements under the programme to ensure that the beneficiaries are companies producing substantial quantities of components for vehicle manufacturing, and to exclude accessories. Component manufacturers have to supply at least 25% of their total turnover, or R10 million annually, as part of an OEM supply chain domestically and/or internationally to comply under the APDP. In this regard, with the exception of automotive tooling, which is used in the production processes of vehicles and automotive components, the imported replacement parts are not linked to value addition in the country under the APDP, and they are therefore not included in the automotive trade balance which is used to monitor the progress of the APDP.

Under the APDP, as was the case under the MIDP, the level of imports remains a function of the success of the programme as the benefits can only be used to rebate the import duties on vehicles and eligible automotive components that are imported. A key strategy of the OEMs operating in South Africa is to expand market share through a combination of domestic production of one or two relatively high-volume models for the domestic and export markets, and to import models not manufactured in the country to complement their domestic model mixes.

Memo item:

For the purposes of comparison of the 2013, 2014 and 2015 trade balance data under the APDP, based on a holistic view of total automotive exports and imports (including vehicles, OE components and aftermarket parts), total automotive imports were R196,7 billion in 2015 compared to the R177,9 billion in 2014. The imported replacement parts, not linked to value addition in the country under the APDP, with the exception of automotive tooling, amounted to R55,4 billion in 2015, reflecting an increase of 15,3% compared to the R48,0 billion imported in 2014. The trade deficit narrowed to R45,2 billion in 2015, compared to the R62,2 billion in 2014, a significant reduction in real terms.

Overall automotive industry trade balance, including all automotive products – 2010 to 2015

Year Imports into SA(R billion)

Exports from SA(R billion)

Net forex usage (R billion)

2010 102,2 79,3 (22,9)

2011 122,1 90,5 (31,6)

2012 137,2 94,9 (42,3)

2013 166,5 102,7 (63,8)

2014 177,9 115,7 (62,2)

2015 196,7 151,5 (45,2)

Vehicles 61,6 101,9 40,3

Automotive components(including aftermarket parts) 135,1 49,6 (85,5)

Source: AIEC, SARSRevised retrospective from 2010 to include BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

82

New vehicle and automotive component export growth in 2016 will remain a function of the direction and performance of global markets, domestic OEMs’ export programmes, as well as an expected weaker rand exchange rate compared with 2015. In particular the competitive exchange rate offers opportunities on the export front.

New vehicle and automotive component export growth in 2016

will remain a function of the direction and performance of global markets, domestic OEMs’ export programmes, as well as an expected weaker rand exchange rate compared with 2015.

83

POTENTIAL OPPORTUNITIES VIA TRADE AND CO-OPERATION ARRANGEMENTS

South Africa has pursued participation at regional, bilateral and multilateral levels, promoting collaborative agreements with both existing trade partners and fast-growing emerging markets. The country’s goal in negotiating trade agreements is to support national development objectives, to promote intra-Africa trade, as well as to enhance South Africa’s integration into global markets.

In addition to the SACU-EU free trade agreement, the SADC free trade area, and the African Growth and Opportunity Act (AGOA) arrangement with the US, South Africa’s international stature is increasingly being recognised, with the result that trade and investment opportunities for the country’s economy in general, and for its automotive sector in particular are emerging. As an export-oriented economy, it is imperative for South Africa and its automotive industry to continuously identify potential export opportunities via trade and co-operation arrangements.

SADC – EAC – COMESA Tripartite Free Trade Area

South Africa’s destiny is inter-twined with those of countries on the continent. Industrial development in the rest of Africa will directly benefit the South African economy, including contributing towards faster economic growth and job creation. The tripartite free trade area (TFTA) consisting of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) was officially launched in Egypt on 10 June 2015. The TFTA consists of 26 countries - which could increase to 27 should South Sudan join - with a combined GDP of US$1,3 trillion and aims to bring about a unified and liberalised single market. The landmark arrangement would be underpinned by robust infrastructure programmes designed to catalyse the regional market through interconnectivity, facilitated by all modes of transport and telecommunications, and to promote competitiveness. The launch signifies the conclusion of negotiations on the legal instrument and will be followed by a process to finalise negotiations on tariffs and rules of origin, which represent the key elements of a functional free trade area. The TFTA is an important milestone in the implementation of the development integration agenda in Africa and is aimed at promoting market integration, based on industrial and infrastructure development.

More countries are recognising that they need to find ways to make their markets more accessible and easier to do business with. The benefits of the new tripartite free trade area are numerous. It has the potential to increase economies of scale, which in turn will increase demand for the region’s goods and services. Greater trade between countries that are members of Regional Economic Communities also helps drive infrastructure development. Economies come alive when citizens exchange more information, technology and knowledge. Dynamic economies again attract more foreign direct investment.

The South Africa/Southern African Customs Union (SACU) tariff offer for the East African Community (EAC) in the TFTA negotiations has been approved and exchanged with the EAC. Other tariff offers are at an advanced stage. Efforts are continuing to develop SADC standards to address non-tariff barriers that impede trade and to promote trade facilitation. The Dti supported the work on infrastructure development under the TFTA by contributing to South Africa’s negotiations on the memorandum of understanding for the North-South Corridor.

84

The launch of the TFTA was followed by the launch of negotiations around the establishment of a Continental FTA at the African Union on 15 June 2015. Once established, the CFTA would offer a market of over one billion people and a GDP of US$2 trillion. At the moment only three of Africa’s eight Regional Economic Communities are participating in the TFTA, although African countries have recognised the potential to bolster economic development through greater co-operation in the areas of combining resources, production, logistics infrastructure and services. In addition, trade barriers across the continent have curtailed its growth prospects by driving up the cost of doing business. Lifting charges like export and import fees could promote new markets and enhance profits.

The current membership of the three Regional Economic Communities (RECs) is summarised in the following table. The countries in green font are the ones to which South Africa does not yet have preferential access.

Membership of the three Regional Economic Communities (RECs)SADC EAC COMESA

Angola Burundi Burundi

Botswana Kenya Comoros

Democratic Republic of Congo Rwanda Democratic Republic of Congo

Lesotho Tanzania Djibouti

Madagascar Uganda Egypt

Malawi Eritrea

Mauritius Ethiopia

Mozambique Kenya

Namibia Libya

Seychelles Madagascar

South Africa Malawi

Swaziland Mauritius

Tanzania Rwanda

Zambia Seychelles

Zimbabwe Sudan

Swaziland

Uganda

Zambia

Zimbabwe

Regional integration could enhance opportunities for the automotive industry while the industry could also be a driver of regional integration by placing pressure on governments to increase market access and improve cross border infrastructure. South Africa was responsible for the production of 64% of Africa’s total vehicle production in 2015. The opportunities that growth across the continent provides for the domestic automotive industry are already evident in the changing pattern of South Africa’s exports. Vehicle and automotive component exports to the three individual Regional Economic Communities in 2015 continued to expand and amounted to R27,3 billion (R25,9 billion – 2014) in respect of SADC, R2,5 billion (R1,7 billion – 2014) in respect of the EAC and R10,7 billion (R9,5 billion – 2014) in respect of COMESA. Harmonisation of trade regimes, increased market liberalisation and various other areas of co-operation could present the South African automotive industry with increased export opportunities.

85

BRICS

South Africa officially became a member nation of BRICS (Brazil, Russia, India, China and South Africa) on 24 December 2010. BRICS accounts for 43% of the world’s population and almost 30% of the global GDP. It produces a third of the world’s industrial products and half of all agricultural goods.

The BRICS have had divergent economic fortunes in the recent past with Brazil and Russia, both large oil producers, dipping into recession, China’s economy slowing down, South Africa’s macro-economic climate weak, and only India showing economic momentum. China remains as an important engine driving the economic growth of developing countries. China has, for six years in a row, been South Africa’s largest trading partner, and China’s economic slowdown has had a major impact on the South African economy. South Africa exports a range of commodities to China and as the country’s economy slows down, so too does its demand for commodities. Trade figures with other BRICS member states have also declined, which could be attributed to the mineral market super cycle which is past its peak due to stagnating commodity prices. Although minerals still dominate South Africa’s exports to the BRICS countries, the focus going forward would be on increasing value-added exports and promoting investments into each other’s economies.

The creation of the New Development Bank and the relevant pool of foreign exchange reserves will strengthen the relationship between the BRICS countries. The bank will provide financial support to the BRICS grouping, particularly for infrastructure and sustainable developments. It will be headquartered in Shanghai, China, and will have its first regional office in Johannesburg. The initiative gives impetus to South Africa’s role as a financial centre for Africa, and will facilitate access to global finance by African investors and institutions.

South Africa’s participation in BRICS presents important opportunities for the country to build its domestic automotive manufacturing base and to expand trade and investment opportunities. China, with 24,5 million units, was the top vehicle producing country in 2015, with India in the 6th position, Brazil 9th and Russia in 13th position. China and India were among South Africa’s top 10 automotive trading partners in 2015, while India and Brazil were two of the countries to which South Africa’s automotive export values more than doubled on a year-on-year basis. The following table reveals that the automotive trade balance, however, remains in favour of these countries, except for Russia. In 2015, the automotive import to export value ratio was 60,4 to 1 in favour of China, 7,6 to 1 in favour of India and 1,9 to 1 in favour of Brazil.

Automotive trade balance and ratio 2015 – imports vs exportsCountry 2015 imports into SA

(R million)2015 exports from SA

(R million)

China 12 585,9 208,1

Ratio 60 1

India 10 790,3 1 416,8

Ratio 8 1

Brazil 4 725,2 2 430,0

Ratio 2 1

Russia 28,4 230,6

Ratio 0,1 1Source: AIEC, SARS

South Africa’s role in African trade is crucial. As a gateway into the continent, South Africa is expected to play a unique role in promoting BRICS-African co-operation. China is the largest developing country and Africa is home to the biggest number of developing countries. China-Africa co-operation will assist Africa

86

in fulfilling its ambitions of industrialisation and economic integration. South Africa, with its know-how and built-for-Africa vehicles, is ideally placed to benefit from the increased demand for vehicles and automotive components on the continent.

SACU – India preferential trade agreement (PTA)

The Southern African Customs Union (SACU) and India have been engaged in a formal process of trade negotiations since 2008 that is intended to lead to a preferential trade agreement (PTA). The negotiations in respect of the PTA are confined to a pre-determined number of product or tariff lines of special interest to the respective parties. A consultative process to compile a list of products of export interest to South African economic operators and exporters was undertaken within the National Economic Development and Labour Council (NEDLAC). Both SACU and India are still engaged in formulating their national positions in relation to the request lists. Automotive products also feature in these request lists and could potentially enhance trade and investment opportunities in the domestic automotive industry. Many synergies between South Africa and India already exist that could be used to enhance two-way automotive trade between the two countries. Both countries form part of the BRICS coalition, while India was South Africa’s eighth largest automotive trading partner in 2015, as well as the domestic industry’s main country of origin for vehicle imports in volume terms over recent years. Automotive exports to India amounted to R1,42 billion in 2015 and consisted mainly of engines, catalytic converters, road wheels and parts, body parts and panels, and automotive tooling. Automotive imports from India amounted to R10,79 billion in 2015 and consisted mainly of light vehicles and original equipment components.

SACU – EFTA free trade agreement

On 26 June 2006 the Southern African Customs Union (SACU) and the European Free Trade Association (EFTA) signed an agreement to establish a free trade agreement (FTA) between the two regions. EFTA consists of Norway, Switzerland, Iceland and Liechtenstein. The free trade agreement provides for reciprocal preferential market access between EFTA and SACU states. The SACU–EFTA FTA, which came into force on 1 May 2008 provides for South African economic operators to take advantage of trade opportunities offered by the agreement, and also for the harmonisation of trade relations with Western Europe in view of the free trade agreement that SACU enjoys with the EU. In terms of access to EFTA, the latter offered South Africa full duty- and quota-free access for industrial products. For its part, South Africa offered EFTA what it had already offered the EU on both processed agricultural products and industrial products, with some marginal adjustments. The following table reveals the South African automotive industry’s trade balance with EFTA countries in 2015.

Automotive trade balance 2015 – EFTA countriesEFTA countries 2015 imports into SA

(R million)2015 exports from SA

(R million)

Switzerland 559,1 127,6

Norway 41,5 128,6

Iceland - 37,3

Liechtenstein 0,3 -

Source: AIEC, SARS

The FTA brings about a number of benefits to South African exporters, which include duty-free market access for SACU products, including vehicles and automotive components, to EFTA markets. Automotive exports to Switzerland, Norway and Iceland have continued to grow in 2015.

87

SOUTH AFRICAN AUTOMOTIVE INDUSTRY GROWTH PROSPECTS

The automotive industry is central to the South African government’s efforts to industrialise and re-industrialise the country’s economy, as South Africa is increasingly being recognised as a world class manufacturer of vehicles and automotive components. The automotive industry’s performance is based on a partnership approach between OEMs, as the key drivers of the automotive supply chain, and government. Globally, supply chains compete against supply chains, not only on end-products, and the entire industry benefits when the supplier base is strong and competitive.

As a key partner in the development and growth of the domestic automotive industry, government’s commitment to and confidence in the future of the industry is illustrated in its developmental policy regimes in the form of the MIDP and APDP, as well as their assurance that policy support will continue beyond 2020. The automotive manufacturing sector has a significant impact on the economy and has been identified as one of the industries with the highest potential for sustainable export growth, which will support an increase in employment, in addition to making a substantial contribution to socio-economic upliftment in the country. In a highly competitive global economy, creating an enabling environment for domestic and foreign investments is paramount for business expansion and economic growth. The stable, pro-investment automotive policy framework is therefore vital as it has significantly enhanced investor confidence in the domestic automotive industry.

For countries wanting to establish manufacturing plants or expand their existing plants, South Africa, as the most sophisticated industrial manufacturing base on the African continent, remains an attractive destination of choice. The country’s attractiveness as a sub-contracting hub for automotive manufacturing includes:

• Long term policy certainty and predictability • Internationally competitive incentives and support measures• Favourable trade arrangements with the EU, EFTA, the US and SADC• World-class logistics suitable for import and export operations• Availability of requisite skills• First-world business sector and high-quality office and business park facilities• Quality private schools, sophisticated cosmopolitan cities and acknowledged quality of life• European time zone• Ranked number 1 in the cost-of-living index by the International Institute for Management

Development (IMD) World Competitiveness Center 2015 competitiveness ranking, number 2 in effective personal income-tax rate and number 3 in stock market capitalisation.

Strong global linkages, supplier development and competitiveness improvement throughout the supply chain will remain critically important to support the sustainable future development of the South African automotive industry. For manufacturing sectors that rely heavily on export markets, such as the automotive sector, competitiveness is vital to their success. The improvement of the automotive industry’s competitiveness is centred on supplier development, localisation, competitive logistics and, most importantly, achieving economies of scale. Therefore, continuous efforts to grow the South African automotive industry’s export business are imperative to achieve the vision of substantially increasing vehicle production in the country by 2020.

88

The potential for Africa as a future market for exports, as well as the newly reviewed APDP should enable South Africa to play a significant role in the production of vehicles for export to African markets. In this regard, government is increasingly aware of the opportunity being presented by the rise of a number of African economies. South Africa already has an established automotive supply chain and has established distribution channels into the continent, which makes it easier to do business in Africa.

The country’s potential for economic growth remains solid but the economy will not recover on its own. It requires a focused drive on the part of government to stimulate the private sector by ensuring that the business environment is free from encumbrances so that the momentum of investments and investor returns are enhanced. The South African automotive industry continues to demonstrate what can be accomplished when constructive collaboration between stakeholders takes place.

The South African automotive industry continues to

demonstrate what can be accomplished when constructive

collaboration between stakeholders takes place.

89

KEY MOTOR INDUSTRY CONTACT DETAILS

Automotive Industry Export Council (AIEC)P O Box 40611Arcadia0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.aiec.co.za

Department of Trade & Industry (the dti)Trade and Investment South Africa (TISA)Export Marketing & Investment Assistance Scheme (EMIA)Private Bag X84Pretoria0001Telephone: +27 12 394 9500 (International)Telephone: 0861 843 384 (Customer Care Centre)Website: www.thedti.gov.za

National Association of Automotive Component & Allied Manufacturers (NAACAM)P O Box 9558Edenglen1613Telephone: +27 11 392 4060Telefax: +27 86 659 0494Website: www.naacam.co.za

National Association of Automobile Manufacturers of South Africa (NAAMSA)P O Box 40611Arcadia0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.naamsa.co.za

Retail Motor Industry Organisation (RMI)P O Box 2940Randburg2125Telephone: +27 11 789 2542/886 6300Telefax: +27 11 789 4525Website: www.rmi.org.za

90

91

Standard disclaimer

The trade data is based on eligible APDP products. The AIEC cannot vouch for the accuracy of the information obtained from the source. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components. The main purpose of this trade data is to discern trends in exports and export destinations, as well as imports and countries of origin.

92

ISBN:978-0-620-70287-4

IN ASSOCIATION WITH:

Inspiring new ways

Documents

South Africa Automotive Export Manual - Naacam · all the country’s economic sectors. The automotive industry is the biggest contributor to manufacturing output and is one of the