SA’s auto sector to remain resilient despite local, global challenges

Media Release

30 September 2020

SA’s auto sector to remain resilient despite local, global challenges

Despite enduring the world’s most severe pandemic lockdown, South Africa’s 450 000 person strong automotive manufacturing sector is likely to remain a resilient and ‘relative bright spot’ for the country according to Simon Woodward, Automotive and Logistics Sector Executive at RMB.

“Thanks to export incentives, South Africa’s auto manufacturing is a multi-decade success story.

“And despite taking a massive hit from the local and global economic pandemic response, we expect it to carry on doing comparatively well by providing quality jobs, being a catalyst for greater local content inclusion, a facilitator of BEE - and of course being a major contributor to the fiscus.”

Woodward noted that despite the lingering effects of South Africa’s lockdown, to date there have been no direct job losses in exporting vehicle manufacturers in South Africa which include global leading companies such as Toyota, Mercedes, BMW and VW which amongst other brands, exported 366k vehicles last year to 155 countries.

“The financial strength of these companies along with decades of experience through all conditions has made the industry much less susceptible to economic shocks,” Woodward said.

Sadly, there have been large numbers of job losses at car dealerships, however.

Said Woodward:”Given there are fewer people driving, particularly to work, we have to date seen vehicle sales internationally and in South Africa bounce back to about two thirds of what they were before the pandemic. While South Africa’s economic recovery is likely to be sluggish and uncertain, the outlook for many export markets seems more optimistic and vehicle manufacturers are responding with real investment in South Africa.”

Woodward noted that Toyota has recently committed R4bn to manufacturing facilities while Mercedes Benz has invested significantly to retool its plant for manufacturing the new C- Class. VW started manufacturing the new VW Polo hatch for export in late 2017, and has invested R6.1bn in their plant and new products. The new Navara LDV is also in production at Nissan’s Roslyn plant for export to many International markets. Similarly, BMW has made significant investments locally.

“What is especially encouraging is that large multinational manufacturers have global standards that must be met by the SA operations. South Africa is not only able to consistently meet these standards, but it also bodes well for further skills transfer and growth in the manufacturing industry. We are hopeful that it is an area of the economy that could grow in the coming years.”

Currently it employs about 570 000 people directly and via supporting industries.

Woodward added that the South African Automotive Master plan calls for an increase in the local content of domestically produced cars from approximately 30% to over 60% over the next 15 years.

This could create a ‘halo’ effect around the major car makers and help develop more standalone South Africa businesses and suppliers to the industry. In support, banks like FNB are assisting suppliers to the industry with the BEE transformation of their share capital to ensure they are well placed to retain and secure supply contracts to facilitate skills and wealth transfer via SMEs.

“We are hopeful that as South Africa’s automotive exports increase, we see a concomitant increase in locally produced components, which increasingly will need to be manufactured or assembled by black owned businesses.”

He added that FirstRand, via its operating brands FNB, RMB and WesBank, remain firmly committed to the SA automotive sector, and will continue to support it.

 End