Shared facilities for component production proposed

There is a mixed report card for the South African auto industry. According to the latest Industry Policy Action Plan (IPAP) released by the Department of Trade and Industry in February this year, in 2008 the auto sector contributed R18-billion, or 1.6% of the total “manufacturing valueadded” in the economy. Despite some successes in exports, the industry had a negative trade balance of R29.7-billion. Way more vehicles and components are shipped into the country than exported – which leaves the freight industry with piles of empty containers that have to be moved around the world before they can be filled again. Where the auto industry does add significant value, however, is in employment – over 131 000 jobs, or 5.9% of all manufacturing jobs in the country. It also contributed around 4.9% to GDP in 2007, and attracts billions of rands in foreign investment a year. The government wants to see exports grow in order to reduce the sector's trade deficit and to preserve jobs. It is a big challenge – South Africa's total production of over half a million vehicles in a good year (or under 1% of global production) can easily be taken up in an increasingly competitive global auto market, which has a surplus of over 25 million new vehicles a year, depending on which estimate you use. Long-term sustainability will come from production of over a million new vehicles a year by 2020, which is almost as big a challenge for the logistics industry as for the motor manufacturers themselves. Government is encouraging the growth of the components industry. Proposals for shared production facilities of common components are on the table. Here, one of the challenges is logistics. All the original equipment manufacturers (OEMs) will want their suppliers as close as possible in order to reduce logistics costs and allow for just-insequence supply. There is, however, one strong argument that can be used in this centralisation of common components, such as alternators, filters, batteries, and the like. And that is that the shipping world is already delivering these parts from around the world to OEM plants just in time. The distance from Port Elizabeth to Rosslyn is a whole lot shorter than that from Sao Paolo to Rosslyn.