Trade balance pressures industry into export-focused mode

A R33.4-billion automotive industry trade deficit is putting pressure on both manufacturers and distributors to more actively create opportunities for exports of both components and fully built up vehicles. Most of the seven original equipment manufacturers (OEMs) with plants in South Africa have said they are committed to increasing local component manufacture and export, while growing the percentage of local content. The figures show that they are not succeeding. According to the Department of Trade and Industry, automotive imports have grown from R16-billion a year after the lifting of sanctions in 1995 to R88.5-billion in 2006. Exports grew from R4.2-billion in 1995 to R55.1-billion in 2006. With the dropping of exchange controls, the value of imported vehicles has grown more sharply, from R2.8-billion in 1996 to R33.4-bn a decade later, in 2006. Imports of original equipment and aftermarket components rose to R56.1-billion in 2006. Put another way, automotive product imports accounted for more than 18% of total merchandise imports in 2005. It is not all a one-way street: The National Association of Automobile Manufacturers of South Africa (Naamsa) is confident that the industry will remain globally competitive. “South Africa has established itself as a centre of growth in Africa and is on target to become an increasingly important part of the global automotive industry,” says Naamsa. South Africa’s track record as a manufacturer and supplier of vehicles and automotive components has been firmly established over recent years. For 2008, industry export sales are projected to exceed 255 000 vehicles. January was a good start, according to Naamsa figures, which show that new vehicle exports rose by 2 998 units, or 35.1% to 11 548 vehicles from 8 550 in January 2006. If exports reach their target, Naamsa says they will boost the industry’s total domestic production from 542 000 vehicles in 2007 to about 6 20 000 vehicles in 2008 – which means a strong year for the manufacturing industry despite an expected 10% drop in local sales.