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Broaden participation

EDD Parliamentary Portfolio Committee Presentation on SA Automotive Sector Department of Trade and Industry. Broaden participation. SA Automotive Industry: OEM Representation.

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Broaden participation

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  1. PPC PRESENTATION: AUTOMOTIVES EDD Parliamentary Portfolio CommitteePresentation on SA Automotive SectorDepartment of Trade and Industry Broaden participation

  2. PPC PRESENTATION: AUTOMOTIVES SA Automotive Industry: OEM Representation • European light motor vehicle manufacturers represented in SA - Mercedes Benz, BMW, and Volkswagen - are all wholly owned subsidiaries • Japanese and American manufacturers - Toyota, General Motors, and Ford - are also 100% controlled subsidiaries • Other major marques imported: European (Peugeot/Citroen, Volvo), Japanese (Daihatsu, Honda, Subaru), Korean (Hyundai/Kia),Indian (Tata, Mahindra), with Chinese brands also growing in the SA market • OEM employment levels: approx. 30 000

  3. PPC PRESENTATION: AUTOMOTIVES SA Automotive Industry: Component Manufacturing • Widespread base of auto component suppliers including global first tier suppliers such as Faurecia, Johnson Controls, Mothersons, Yazaki, Sumitomo, Bosch and Behr • 120 1st tier suppliers, 75% of them multinationals • Over 200 2nd and 3rd tier suppliers, mostly local • Supplier Employment Level‏: approximately 80 000 in 2014

  4. PPC PRESENTATION: AUTOMOTIVES SA Automotive Industry: Economic Contribution • The Automotive Industry is the largest manufacturing sector in the SA economy and in 2014 the wider industry contributed approximately 7.2% of GDP • The export-led growth model came under pressure in 2009 as a result of the global economic crisis • Since then, there has been growth in both export and domestic business (post-2010 and projected through the APDP period) • Approximately 566 083 vehicles produced in SA 2014; 2015 projection: 627 500 (approximately 0.63%) • Auto product exports 2014: R115.7bn (12.7% of total SA exports) • OEM focus on high quality and competitive production e.g. Mercedes Benz Plant, JD Power Platinum Quality Award

  5. PPC PRESENTATION: AUTOMOTIVES Major SA Automotive Exports • OEMS • Nissan – 1-ton pickup into Africa • Volkswagen - Polo series to EU • BMW – 3 Series to Japan, Australia and USA • Mercedes Benz – C Class • Toyota - Corolla/Hilux to EU and Africa • Components (Quoted in R million) – See table • Major export destinations: EU, Africa, USA, Brazil, Japan, followed by Australia, S Korea, India and China

  6. PPC PRESENTATION: AUTOMOTIVES Supportive Trade Environment • SADC FTA – market of 200 million consumers • EU FTA; AGOA into US • Possible future FTA with SADC, COMESA & EAC - with a market of 700 million consumers • Regional Industrialisation: opportunity for SA components/sub-assemblies to support initial-stage assembly in other countries looking to industrialise

  7. PPC PRESENTATION: AUTOMOTIVES SA vehicle population: (Registered vehicles 2011 - 2013 and projections for 2015 & 2017) Source: NAAMSA

  8. PPC PRESENTATION: AUTOMOTIVES SA Autos Support Policy History

  9. PPC PRESENTATION: AUTOMOTIVES Key Performance Indicators: Post 1995

  10. PPC PRESENTATION: AUTOMOTIVES Post 1995: Increase in SA automotive global market share

  11. PPC PRESENTATION: AUTOMOTIVES SA Assembly Investment Trends

  12. Automotive Production and Development Programme: 1 PPC PRESENTATION: AUTOMOTIVES • The APDP consists of 4 pillars aimed at supporting and developing the SA automotive industry • Stable import tariffs: 25% for CBUs; 20% for CKD components • Vehicle Assembly Allowance(VAA): manufacturers with a minimum plant volume of 50 000 pa allowed to import a percentage of their components duty free (20% - decreasing to 18% over 3 years) • Production Incentive (PI): an allowance for duty free import of vehicles or components, calculated at: • 55% of value added in the SA supply chain; reducing to 50% over 5 years • Special dispensation for vulnerable industries

  13. Automotive Production and Development Programme: 2 PPC PRESENTATION: AUTOMOTIVES • Automotive Investment Scheme (AIS) Purposes: • To stimulate investment and job creation in SA’s automotive sector - in particular: • Investment in technologically advanced automotive production & new and replacement models/components • Increased plant production volumes • Overall strengthening of the automotive value chain Mechanisms: • A non-taxable cash grant paid over 3 years with minimum benefit calculated at 20% for OEMs and 25% for suppliers • An additional 5% and 10% benefit - subject to Economic Benefit criteria • Available to OEMs and component suppliers

  14. PPC PRESENTATION: AUTOMOTIVES APDP: Cumulative Annual Support : 1 • Industry support that is of physical cost to the fiscus is the grant offered under the AIS. • The total investment approved since inception amounts to R25 145 843 725 • Total of incentives approved since inception amounts to R6 902 984 593 • Since inception 245 projects have been approved under AIS; associated new jobs created = 11 351.

  15. PPC PRESENTATION: AUTOMOTIVES APDP: Cumulative Annual Support : 2 Maximum (theoretical) Duty Loss Table above provides not “on budget” support, but support generated through the duty credit system.

  16. Policy Developments: 1 PPC PRESENTATION: AUTOMOTIVES • Electric Vehicles and Green Production • Finalisation of SA EV Roadmap: multi-departmental approach Framework rests on two main pillars: • Creating an environment in which electric vehicles can be operated on South African roads • Supporting the development and production of electric vehicles and relevant EV components • Supporting emerging regional production locations • Other SSA countries looking to kick-start nascent auto industry • Assembly in such countries presents opportunities for expanded SA supply chain developement in the short to medium term

  17. Policy Developments: 2 PPC PRESENTATION: AUTOMOTIVES • Medium Heavy Commercial Vehicle (MHCV) segment • Significant MHCV opportunity: • Encourage higher levels of localisation e.g. through Preferential Procurement • Support increased levels of R&D spend; encourage commercialisation of R&D • Support deepening of component manufacture • Widen distribution and after-sales support in regional markets • Review of APDP under way in consultation with all stakeholders - in the context of maintaining policy certainty

  18. Policy Developments: 3 PPC PRESENTATION: AUTOMOTIVES • The present policy implementation in the MHCV segment has facilitated an improved operating environment for the industry • A number of positive developments have since emerged: • Bus bodies have been designated for public procurement, further catalysing local manufacturing • The Automotive Investment Scheme (AIS) package has been extended to people-carriers/mini-buses, trucks and buses • Large new investments from companies like Iveco, Tata, BAW, Toyota, FAW and Hyundai have recently been announced

  19. Policy Developments: 4 PPC PRESENTATION: AUTOMOTIVES • Strengthening the Supply Chain • Auto Supply Chain Competitiveness Initiative (ASSCI) • Collaboration between all major industry role-players • Wide ranging, 3-year Business Plan activities - all aimed at competitiveness improvement and supplier development • Co-ordinating, measuring and targeting value-adding opportunities

  20. SA Automotive Sector - Now and Beyond: 1 PPC PRESENTATION: AUTOMOTIVES • Vision 2020 • Stimulate expansion of automotive vehicle production to 1.2 million vehicles p/a by 2020 - with associated deepening of the components industry (To be accomplished through long-term partnerships and relationships built with the industry) • Sector-specific Support Programmes - APDP and related: • Encouraging higher levels of investment and value addition • Support for firm- and industry-level competitiveness improvement and supply chain development

  21. SA Automotive Sector - Now and Beyond: 2 PPC PRESENTATION: AUTOMOTIVES • Recent Investment Announcements: • Mercedes Benz: R5bn • General Motors: R1bn • Ford: R3.6bn • Metair Group: R400mill (2008-10) • Johnson Controls: R380m • Opportunities: • Engine parts/components, vehicle interiors, electronic, drive train components, body parts and exterior finishes, aluminium forgings and castings (vis-à-vis OEM project-specific opportunities) • Attract new vehicle assembly opportunities

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