The South African Automotive Industry,

Transcription

1 The South African Automotive Industry, the MIDP and the APDP Presentation by Roger Pitot NAACAM October

2 SA Automotive Industry: Structure The vehicle manufacturers present in SA Mercedes Benz, BMW, Volkswagen, Nissan/Renault, Toyota, General Motors and Ford are all wholly owned subsidiaries. Other major brands are imported European (Peugeot/Citroen), Japanese (Daihatsu, Honda, Subaru, Suzuki), Korean (Hyundai, Kia), Indian (Tata, Mahindra), with Chinese brands also entering the market (Chery, Chana, GWM and others) There are approximately 400 auto component suppliers including diversified manufacturers. 16 of the 20 major global first tier suppliers are present in South Africa 2

3 Industry Performance Since 1995 New vehicle sales and projections New Vehicle Markets in South Africa History and Forecast to 2012 Medium and Heavy Commercial Vehicle Market Light Commercial Vehicle Market Passenger Car Market Annual Sales Volume

4 Industry Performance Since 1995 New vehicle Production 4

5 OEM capital expenditure (R millions) Total industry investment since 1995 over R40 billion 5

6 Annual Average Industry Capacity Utilisation th Qtr 2010 Cars 81,1% 80,1% 67,7% 68,3% 59,4% 77,1% 87,2% LCV 79,9% 87,8% 82,7% 73,9% 56,5% 68,4% 76,4% MCV 84,4% 97,9% 91,7% 89,9% 64,6% 77,2% 82,6% HCV 95,9% 95,1% 95,3% 87,6% 66,1% 77,5% 81,1% 6

7 Vehicle Production Production (000s) VW Polo (new) 94.0 Toyota Hilux/Fortuner Merc C Class BMW 3 Series Toyota Corolla Total Light Vehicles

8 The Motor Industry Development Programme (MIDP) Introduced 1995 Key Objectives: To improve SA automotive industry s international competitiveness To improve vehicle affordability in the domestic market To encourage growth in vehicle and component manufacturing, particularly through exports To stabilise employment levels in the industry To create a better industry foreign exchange balance

9 Industry Performance: International competitiveness Significant improvement in quality and productivity. Progressive economies of scale with local vehicle platforms down from 42 to 15 Average volume per model (cars/lcv s) produced increased from units to In 2010, 4 models > units and 6 models > units per annum. Increase in number of vehicles produced per employee from less than 10 vehicles per annum to 17 vehicles per annum in Significant rationalization and economies of scale production has reduced complexity for domestic component suppliers and enhanced efficiencies 9

10 Passenger Car Market Makes & Models : 1994 to April 2010 April Marques 1,187 models January Marques 192 Models

11 Motor Vehicle Export since 1995 (units) 300, , , , ,465 Export units 200, , , , , , , , , , ,000 59,716 68,031 50,000 15,764 11,553 19,569 25, Year

12 Major Vehicle Exports 2010 Volkswagen - Polo series to Europe BMW - 3-Series to Japan, Australia and USA Mercedes Benz - C-Class to USA Toyota - Hilux to Europe and Africa 12

13 Major Vehicle Exports 2010 (cont.) General Motors Isuzu KB to Africa Toyota - Corolla to Europe and Africa Nissan - Hardbody to Africa Ford - Focus to Australia 13

14 Global fuel standards 14

15 Profile of NAACAM Established 1980 to represent component and spare parts manufacturers Over 190 members with 260 plants Members comprise 70% of dedicated auto component manufacturing companies in SA Independently elected National Executive Committee, 5 Regions with Chairmen and Deputy Chairs The servicing, spares and retail sectors are represented by the RMI

16 Size of Component Companies 2007 Analysis NAACAM MEMBERSHIP ANALYSIS SURVEY < TO TO TO TO TO TO TO TO TO TO TO to TO TO TO TO TO TO TO TO PLUS # EMPLOYEES # MEMBER COMPANIES

17 Component Manufacturers Key 2010 Data The employment of the component manufacturers totals 65,000, down from the peak of 82,000 (NAACAM membership 44,000) Sales exceeded R65 billion ($9 bn), with 35% OE, 45% export, 20% aftermarket Capex was R2 billion Average local content of components exported was 75% Real Vehicle local content averages 35%

18 Service and Sales Outlets Workshops 2500 Petrol Stations >1800 New & Used vehicle Dealers 1200 Tyre workshops 600 Engine specialists 250 Panelbeating shops >1000 Spare parts dealers >700 Employment over 200,000 18

19 Current Breakdown of costs and Local Content 65%: % of total material cost 35%: true local material plus value add as % of total material cost Harnesses Starter motors Alternators Wiper systems HVAC Body 15% Electrical / Electronic 19% 5% Exterior Interior Cockpit Seats Door panels Carpets 10% 3% Glass Paint Bumpers Mirrors 23% 7% 6% Bonnets Bootlids Sideframes Doors Chassis and Drive train 33% 14% Axles Differentials Drive shafts Brakes

20 Why is Local Content so low? Volumes in SA much lower than elsewhere, except where component companies export The MIDP allows OEMs to offset duties through exports The Rand is overvalued, reducing the prices of imported components The SA component manufacturers are not yet globally cost competitive

21 The MIDP: Duty Credits A Duty Free Allowance for OEMs to import components to the value of 27% of selling price A Duty credit certificate system which incentivises component and vehicle exports, equivalent to 14% of the local content of the exports A Productive Asset Allowance for OEM and related component investments, equal to a duty credit of 20% All these encouraged more imports!

22 Component Exports (R mil) Component Catalytic Converters Seats, Stitched Leather Engines and Parts Tyres Silencers/Exhausts Transmission shafts/cranks Automotive tooling Automotive glass Total Components

23 Car Imports - Share of market 80.00% 70.00% 60.00% 50.00% 40.00% Car Imports % of market Source : NAACAM

24 FBU Import Duty MIDP introduced 1 September 1995 EU preferential duty rate introduced end : minus 2% 2007: minus 4% 2008: minus 5% 2009: minus 6%

25 Background and Objectives of the 2013 Automotive Production and Development Program (APDP) Production increase to 1.2 million vehicles per annum by 2020 with associated deepening of the components industry. Provide appropriate levels of support for these ambitious targets. Achieve better balance between domestic and export sales to supply growing domestic demand. Ensure consistency with WTO rules.

26 Background and Objectives of the APDP The APDP consists out of 4 pillars that will drive the programme: Import Duty. Vehicle Assembly Allowance (VAA). Production Incentive (PI). Automotive Investment Scheme (AIS). APDP Import Duty taxation Vehicle Assembly Allowance Production Incentive Automotive Investment Scheme 26 Duty Rebates

27 Background and Objectives of the APDP Import Duty and Assembly Allowance The New APDP will have stable, moderate import tariffs from 2013: 25% for Completely Built Up Vehicles (CBUs). 18% for CBU s out of Europe via the EU preferential rate. 20% for CKD components used by vehicle assemblers. The Vehicle Assembly Allowance (VAA) will allow vehicle manufacturers with a plant volume of at least 50,000 units per annum to import a percentage of their components duty free. 20% of the ex factory price reducing to 18% over 3 years. This equates to approximately 30% of the components.

28 Background and Objectives of the APDP The Production Incentive (PI) The Production Incentive will be in the form of an allowance for duty free importation of vehicles or components: 55% of value added in the South African supply chain, reducing to 50% over 5 years. Additional 5% for vulnerable sub sectors. = Net benefit of 11% of Value added, reducing to 10% It is expected to increase the depth of localisation by encouraging OEMs and suppliers to source sub components locally

29 Automotive Incentive Scheme (AIS) AIS is part of the APDP which is to replace the MIDP in 2013 Launched in July 2009 Targets companies that are: Automotive assemblers (OEM s) Automotive component suppliers Objectives: To stimulate investment and job creation in SA s automotive sector Investment in technologically advanced automotive production & new and replacement models/ components Increased plant production volumes & strengthen the automotive value chain

30 AIS Incentive Benefits A taxable cash grant paid over 3 years Base benefit calculated at 20%; An additional 5% and 10% benefit subject to Economic Benefit Requirements The base benefit is calculated on the investment in the following Qualifying assets that includes: Plant, Machinery, Equipment and Tooling; for example Jigs, dies, moulds; In plant logistics (software and hardware); Material handling equipment; Production testing and design equipment; IT equipment and supporting software. Owned land and buildings limited to the value of investment in plant, machinery and equipment

31 AIS Incentive Benefits (cont) An additional taxable cash grant of 5 or 10 percent can be granted to projects that contribute to the following economic benefits: Substantial support for the local tooling industry Significant Research and Development in South Africa related to the project Maintain employment levels throughout the incentive period and or result in the creation of new jobs Strengthening the automotive supply chain through backward and forward linkages Substantial increase in local value addition Increase in unit production per plant for OEM s in line w ith vision 2020 Increase in turnover for component manufacturers

32 Other dti Incentives Incentive Benefit Main Conditions The Enterprise Investment Program (EIP) Foreign Investment Grant The EIP (manufacturing) is a cash grant for locally based manufacturers who wish to establish a new production facility, expand an existing facility or upgrade an existing facility in the clothing and textiles sectors To compensate qualifying foreign investors for the cost of moving qualifying new machinery and equipment from abroad to SA. the EIP will be used to stimulate investment within manufacturing and tourism, it will also be used to deliver on some of the IPAP's key performance areas, as well as priority sectors. Foreign investors only Industrial Development Zone Exemption from VAT when sourcing goods and services from South African customs territory and duty-free imports of raw materials and inputs for export Prospective IDZ operator companies must apply for permits to develop and operate an IDZ

33 In Conclusion Many European OEMs and Suppliers already buy components from South Africa more than 2 billion annually The automotive sector is expanding its capabilities and gearing up for the higher production and localisation levels of the APDP Ten new large multinational suppliers have started production in South Africa in past 3 years

34 Thank You! Roger Pitot Executive Director NAACAM