1 EDD Parliamentary Portfolio Committee Presentation on SA Automotive Sector Department of Trade and Industry
2 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 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 1 st tier suppliers, 75% of them multinationals Over 200 2 nd and 3 rd tier suppliers, mostly local Supplier Employment :Level approximately 80 000 in 2014
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 4 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 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 Component (R m) 1995 2000 2013 2014 Catalytic Converters 389 4 683 17 620 19 479 Seats, Stitched Leather 1 019 1 915 1 524 1 277 Engines and Parts 111 485 2 938 3 491 Tyres 213 682 1 215 1 531 Silencers/Exhausts 76 377 1 214 497 Radiators 55 127 1 088 1 144 Wheels 157 551 413 331
6 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 initialstage assembly in other countries looking to industrialise
7 SA vehicle population: (Registered vehicles 2011-2013 and projections for 2015 & 2017) 2011 2012 2013 2015 2017 Motor cars 5 832 197 6 110 660 6 400 407 7 013 603 7 641 784 Minibuses 284 189 285 859 287 543 291 269 295 272 Buses 49 254 51 687 54 281 60 597 67 897 Medium trucks 2 074 437 2 152 779 2 227 976 2 394 397 2 573 143 Heavy trucks 333 255 342 131 351 111 370 758 392 038 Other vehicles 220 724 224 050 227 411 234 284 241 365 TOTAL VEHICLES 8 794 056 9 167 166 9 548 729 10 364 908 11 211 499 Source: NAAMSA
8 SA Autos Support Policy History
9 Key Performance Indicators: Post 1995 Activity 1995 2012 Capital expenditure by OEMs R847 million R4.7 billion Export value (vehicles and components) R4.2 billion R86.9 billion Total vehicles exported (units) 15 764 277 893 Top vehicle export destinations 1. China 2. Zimbabwe 3. Malawi Top automotive components exported 1. Stitched leather seat parts 2. Catalytic converters 3. Tyres Top vehicle countries of origin: imports 1. Germany 2. Japan 3. UK 1. USA 2. UK 3. Algeria 1. Catalytic converters 2. Engine parts 3. Silencers/exhaust pipes 1. Germany 2. India 3. Japan Productivity (avg. no. of vehicles produced per employee) 10.0 18.5 Automotive industry contribution to GDP 6.5% 7.0% No. of passenger car model derivatives 356 2 159 Export destinations for vehicles and components 62 152 Total vehicles produced (units) 389 392 539 538 Total new vehicle sales (units) 399 967 624 035 No. of model platforms 41 13 Models with production volumes > 40 000 units 0 5
10 Post 1995: Increase in SA automotive global market share 300,000 Exports 284,211 277,893 250,000 200,000 150,000 100,000 50,000 11,553 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-50,000
11 SA Assembly Investment Trends OEM Investment (R bn) 8 7 6 6.2 6.9 5 4 3 2 2.3 2.2 3.6 3.1 3.3 2.5 4 3.9 4.7 4.4 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
12 Automotive Production and Development Programme: 1 The APDP consists of 4 pillars aimed at supporting and developing the SA automotive industry 1. Stable import tariffs: 25% for CBUs; 20% for CKD components 2. 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) 3. 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 4. 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 APDP: Cumulative Annual Support : 1 Financial Year Budget Committed (R) Total Payments since inception (R) 2010-2011 294 252 065 294 252 065 2011-2012 951 456 916 951 456 916 2012-2013 823 668 384 823 668 384 2013-2014 817 838 357 817 838 357 2014-2015 1 239 696 497 1 239 696 497 2015-2016 971 664 769 0 2016-2017 803 092 088 0 2017-2018 439 810 541 0 Total 6 341 479 617 4 126 912 219 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 APDP: Cumulative Annual Support : 2 Maximum (theoretical) Duty Loss 2009 2010 2011 2012 2013 2014 Vehicles R 2 191 561 385.44 R 3 414 245 511.96 R 3 060 879 657.68 R 2 534 734 258.75 R 1 181 473 267.00 R6 457 373 749 Components R 2 904 957 374.42 R 3 090 986 168.38 R 3 256 160 235.30 R 3 037 860 461.80 R 1 415 975 095.60 R3 573 738 372 DFA/VAA R 1 418 366 373.00 R 1 564 527 247.00 R 1 828 398 978.00 R 1 943 121 191.00 R 4 220 505 368.00 PAA R 523 376 644.00 R 487 266 039.00 R 370 913 477.00 R 203 799 429.00 R 326 825 998.00 R144 910 209 TOTAL R 7 038 261 776.86 R 8 557 024 966.34 R 8 516 352 347.98 R 7 719 515 340.55 R 7 144 779 728.60 Table above provides not on budget support, but support generated through the duty credit system.
16 Policy Developments: 1 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 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 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 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 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 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