South African Business 2019 edition

OVERVIEW
Automotive
Chinese investors are building at the Coega Industrial Development Zone.
SECTOR INSIGHT
Manufacturers are eyeing the
African market for growth.
• Exports have doubled in 10
years.
The automotive sector contributes 33% to manufacturing GDP
and about 6% to overall GDP. It produces approximately 600
000 vehicles per year, supporting 113 000 jobs in three provinces.
Exports have doubled in the 10 years to 2018.
Some of the world’s leading original equipment manufacturers
(OEMs) have recently made large investments in new plant and technology.
According to the National Department of Trade and Industry (dti),
the figure invested since 2009 is approximately R45-billion.
Long-term state support of the industry through the Automotive
Production and Development Programme (APDP) is a major reason for
the continuing health of this vital sector. The industry itself is looking
to Africa for new markets. By increasing total production numbers to
one-million vehicles, the sector will be more viable.
The dti, working together with the NAAMSA, has set targets for 2035
to increase production to 1% of world volumes (1.4-million vehicles), to
increase local content and to double employment and black-owned
businesses in the sector. Automotive and automotive components
make up 30.2% of total manufacturing output and about 7% of the
nation’s Gross Domestic Product (GDP).
Beijing Automotive Industry Group (BAIC) expects to be building
50 000 vehicles per year at its site at Coega Industrial Development
Zone (IDZ) by 2022. BAIC’s investment follows that of another Chinese
firm, First Automotive Works (FAW).
Companies like BAIC may be positioning themselves to push
into Africa, not only for selling vehicles but for automotive parts and
partly-assembled kits. A new pan-
African organisation has been
established to promote the auto
industry on the continent, the
African Association of Automotive
Manufacturers (AAAM). Most
international brands such as
Volkswagen have given responsibility
for Africa to their South
African offices. VWSA is in a joint
venture in Kenya and is exploring
opportunities in Rwanda.
VWSA is based in the Eastern
Cape where it manufactures
half of the country’s passenger
vehicles and provides 51% of
South Africa’s vehicle exports.
The sector accounts for over 40
000 formal sector jobs in the
Eastern Cape.
Volkswagen’s two new types
of Polos started rolling off the
production line in Uitenhage in
2018. Volkswagen’s R6.1-billion
investment will take production
up to full capacity of 160 000
vehicles in 2019, from 110 000 in
2017. The increase will mean that
a third shift will be introduced.
In addition, VWSA makes
130 000 engines for local demand
and for export. Ford in
Port Elizabeth is the country’s
other engine manufacturer.
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