Covid-19 sets SA auto industry back three years in achieving masterplan targets

The Covid-19 pandemic has put South Africa’s automotive industry back by about three years in achieving the “aspirational and ambitious targets” set for the industry in the SA Automotive Masterplan 2021 to 2035.

This has resulted in the industry considering approaching the Department of Trade, Industry and Competition (dtic) for an early review of the masterplan despite the industry achieving some new export performance records in 2021.

Mzwake Mbatha, policy analyst at the dtic, asked during a briefing on the export achievements in 2021 if the industry is still on track to fulfil the 2035 targets.

“I just want an honest view that is distilled from any decorations or trapping so that we as government can be in a particular space to correct any policy lapses so that we work closely to fulfil those particular targets,” he said.

Norman Lamprecht, the executive responsible for trade, exports and research at automotive business council Naamsa and author of the SA Automotive Export Manual, said Covid-19 has set the industry back by about three years.

“The targets under the masterplan are still official targets but one must also be realistic in terms of achievements and what can be achieved under current circumstances,” he said.

Naamsa CEO Mikel Mabasa said the automotive sector is certainly concerned about the challenges it has seen and is facing.

Adverse challenges

Mabasa highlighted that the masterplan was officially adopted and signed off on November 28 2018 but since then there have been a lot of adverse challenges.

He said these challenges have had major and in some cases catastrophic implications for several of the ambitious targets in the masterplan.

“As the industry, we are discussing among ourselves whether we should be calling for an early review,” he said.

Mabasa said this discussion will focus on whether the aspirational targets the industry has set itself are still relevant today “because of the seismic changes we have seen in the last 18 months or so”.

Mabasa added that there are also a lot of conversations about new energy vehicles (NEVs) and to what extent this aspect is woven into the review process.

“That is absolutely what we will have to consider in the next couple of months or so,” he said.

The objectives of the SA Automotive Masterplan 2035 are:

• Achieve 1% of global production, which is projected to be 1.4 million units by 2035.

• Increase local content in South African assembled vehicles to 60% from less than 40% currently.

• Double industry employment to 224 000 people.

• Improve manufacturing competitiveness levels to the same level as leading competitor countries.

• Transform the industry across the value chain.

• Deepen value addition, particularly for supply to regional markets.

Lamprecht said that in line with global trends, the South African economy and the domestic automotive industry sharply rebounded from the low-based, Covid-19 affected 2020 but the growth experienced since the initial shock has not been sufficient to return to pre-pandemic levels.

However, he said that despite the pandemic and supply chain disruptions, such as the global shortage of semiconductors, the industry’s key performance indicators included several records in 2021.

Exports

Vehicle and automotive component exports increased by 18.1% to a record R207.5 billion in 2021 from the R175.7 billion in 2020 to comprise 12.5% of total South African exports.

Vehicle exports increased by almost 9.8% to 298 020 units in 2021 from the 271 287 vehicles exported in 2020 while the export value increased by 14.1% to R138.3 billion from R121.2 billion in 2020.

Automotive component exports increased by a substantial R14.7 billion, or 27%, to a record R69.2 billion in 2021 from R54.5 billion in 2020.

Lamprecht said this was mainly due to record catalytic converter exports of R34.9 billion, which comprised 50.4% of total automotive component exports.

Other substantial automotive component exports were engine parts, tyres and engines.

The domestic automotive industry’s export destinations increased to 152 countries in 2021 from 147 destinations in 2020, with the export value doubling from 2020 to 2021 in the case of 32 of these countries.

Germany and other developed markets have remained the South African automotive industry’s top export destinations for component exports over the past three decades.

However, Lamprecht said substantial increases year-on-year in exports to highly competitive markets in 2021 – such as Thailand, Turkey, India, China, Brazil, Argentina and Malaysia – are underscoring South Africa’s increasing status as a global player.

Imports

Imports of original equipment components by the seven original equipment manufacturers (OEMs) in South Africa increased by 33.8% R110.1 billion in 2021 from R82.3 billion in 2020.

Lamprecht said this was in line with the 11.8% year-on-year increase in vehicle production in 2021 and to accommodate the introduction of new domestically manufactured models.

Despite record export values of vehicles and components, the industry’s trade balance shrunk to a surplus of R39.1 billion in 2021 from the R48.2 billion surplus in 2020.

This is attributable to vehicle and component imports increasing year-on-year by 32.1% to R169.4 billion in 2021 while vehicle and component exports increased by 18.1%.

Lamprecht said the automotive sector remains one of the most visible sectors receiving foreign investments, with the seven OEMs investing R8.8 billion in 2021, the second highest annual figure on record, while the component sector invested a record R5.7 billion in 2021.

The broader automotive industry contributed 4.3% to South Africa’s GDP in 2021, with manufacturing accounting for 2.4% and retail 1.9%, he said.