Record SA auto component exports in 2020 despite Covid-19

Despite the severe impact of Covid-19 lockdowns on the automotive industry globally, South African automotive components exports increased to a record R54.5 billion in 2020 from R53.7 billion in 2019.

This increase was attributed to record catalytic converter exports of R25.98 billion, mainly to Europe in line with stricter emissions legislation implemented in the region in 2020.

Catalytic converter exports accounted for 47.7% of total automotive component exports in 2020.

With the exception of a few other automotive components, such as tyres and batteries whose increases were more related to the aftermarket, most other automotive component categories declined year on year in 2020.

“It just shows that despite huge setbacks suffered because of the pandemic, there are always opportunities in the industry,” said Norman Lamprecht, a director of the Automotive Industry Export Council (AIEC) and an executive manager at automotive council Naamsa, on Friday when releasing the Automotive Export Manual 2021.

Lamprecht said the other highlight in 2020 was the record investment of R9.2 billion by the seven local original equipment manufacturers (OEMs).

“Typically when the OEMs invest, there is a follow strategy by the multinational component suppliers who also invested R2.4 billion in 2020.

“Investment at this scale is significant and will promote local value-addition, while importantly, technology is also embodied in the investment,” he said.

Lamprecht said records were few and far between in 2020 but opportunities present themselves in every circumstance.

He said automotive exports had also benefitted from the depreciation of the rand.

Lamprecht added that despite the European Union (EU) announcement about the ban on new internal combustion engine (ICE) vehicle sales by 2030, electric vehicles (EVs) still only accounted for 4% of total global new vehicle sales in 2020.

He said catalytic converters will still play an increasing role in the EU market because the penalties for exceeding the emission threshold are “extreme”.

“There is still at least a decade when we will hopefully have significant exports of catalytic converters before things will start to change,” he said.

Lamprecht stressed that the EU’s target is to have 40% EV sales by 2030, not 100%, and only by 2040 is the target for all new vehicle sales in the EU to comprise EVs.

He added that the industry has had several meetings in the recent past with the Trade and Industry and Competition Minister Ibrahim Patel on the electromobility road map for South Africa’s automotive industry.

“We are actually far advanced on the electromobility road map. The meetings with the minister was specifically to focus on the hard issues and to accelerate that because we need to keep up [with the latest developments/trends].

“We definitely can’t wait until the last moment and until 2030 for anything to happen,” he said.

Mikel Mabasa, chairperson of the Automotive Industry Export Council (AIEC) and CEO of Naamsa, said Patel is expected to make a policy announcement on electromobility in his budget speech later this month.

The manual revealed that the total automotive export value declined by a substantial R26 billion, or 12.9%, to R175.7 billion in 2020 from the record R201.7 billion in 2019 but still accounted for 13,9% of total South African exports.

Total automotive exports comprised 15.9% of South Africa total exports but the export destinations decreased from 151 to 147 in 2020.

Vehicle exports declined by a massive 115 804 units to 271 288 units in 2020 from the record 387 092 vehicles exported in 2019, with the export value declining by R26.8 billion to R121.2 billion in 2020 from R148.0 billion in 2019.

The broader automotive industry’s contribution to South Africa’s gross domestic product (GDP) also declined in 2020 to 4.9% – 2.8% manufacturing and 2.1% retail – from 6.4% in 2019.

Lamprecht said this reflected the severe impact of the Covid-19 hard lockdown restrictions on automotive manufacturing and retail during the year.

Global vehicle production declined by a massive 15.8% to 77.62 million vehicles in 2020 from the 92.18 million units produced in 2019.

South Africa’s global vehicle production ranking remained at 22^nd in 2020 although its market share declined from 0.69% in 2019 to 0.58% in 2020.

In terms of global light commercial vehicle production, South Africa was ranked 15^th with a market share of 1.08%.

Azar Jammine, the chief economist at Econometrix, said there was very little that was surprising in the manual because of what happened to the automotive industry in 2020.

Jammine said it was one of the sectors that was worst affected by the Covid-19 crisis, principally because lockdowns around the world resulted in a reduction in the amount that people travelled.

The cessation of international travel also meant that vehicle rental requirements fell very sharply.

“In South Africa in particular, you had the full lockdown of the motor industry in April for five weeks where virtually nothing was sold or produced and then it lifted a little bit in May 2020.

“You had an [approx] 30% reduction in production and exports and that is more or less par for the course that one would have expected bearing in mind that the motor industry’s fortunes fluctuated disproportionately highly to the rate of change in economic growth.

“What we had last year was a 7% contraction in the economy and so therefore one would expect the motor industry to contract much more than 7%, which indeed it did by about 30%,” he said.

Jammine said the slightly better export performance of the automotive component sector compared to the OEMs was possibly also due to the lockdown in China during the initial stages of the Covid-19 pandemic in February and March 2020, which resulted in a huge shortage of vehicle components and opening up opportunities for domestic component manufacturers.