automotive export manual 2015 · 5 automotive export manual – 2015 – south africa publication...

Automotive Export Manual

2015

1

ACKNOWLEDGEMENTS

The information and analysis in this report were produced and compiled by Dr Norman Lamprecht on behalf of the Automotive Industry Export Council. The contributions and assistance by NAAMSA, NAACAM and the Department of Trade and Industry are hereby gratefully acknowledged. The data processing and editing by Dr Alet Tolmay and design and outlay of the publication by Dr Selma Schiller are also acknowledged with appreciation.

2

AIECP O Box 40611

Arcadia0007

Tel: +27 12 807 0086Fax: +27 12 807 0481

Website: www.aiec.co.za

3

CONTENTS

Automotive Export Manual – 2015 – South Africa publication ....................................................................................5

South African automotive industry representative bodies ...............................................................................................7

The South African automotive industry operating environment ......................................................................................9

South Africa and its automotive clusters ......................................................................................................................... 11

South Africa’s automotive policy regime ........................................................................................................................15

South African new vehicle market features ....................................................................................................................19

Automotive exports and imports – methodology ..........................................................................................................24

Exports to countries ..........................................................................................................................................................25

Exports to regions .............................................................................................................................................................30

Exports of vehicles ............................................................................................................................................................49

Automotive components – exports by country ..............................................................................................................51

Automotive components – exports by product ..............................................................................................................61

Imports by country of origin ............................................................................................................................................71

Imports of vehicles ............................................................................................................................................................74

Automotive parts and components – imports ................................................................................................................76

Main automotive trading partners ..................................................................................................................................78

Automotive industry trade balance .................................................................................................................................82

Potential opportunities via trade and co-operation arrangements ...............................................................................85

South African automotive industry – prospects and imperatives to grow ...................................................................89

Key motor industry addresses ..........................................................................................................................................91

4

ABBREVIATIONS

AGOA African Growth and Opportunity Act

BRICS Brazil, Russia, India, China and South Africa

CBU Completely Built-up

CKD Completely Knocked Down

COMESA Common Market for Eastern and Southern Africa

CPI Consumer Price Index

DTI The Department of Trade and Industry

EAC East African Community

EU European Union

FDI Foreign Direct Investment

FOB Free on Board

FTA Free Trade Agreement

GDP Gross Domestic Product

IDZ Industrial Development Zone

MERCOSUR Mercado Común del Sur – Common Market of South America

MIDP Motor Industry Development Programme

NAACAM National Association of Automotive Component and Allied Manufacturers

NAAMSA National Association of Automobile Manufacturers of South Africa

NAFTA North American Free Trade Area

OEM Original Equipment Manufacturer (Vehicle Manufacturer)

SA South Africa

SADC Southern African Development Community

SARS South African Revenue Service

WTO World Trade Organisation

5

AUTOMOTIVE EXPORT MANUAL – 2015 – SOUTH AFRICA PUBLICATION

The Automotive Export Manual – 2015 – South Africa publication is an annual publication produced and compiled by the Automotive Industry Export Council (AIEC) – the recognised source of South African automotive trade data. The 2015 publication, as well as the previous publications since 2006, provides a comprehensive guide on the export and import performance of the South African automotive industry under the previous Motor Industry Development Programme (MIDP) and current Automotive Production Development Programme (APDP). The aim of the manual is to identify and report on the major automotive export destinations, the major countries of origin, the main automotive export trade blocs, the most important automotive products exported and imported, the top growth markets and products as well as the impact of the trade arrangements enjoyed by South Africa on automotive trade patterns.

Key performance indicators – 2014Indicator Performance

South Africa’s Gross Domestic Product (GDP) R3 796,5 billion

Broader automotive industry contribution to GDP 7,2%

Vehicle and component production as % of South Africa’s manufacturing output 30,2%

Average monthly employment by vehicle manufacturers 29 715

Automotive component sector employment 82 790

Capital expenditure – vehicle manufacturers R6,92 billion

Capital expenditure – component sector R2,7 billion

Total South African new vehicle sales 644 504 units

Total South African vehicle production 566 083 units

South Africa’s vehicle production as % of Africa’s vehicle production 68%

South Africa’s global vehicle production ranking 24th

South Africa’s global vehicle production market share 0,63%

Total automotive export earnings R115,7 billion

Automotive export value as % of total South African export value 11,7%

Number of export destinations 148

Number of export destinations with export values more than doubling year-on-year 25

Top automotive country export destination in rand value terms Germany

Total South African vehicle exports 276 873 units

Total value of vehicle exports R70,0 billion

Top vehicle export destination in volume terms UK

Total value of automotive component exports R45,7 billion

Top automotive export component category in rand value terms Catalytic converters

Top automotive trading partner in rand value terms Germany

Top automotive trading region in rand value terms EU

Top country of origin for total automotive imports in rand value terms Germany

Top country of origin for vehicle imports IndiaSource: AIEC, Econometrix, NAACAM, NAAMSA/Lightstone Auto, SARS

6

For currency comparison purposes, the following table reveals the movements of the rand against the currencies of the South African automotive industry’s main trading partners, which are the EU, the US and Japan from 2010 through to 2014.

Currency indices for rand versus major trading partners (Foreign currency: rand – annual averages) Currency 2010 2011 2012 2013 2014

Euro 9,71 10,08 10,55 12,82 14,40Index 2010 100 104 109 132 148US$ 7,32 7,25 8,21 9,65 10,84Index 2010 100 99 112 132 148Japan (100 Yen) 8,35 9,12 10,29 9,87 10,26Index 2010 100 109 123 118 123

Source: South African Reserve Bank

The rand is one of the most traded and liquid currencies. The South African Reserve Bank (SARB) is responsible for formulating and implementing monetary policy. Its primary objectives are keeping inflation within a targeted rate of 3% to 6% and maintaining a stable, competitive currency. CPI for 2014 was 6,1%. The upper end was breached during 2014 and the SARB hiked interest rates by 50 basis points in January 2014 as well as by 25 basis points in July 2014 to combat inflation.

“The rand is one of the most traded and liquid currencies.”

7

SOUTH AFRICAN AUTOMOTIVE INDUSTRY REPRESENTATIVE

BODIES

Various automotive industry associations represent the manufacturing and retail side of the automotive industry in South Africa, namely, the National Association of Automobile Manufacturers of South Africa (NAAMSA), the National Association of Automotive Component and Allied Manufacturers (NAACAM), the Retail Motor Industry Organisation (RMI) and the Automotive Industry Export Council (AIEC).

NAAMSA, established in 1935, represents the collective, non-competitive interests of the new vehicle manufacturing industry in South Africa and comprises 22 companies involved in the production of passenger cars and commercial vehicles which collectively employ over 29 700 persons. NAAMSA also represents the interests of a further 19 companies involved in the importation and distribution of new motor vehicles in South Africa. In broad terms NAAMSA’s brief is to promote the growth and development of the automotive industry in South Africa; to provide a platform for policy dialogue with government and private sector stakeholders; to implement and administer ad hoc projects; to address specific industry issues and challenges; and to facilitate empowerment and social development. More information on NAAMSA and its activities can be accessed at www.naamsa.co.za.

NAACAM, established in 1980, represents the interest of the automotive component manufacturers in the country and is nationally and internationally recognised as the voice of the South African component industry. The association has 140 members, including 120 first tier suppliers, with 220 regional manufacturing sites, in addition to 23 associate members who provide mainly logistics, information technology and financial services to members. Almost 70% of South African main Tier 1 manufacturers are NAACAM members, while outside of NAACAM there are some foreign and smaller local companies who are either not members of any association or are affiliated to tyres, plastics, stainless steel, aluminium and similar bodies. Employment in the component sector, including the enterprises not members of NAACAM, comprised 82 790 persons in 2014. A diverse range of original equipment components, parts and accessories are manufactured in the country. More information on NAACAM, including the profiles and contact details of the major automotive component suppliers in South Africa, can be accessed at www.naacam.co.za.

The RMI, established in 1908, represents the retail motor trade side of the automotive industry, including 7 500 members across 14 trade associations, which are serviced out of six offices around the country. OEMs, franchise dealers and repair specialists work closely together to provide maintenance and repair services. They also cooperate to ensure warranty service, driver safety, environmental protection, spare parts availability and information about technical improvements. South Africa had a vehicle parc (number of registered vehicles) of 11,37 million at the end of December, 2014, of which 6,62 million or 58% comprised passenger cars. In terms of the trade which supports this industry, there are approximately 4 551 garages and fuel stations (with the majority having service workshops as well) plus a further 1 898 specialist repairers; 1 374 new car dealerships holding specific franchises; an estimated 1 768 used vehicle outlets; 1 506 specialist tyre dealers and retreaders; 440 engine reconditioners; 171 vehicle body builders; 2 907 parts dealers and around 216 farm vehicle and equipment suppliers. More information on the RMI can be accessed at www.rmi.org.za.

The Automotive Industry Export Council (AIEC), established at the end of 1999, serves as the umbrella body for the South African automotive industry’s export promotion and development activities and acts as the important link between the export promotion and development activities of the industry and the Dti. The AIEC represents the interests of seven motor vehicle manufacturers/exporters, namely BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen as well as manufacturers/exporters of trucks and buses, and about 500

8

automotive component suppliers in South Africa. Importantly, the AIEC is the only means of access for about 200 small enterprises not part of the main stream in respect of trade enquiries, invitations to events and other service offerings.

The AIEC is operated from the NAAMSA offices in Pretoria and the activities and administration are coordinated by the AIEC Board. The AIEC Board of Directors consists of Mr Robert Houdet (Executive Director – NAACAM – Chairperson), Mr Nico Vermeulen (Director – NAAMSA), Dr Norman Lamprecht (Executive Manager – NAAMSA) as well as two ex-officio members from the Department of Trade and Industry, Mr Mzwakhe Mbatha and Mr Adriaan Adams.

One of the AIEC’s key service offerings to stimulate export growth and deepen the export base is to facilitate participation in major automotive events abroad. National Pavilions are regarded as the flagship tool utilised for the promotion of the domestic automotive industry’s world class capabilities. During 2014, financial assistance under the Dti’s Export Marketing and Investment Assistance (EMIA) scheme was again provided to automotive manufacturing exhibitors to participate in the Automechanika Middle East, United Arab Emirates (UAE) National Pavilion from 3 to 5 June 2014, the Automechanika Frankfurt, Germany National Pavilion from 16 to 20 September 2014 as well as the South African National Pavilion at Midest, France from 4 to 7 November 2014.

The automotive National Pavilions approved for 2015 include the Automechanika Middle East, UAE National Pavilion from 2 to 4 June 2015 (www.automechanikadubai.com). Automotive manufacturing companies will also be invited to participate in the Midest, France South African National Pavilion from 17 to 20 November 2015 (www.midest.com). The 2015 national automotive events in South Africa include the Automechanika South Africa from 6 to 9 May 2015 (www.automechanikasa.co.za) and the Johannesburg International Motor Show from 14 to 25 October 2015 (www.jhbmotorshow.co.za).

More information on the Automotive Industry Export Council could be accessed at www.aiec.co.za.

Mr Robert HoudetExecutive Director

NAACAM

Dr Norman LamprechtExecutive Manager

NAAMSA

Mr Nico VermeulenDirector

NAAMSA

9

THE SOUTH AFRICAN AUTOMOTIVE INDUSTRY OPERATING

ENVIRONMENT

Global vehicle production set yet another record in 2014 and according to OICA, the International Organisation of Motor Vehicle Manufacturers, vehicle production rose by 2,6% from 87,51 million units in 2013 to 89,75 million units in 2014. South Africa was ranked 24th in the world in terms of global vehicle production with a market share of 0,63%. With regards to OEM performance globally, Toyota maintained its market leadership position in 2014 ahead of VW and GM. Global vehicle sales increased by 3,1% to 88,16 million vehicles in 2014 compared to the 85,47 million units sold in 2013. South Africa was ranked 22nd in the world in terms of global vehicle sales with a market share of 0,73%. Toyota as well as VW posted sales above 10 million units and became the first OEMs ever to break the 10 million unit mark. At 23,7 million units produced and 23,5 million units sold, China produced and sold more vehicles than the US and Japan combined, clearly emphasising the shift from west to east in terms of vehicle production and consumption.

Eleven OEMs from the US, Europe and Japan dominate global vehicle production and hence exercise control over their increasingly concentrated global supply chains. The future of the OEMs in South Africa is inextricably linked with that of international OEMs and is therefore subject to the same market forces driving or restraining growth. Globally OEMs are focused on relentless cost reductions to reduce prices through efficiency improvements, improved productivity and relocation of manufacturing closer to markets with high demand to avoid logistics costs, trade barriers and currency risks. South Africa manufactures vehicles for the world which means a locally manufactured vehicle is identical irrespective if it is made in the US or Europe or South Africa. This means that local suppliers must be able to deliver on technology and quality levels that are on par with those anywhere else in the world, at comparable cost. The global nature of the industry requires profitable and timely delivery of quality products at competitive international prices. Failure to do so will ultimately force multinational automotive corporations to locate elsewhere.

In South Africa the automotive sector is the mainstay of the national industrial base. Accounting for 7,2% of GDP, 30,2% of manufacturing output and 11,7% of all South African exports, the industry demonstrates what can be accomplished when constructive collaboration between stakeholders takes place. The automotive sector remains a key focal point in South Africa as one of the most critical sectors that drives sustainability, job creation, competitiveness and all-inclusive growth. South Africa is seen as providing the largest automotive market and most significant automotive centre and supply chain cluster in Africa. Manufacturing is recognised as being vital to sustainable growth and job creation as each job in manufacturing supports a multiple of jobs elsewhere in the economy. The key means of increasing employment in the vehicle and automotive component sector in South Africa is via exports. Increasing demand in the domestic market alone will not support the growth required in production to promote substantial growth in employment in the sector. With global demand projected to grow at 2% to 3% per annum over the next 10 years, it is imperative that South Africa attracts new generation model investments or increased export volumes of existing models to participate more fully in the global growth scenario. This in turn is based on being able to offer an attractive proposition to global OEMs.

The review of the APDP and the implementation of the Automotive Supply Chain Competitiveness Initiative (ASCCI) were the two major activities in the domestic automotive industry in 2014. ASCCI is a joint initiative between NAACAM, the NAAMSA OEM Purchasing Council, the Dti and NUMSA. The objective of this initiative is to increase supplier manufacturing value-added in support of producing 1,2 million vehicles per annum by 2020. The collaboration between major automotive industry stakeholders will see various projects being implemented in the following years, with specific focus on increasing supplier capabilities, increased localisation levels and better

10

strategic guidance with regard to increasing the levels of automotive supply chain competitiveness. ASCCI initiatives are important in the context of enabling competitiveness, growth, employment creation and transformation in the South African automotive industry. The initiative will go some way in ensuring long-term sustainability of the South African automotive industry.

11

SOUTH AFRICA AND ITS AUTOMOTIVE CLUSTERS

South Africa represents the second largest economy in Africa after Nigeria but is Africa’s most integrated nation in terms of capital and trade flows. The country has an enviable resource base to underpin an economy that generates a third of sub-Saharan GDP, an established manufacturing base, a modern infrastructure, well-developed legal and financial systems, good communications and a stock exchange among the top 20 in the world. Further huge investments in infrastructure are planned as part of the country’s National Growth and Development strategy to enhance industrial and regional development. South Africa is ranked by the World Bank as an upper-middle income country. The tertiary sector, including financial services, retail and wholesale trade, tourism and telecommunications, comprises over two-thirds of the economic output.

The country’s overall business environment is reinforced by almost two decades of sound macro-economic policies. Despite recent cost increases, South Africa remains one of the least expensive places in the world to set up and run a business. There is a wide range of investment incentives available to South African-based companies, whether foreign or domestic owned. Incentives are administered by the Dti and are uniform throughout the country. The bouquet of tools at government’s disposal include manufacturing incentives, special economic zones, trade promotion, especially with Africa, infrastructure developments, local procurement by the state and promoting beneficiation. The focus is to drive manufacturing so that it may take a leading role in the economy on a more sustainable, higher-growth path and to assist South Africa’s manufacturing industry to position itself to supply value-added products to countries around the world, but especially in Africa where countries are undergoing industrialisation.

South Africa’s constitution established nine provinces and three levels of municipal government, namely metropolitan, district and local. Each province has its own premier, cabinet and legislature. The provinces vary substantially in size, wealth, geography, ethnicity, population and performance. Per capita GDP is highest in Gauteng and lowest in the Eastern Cape. Investment opportunities exist across the economic landscape and there are investment promotion agencies at the national, provincial and municipal levels to provide assistance. The South African automotive industry clusters are located in three provinces, namely Gauteng, KwaZulu-Natal and the Eastern Cape, although there has been an increasing migration over provincial borders to other provinces over the recent past. South Africa has 11 official languages but English is the preferred language of business.

Gauteng

Gauteng is the smallest of the country’s nine provinces but is the country’s financial and industrial economic centre. The province produces around a third of national GDP, generates the highest per capita income, and accounts for 40% of South Africa’s manufacturing output, construction activity and financial services. Johannesburg is the provincial capital and the main point of entry for the country. Pretoria is the administrative capital of South Africa and houses most of the foreign embassies in the country. Main contributors to provincial GDP are finance, manufacturing and trade, although agriculture and food processing are also important in the country’s most densely populated province. Most overseas visitors enter South Africa through OR Tambo International Airport. The Gautrain, a rapid transit system which connects Pretoria, Johannesburg and OR Tambo International Airport, was opened in 2010 and helps to alleviate road congestion between Johannesburg and Pretoria.

The province is regarded as the natural destination for international investors wishing to establish a springboard into Africa. Gauteng houses three OEMs and the majority of automotive suppliers. The Gauteng Growth and Development Agency (GGDA) is responsible for the promotion of trade and investment and project implementation in the province and via its two automotive specific subsidiaries, the Automotive Industry Development Centre (AIDC)

12

and the Automotive Supplier Park (ASP), provides support to the automotive industry. The Gauteng Investment Centre (GIC), housed in Sandton and managed by the GGDA, represents a one-stop business services facility offering to domestic and foreign investors, and an access to investment services and support from various tiers and agencies of government. The province also hosts the various National Government Departments, the Council for Scientific and Industrial Research (CSIR) - one of the largest scientific and technology, research and development (R&D) and implementation organizations in Africa - as well as the City Deep logistics hub - the premier container depot in the country, the largest inland port in Africa and the fifth-largest in the world. Nasrec has been earmarked for the establishment of a Special Economic Zone (SEZ).

Gauteng – key features – 2014

Gauteng

Capital Johannesburg

Population (% of SA total of 54,0 million) 12,91 million (23,9%)

GDP contribution as % of SA total GDP of R3 796 billion 33,5%

OEMs (manufacturing plants) BMW SANissan SA

Ford Motor Company of Southern Africa

Medium, heavy, extra heavy commercial vehicle and bus companies Associated Motor Holdings (AMH), Babcock, Busmark 2000, Fiat Group, Ford, Freightliner, Fuso, Iveco SA, JMC SA, MAN Truck & Bus, MarcoPolo, NC 2 Trucks Southern Africa, Peugeot Citroen SA, Powerstar SA, Renault

Trucks, Scania, TATA Motors, UD Trucks, VDL Bus & Coach and Volvo Trucks & Buses

Number of automotive component companies 200

Motor vehicle parc as % of SA total vehicle parc of 11,37 million vehicles 38,76%

Passenger car sales as % of total 2014 passenger car sales of 439 264 units

35,4%

LCV sales as % of total 2014 LCV sales of 173 689 units 31,2%

MCV/HCV sales as % of total 2014 MCV/HCV sales 31 551 units 34,3%

Light vehicle production by OEMs in the province as % of total 2014 light vehicle production of 533 120 units

35,7%

Light vehicle exports by OEMs in the province as % of total 2014 exports of 276 873 units

43,2%

Source: NAACAM, NAAMSA/Lightstone Auto, Statistics SA

KwaZulu-Natal

KwaZulu-Natal represents the second largest economy in the country after Gauteng and one of the country’s most popular holiday destinations. Durban is South Africa’s second largest city and the country’s busiest port. Richards Bay is South Africa’s busiest bulk port and the centrepiece of the Richards Bay IDZ. Durban and Richards Bay handle about three quarters of the country’s tonnage. The province benefits from its diversification efforts across various sectors. Manufacturing – dominated by pulp and paper, chemicals, automotives and food and beverages – is the largest sector in the province, followed by finance, trade, tourism and agriculture. The King Shaka International Airport and the Dube Tradeport at La Mercy provide easy access to Durban and also to international markets. Dube Tradeport has been earmarked for the development of a Special Economic Zone (SEZ). IDZ benefits, which include both fiscal and customs incentives, now apply to agro-processing and manufacturing enterprises located within Dube TradeZone and Dube AgriZone. Dube TradePort is Africa’s first purpose-built aerotropolis and its proximity

13

to King Shaka International Airport is an advantage. The province hence enjoys the strategic and competitive advantage of being a global gateway for trade into Africa and to the world.

Trade and Investment KwaZulu-Natal and Tourism KwaZulu-Natal are responsible for promoting trade, investment and tourism in the province, with Durban Investment Promotion Agency (DIPA) concentrating on Durban. These institutions have been supplemented by the new Durban KwaZulu-Natal Convention Bureau which has been established to promote the city and province as top conference destinations in Africa.

KwaZulu-Natal – key features – 2014

KwaZulu-Natal

Capital Mzunduzi (Pietermaritzburg)



OEMs (manufacturing plants) Toyota SA Motors

Medium, heavy, extra heavy commercial vehicle and bus companies Bell Equipment Co SA, Hino, MAN Truck & Bus (SA) and Toyota SA Motors




12,44%


MCV/HCV sales as % of total 2014 MCV/HCV sales of 31 551 units 16,6%


26,8%


23,4%


Eastern Cape

The province, well served logistically with airports situated in Port Elizabeth, East London, Mthatha and Bisho and with ports in Port Elizabeth, Coega and East London, has been earmarked as a key growth area for growth and economic development. Finance, government services and manufacturing are the leading sectors in the Eastern Cape economy. The province has a sound manufacturing base, primarily in the automotive sector. The allocation of two of South Africa’s five industrial development zones (IDZs) to the province is confirmation of the potential generated by the shipping traffic that operates between Europe, Asia and the Far East. The Coega IDZ is the largest IDZ in the country and is the main catalyst for Eastern Cape socio-economic development and the gateway to global markets. The East London IDZ has also established an Automotive Supplier Park. The new Port of Ngqura near Port Elizabeth has opened a R2 billion state-of-the-art container terminal.

The Automotive Industry Development Centre, the Eastern Cape Development Corporation, the Nelson Mandela Bay Metropolitan Municipality and the Cacadu District Municipality are among the several organisations promoting the Eastern Cape as a preferred destination for trade and investment. Three Spatial Development Initiatives (SDIs) – Fish River, Wild Coast and East London/Coega – are also located in the Eastern Cape.

14

Eastern Cape – key features – 2014

Eastern Cape

Capital Bisho



OEMs (manufacturing plants) Volkswagen Group SAMercedes-Benz SA

General Motors Southern AfricaFord Motor Company of Southern Africa engine plant

Medium, heavy, extra heavy commercial vehicle and bus companies FAW Trucks, General Motors/Isuzu, Mercedes-Benz SA and Volkswagen Group SA




3,6%


MCV/HCV sales as % of total 2014 MCV/HCV sales of 31 551 units 4,3%


37,5%


32,3%


15

SOUTH AFRICA’S AUTOMOTIVE POLICY REGIME

The economic impact of the automotive industry extends well beyond vehicle and automotive component manufacturing, exporting and retailing into financing, insurance, services, general retail and wholesale as well as the public sector. The automotive sector contributes significant revenues from vehicle sales, usage-related levies, personal income taxes/fringe benefit taxes, and business taxes. The production and sales of new and used vehicles, parts and services deliver excise, sales, value-added and local taxes as well as import duties.

The automotive industry’s performance is dependent on an intelligent partnership between vehicle manufacturers, as the key drivers of the supply chain, and government. However, the emerging issue is supply chain competing against supply chain, not only on end products. Transferring costs upstream or downstream does not make companies more competitive as all costs filter down to the final marketplace in the price paid by the end user. In every country where OEMs are based, they are strong when their supplier base is strong and competitive.

The Automotive Production Development Programme (APDP) replaced the export-oriented Motor Industry Development Programme in January 2013 with the aim of stimulating local production of automotive components while maintaining the incentives for OEMs to manufacture passenger cars and light commercial vehicles in the country for export and the local market. One of the attractions of South Africa’s automotive policy over the past two decades has been its long-term vision and consistency. The APDP has reinforced policy certainty, which is critical for the industry to make long-term investment decisions. The APDP’s focus is on raising local value addition to enhance the automotive industry’s manufacturing output and export competitiveness. The automotive sector relies heavily on the additional economies of scale provided by exports and competitiveness is critical to its success.

The vision of the APDP is to double vehicle production in South Africa by 2020 to 1,2 million vehicles per annum, elevating the country’s automotive industry up to an anticipated global market share of over 1%. The increase in market share should trigger additional interest and investment and generate increased export business. Vision 2020 also includes a particular focus on the development of the automotive component sector. The APDP focus is to ensure the sector has a greater impact on the economy and on national employment levels by increasing local component manufacturing in the domestic market.

The APDP parameters were established in 2008 during a period of sustained higher levels of economic growth and record industry performance, prior to the global economic crisis. Major global and domestic events have since impacted on expectations and projections. The OEMs note that lower demand affects their volumes of production and, hence, their use of local components. Local component suppliers note that the low OEM production volumes increase costs per unit and affect their competitiveness. The first full Review of the APDP commenced in the first quarter of 2014 aimed at considering the effectiveness of current support measures for the industry, identify shortcomings and recommend possible changes or enhancements to the programme. The Review must balance many competing demands, including policy stability and certainty demanded by international OEMs, localisation thresholds that incentivise local component manufacturers, union demands for jobs, international competitiveness concerns and the cost of the incentives to the national fiscus. The incentives are intended to produce positive results for the broader economy and the Review will also aim to ensure a better balance between enhancing production of vehicles and components and enabling OEMs to import vehicles or components duty-free under the APDP. This is in line with the Dti’s objectives to balance the stimulation of the local industry whilst meeting international trade obligations. Recommendations on the outcome of the Review are expected during 2015.

16

The APDP consists of four pillars that drive the programme:

1. Import Duty2. Vehicle Assembly Allowance (VAA) (rebate mechanism)3. Production Incentive (PI) (rebate mechanism)4. Automotive Investment Scheme (AIS) (cash grant)

The four key elements of the APDP may be described as follows:

Tariffs: Import duties on vehicles and automotive components will remain at 2012 levels (25% on light vehicles and 20% on original equipment components) through to 2020. A preferential agreement will result in imported vehicles from the EU paying only 18% duty. These tariffs are meant to provide just enough protection to justify continued local vehicle manufacturing.

Vehicle Assembly Allowance (VAA): This support is in the form of duty-free import credits issued to vehicle manufacturers based on 20% (2013) of the ex-factory vehicle price, reducing to 19% in 2014 and in 2015 to 18% for all light motor vehicles produced domestically. The equivalent value of this to the OEMs is the allowance multiplied by the duty rate. This represented 4% of the ex-factory vehicle price in 2013 and will reduce to 3,6% in 2015. This support is effectively providing a lower duty rate for local vehicle manufacturers and should provide enough encouragement for high volume vehicle production in line with the target of doubling domestic production.

Production Incentive (PI): In 2013 this support started at 55% of the designated local value addition, reducing progressively by 1% annually to 50%, in the form of duty-free import credits. The equivalent value will be the incentive multiplied by the component/vehicle duty rate, so this represents 11% (on components) of value-added in 2013, and will reduce to 10% by 2018. There will be an additional amount for “vulnerable products” which will earn a PI of 80% in 2013 and 2014, reducing thereafter by 5% annually to 50% in 2020. Value-added has been defined in simple terms as the manufacturer’s selling price less the value of non-qualifying material and components. For OEM supply, the incentive will flow through the supply chain to the OEM and, in the case of component exports or replacement parts, to the component manufacturer. The value-add support is planned to encourage increasing levels of local value addition along the automotive value chain with positive spin-offs for employment creation. A 25% standard value is regarded as local value-added on the following qualifying raw materials originating in the Southern African Customs Union (SACU) which have been beneficiated to suit automotive specifications:

• Aluminium

• Brass

• Leather

• PlatinumGroupMetals(PGMs)

• Stainlesssteel

• Steel

With regard to vulnerable products, these high material content products will receive additional support in terms of the APDP to avoid any sudden and significant loss of export business compared to the export incentives inherent in the MIDP prior to 2013. In this regard 40% of the standard material(s) listed above and applicable to the following list of products will be regarded as local value-added:

• Alloywheels

• Aluminium products (engine and transmission components, heat exchangers and tubes, suspension

components and heat shields)

17

• Castironcomponents(engine/axle/brake/transmissionandrelatedtypesofcomponents)

• Catalyticconverters

• Flexiblecouplings

• Leatherinteriors

• Machinedbrasscomponents

• Steeljacks

The 40% level will be reduced by 5 percentage points per annum from 1 January 2015 to reach 25% from 1 January 2017 onwards.

Automotive Investment Scheme (AIS): Effective from July 2009, this investment scheme replaced the Productive Asset Allowance (PAA). The amended AIS guidelines, including the People-Carrier AIS, effective from July 2014, provide clarity on the non-taxability of the grant, as well as on the eligibility of automotive tooling companies to apply for the same benefits as those enjoyed by component manufacturers under the scheme. The AIS provides for a non-taxable cash grant of 20% of the value of qualifying investment in productive assets by light motor vehicle manufacturers and increased support of 25% of the value of qualifying investment in productive assets by component manufacturers and tooling companies as approved by the Dti. In addition, by achieving certain performance objectives, companies will be able to earn an additional 5% or 10%. This support is available to encourage investments by OEMs and component manufacturers in a manner that supports productive capacity upgrading. A competitiveness improvement cost grant of 20% of qualifying costs will also be available for automotive component manufacturers. The objective of this benefit is to enhance the competitiveness of component manufacturers through the improvement of processes, products, quality standards and related skills development through the use of business development services. The grant is a function of expenditure incurred by component suppliers to improve competitiveness and must be linked to a new or replacement model of a light vehicle manufacturer.

The APDP applies to light vehicles (passenger cars and light commercial vehicles) only, although components produced for heavy commercial vehicles also qualify for the Production Incentive (PI). In parallel with the launch of the APDP, other significant developments on other complementary fronts include the design of the Electric Vehicle Roadmap and the medium and heavy commercial vehicle (MCV/HCV) development strategy. The medium and heavy commercial vehicle sector and bus sector have also received increased attention. The rationale behind this is the fact that the MCV/HCV sector is labour intensive in terms of assembly, while a more active sector could also broaden South Africa’s component manufacturing industry. It is believed that this could be an opportunity for the component sector to grow its base and create additional employment. Recent progress made includes the Automotive Investment Scheme (AIS) for this sector which was published in November 2014 and was backdated to April 2014. The intention is to use AIS support to drive the future growth and development of the MCV/HCV sector and to promote additional localisation and employment creation. A number of opportunities are also being exploited to revitalise and grow bus production in the country through the roll-out of the Bus Rapid Transport Systems in Metros and implementing the revised state preferential procurement framework.

It is recognised that the APDP on its own will not be able to achieve the 2020 vision under the APDP without the support and coordination of a number of distinct factors including the alignment between all stakeholders. NAAMSA compiled a “Roadmap to automotive industry sustainability” which includes and outlines the following building blocks or key strategic interventions needed to deliver on the APDP objectives:

• StabilityintheAutomotivePolicyRegime–theAPDP

• APDP–Strategic“vulnerable”sectorsupport

• IndustrialDevelopmentCorporationfinancingatpreferentialrates

• Industrylocalisationandsupplierdevelopmentinitiatives

18

• Toolinginitiativeandadditionalfundingforthetoolingindustry

• Preferentialprocurementtoenhancedemandforlocalvehicles

• Retentionofexistinginternationaltradeagreements

• Developmentofnewinternationaltradeagreements

• Implementationofbeneficiationstrategy

• Reductionininfrastructure,logisticsandotherinputcosts

• Initiativestopromotelabourstability

• Attractionofglobalsuppliersandtosupportadditionallocalcontent

• EarlyintroductionofEuroVfuelandimprovedfuelquality

• Promotionoflowemissionandzeroemissionvehicles

• Stepstosupportmarketgrowththroughimprovedvehicleaffordabilityandareviewofthedisproportionately

high tax burden on buyers and users of motor vehicles in South Africa

• Theneedforalignmentbetweenindustrialpolicyandfiscalpolicy

As part of the industry’s Road map to 2020 in support of the APDP vision, industry initiatives and pro-active activities are taking place in many areas to address these challenges. Close collaboration and active participation by all role-players in the industry is of utmost importance and particularly the Dti, which should champion a number of the building blocks.

“Close collaboration and active participation by all

role-players in the industry is of utmost importance and particularly the Dti, which should champion a

number of the building blocks.”

19

SOUTH AFRICAN NEW VEHICLE MARKET FEATURES

Consumers in South Africa are spoilt for choice. In just about every segment of the market every brand has a benchmark product. There were 55 brands and 4 406 passenger car model derivatives for consumers to select from in 2014. This offered car buyers the widest choice to market size ratio anywhere in the world. On the light commercial vehicle side there were 31 brands with 615 model derivatives to choose from. The car ownership ratio in South Africa is in the order of 180 vehicles per 1000 persons.

New vehicle sales data is of utmost importance to government institutions, economists, automotive and component industries, dealerships and the public who use it for policy formulation, policy review, official decision-making and monitoring. In 2014, new vehicle sales in South Africa declined slightly for the first time over the past five years. A slowdown in the domestic economy, two interest rate increases as well as above-inflation new vehicle price increases contributed to the marginal year-on-year decline of 0,7% in aggregate new vehicle sales. After years of stability in new vehicle prices, the depreciation of the rand against major currencies resulted in inevitable above inflation new vehicle price increases in 2014.

Light commercial vehicles and more affordable cars dominated South Africa’s new vehicle market in 2014. Nine of 2014’s top ten selling passenger car and light commercial vehicle models were manufactured locally. These include the Toyota Hilux, Ford Ranger, Nissan NP200, Isuzu KB and Chevrolet Utility and four passenger cars, namely Toyota Corolla/Corolla Quest, VW Polo, VW Polo Vivo and the Toyota Quantum, with the budget Toyota Etios, imported from India, being the only exception.

New vehicle related sales turnover grew by 9,8% to R225 billion in 2014 over 2013. Growth in the new vehicle market will be intrinsically linked to the performance of the economy during 2015. Based on the assumption of another year of above-inflation new vehicle prices and modest improvement in the South Africa economy, the outlook for 2015 reflects minimal domestic sales volume growth.

Toyota SA Motors has maintained its overall market leadership in 2014 for the thirty-fifth year running with a market share of 19,8%, followed by Volkswagen Group of SA, Ford Motor Company of Southern Africa and Associated Motor Holdings. The following graph reveals the market shares of the top 10 OEMs/Importers in the country in 2014.

Overall new vehicle market share – 2014Source: NAAMSA/Lightstone Auto

Other, 10,0%Honda, 1,6%

Renault, 2,9%BMW Group, 4,1%

Mercedes-Benz, 5,7%

Nissan, 7,2%

GM, 9,6%

AMH/AAD, 10,8%Ford Motor Company, 11,6%

VW/Audi, 16,7%

Toyota, 19,8%

20

South Africa produces a full range of vehicles including passenger cars, light commercial vehicles, medium commercial vehicles, heavy commercial vehicles, extra heavy commercial vehicles and buses. The following table reveals the number of passenger car and light commercial vehicles produced over the past five years.

21

Production of passenger cars and light commercial vehicles – 2010 to 2014

PASSENGER CARS LIGHT COMMERCIAL VEHICLES

Market Exports as a % of total

Market Exports as a % of total Domestic Exports Total Domestic Export Total

2010 113 740 181 654 295 394 61,5 96 823 56 950 153 773 37,0

2011 124 736 187 529 312 265 60,1 108 704 84 125 192 829 43,6

2012 120 417 151 659 272 076 55,7 121 638 123 443 245 081 50,4

2013 113 247 151 893 265 140 57,3 127 051 121 345 248 396 48,9

2014 122 571 154 920 277 491 55,8 137 044 118 585 255 629 46,4Source: NAAMSA/Lightstone Auto

Total domestic vehicle production is expected to increase to around 627 500 units in 2015 compared to the 566 083 units in 2014, an improvement of 10,8%. South Africa exports the major portion of its vehicle production. The performance of exports would remain a function of the performance and direction of global markets. Signs are emerging of an improvement in the global economy. Recovering sales in the US and the EU and continued growth in Asia, particularly China, represent the main drivers behind global sales. Demand for light commercial vehicles in African markets was also expected to show above-average growth.

Passenger car models manufactured by the OEMs in 2014 included the following:

BMW 3-Series 4-door

General Motors Chevrolet Spark

Mercedes-Benz C-Class 4-door

Nissan Livina and Tiida

Toyota Corolla 4-door new and previous series, Fortuner

Volkswagen Polo new and previous series

Light commercial vehicle models manufactured by the OEMs in 2014 included the following:

Ford Ranger

Mazda BT-50

General Motors Chevrolet Utility and Isuzu KB

Nissan NP300 Hardbody, NP200

Toyota Hilux

The popularity of diesel engine models has been increasing steadily over recent years and in 2014 the market share for new diesel passenger car and light commercial vehicle sales accounted for 30,8% of total light vehicle sales, up from the 29,6% in 2013. Hybrid petrol and diesel vehicle sales comprised 651 units in 2014. The following table reveals the split between sales of new petrol and diesel light vehicles in South Africa.

22

Petrol versus diesel passenger cars and light commercial vehicles – 2010 to 2014

2010 2011 2012 2013 2014

Diesel Cars & Diesel Light Commercials 115 062 133 240 156 512 182 833 188 890Petrol Cars & Petrol Light Commercials 355 077 418 389 445 499 435 425 424 049Total Cars & Light Commercials 470 139 551 629 602 011 618 258 612 939Diesel Vehicles as % of Total 24,5% 24,2% 26,0% 29,6% 30,8%

Source: NAAMSA/Lightstone Auto

In 2014, the following medium, heavy and extra heavy commercial vehicle companies were represented in South Africa:

Associated Motor Holdings (AMH) Babcock

Bell Equipment FAW Trucks

Fiat Group Ford

Freightliner Fuso

General Motors/Isuzu Trucks Hino

Iveco JMC

MAN MarcoPolo

Mercedes-Benz NC2 Trucks Southern Africa

Peugeot Citroen Powerstar

Renault Trucks Scania

TATA Toyota

UD Trucks Volkswagen Group

Volvo Trucks

In 2014, the following bus companies were represented in South Africa:

Busmark 2000 Iveco

MAN Mercedes-Benz

Scania TATA

VDL Bus & Coach Volvo Buses

The 2014 truck market remained mixed to negative. Growth in the truck market has been achieved on the back of impressive results in the extra-heavy commercial vehicle and bus segments. Growth in the extra-heavy commercial vehicle segment flowed from the heavy construction, inter-regional and long-haul segments. The results can be attributed to the development of several key infrastructure projects. The extra-HCV category, which consists primarily of line-haul and construction vehicles, has derived the most benefit from the shortening of replacement cycles and an increase in both intra-Africa trade and business activities. The bus category performed well, supported by preferential procurement by government. A drop of almost 5% in medium commercial vehicle sales in 2014 indicates that small businesses are taking strain. The MCV segment, including vans, medium trucks and midi-buses, is mainly dependent on the domestic economy for momentum and the modest growth reflected in the country’s GDP with a downturn in the retail and wholesale areas had its impact on this category’s relative performance. Similar factors impacted on the HCV segment which is heavily involved in distribution activities.

23

Assembly of medium and heavy commercial vehicles and buses – 2010 to 2014

MEDIUM AND HEAVY COMMERCIALS

MarketExports as a % of total

Domestic Exports Total

2010 22 021 861 22 882 3,8

2011 26 656 803 27 459 2,9

2012 27 841 1 076 28 917 3,7

2013 30 924 1 206 32 130 3,8

2014 31 551 1 412 32 963 4,3Source: NAAMSA/Lightstone Auto

Medium and heavy commercial vehicles are regarded as productive assets and essential capital inputs in the economy. Therefore the level of protection on these vehicles has been set at 20% ad valorem, which is lower than the level on light commercial vehicles and passenger cars. Assembly operations of these vehicles are characterized by the duty-free importation of all the drive line components, which include the engines, transmissions, drive-axles and gearboxes. Tyres, which are manufactured domestically, are excluded and attract a 15% import duty.

“Assembly operations of these vehicles are characterized by the duty-free importation of

all the drive line components, which include the engines, transmissions, drive-axles

and gearboxes.”

24

AUTOMOTIVE EXPORTS AND IMPORTS – METHODOLOGY

The trade data in this publication is reflected for South Africa. A significant change in South Africa’s trade statistics, as approved by the Minister of Finance on 14 November 2013, was that South African trade with member countries of the Southern African Customs Union (SACU), comprising of Botswana, Lesotho, Namibia and Swaziland (BLNS), would now be included in South Africa’s trade data to provide a more accurate reflection of the country’s trade. BLNS country trade data had previously not been included in the country’s trade statistics because of the free interchange of goods between member countries from a customs point of view within SACU. The automotive industry’s trade performance has subsequently been revised with BLNS country data, with retrospective effect to 2010, where applicable, in the 2014 as well as in the 2015 publication.

The trade data in the Automotive Export Manual – 2015 – South Africa publication is based on the detailed Customs and Excise statistics for products eligible under the APDP, obtained from the South African Revenue Service (SARS). The Customs and Excise export values reflect free on board (FOB) values in nominal terms. The export values of the latest year (2014) are used to rank the countries in order of priority, from the most to the least important export country destination. The same principle is applied so as to prioritise the export data regarding regions, vehicles and component categories. There are 263 country export destinations listed by SARS. For purposes of relevance, one million rand (R1 million) is used in the Automotive Export Manual – 2015 – South Africa publication as a cut off level (measure) to determine the top 148 South African export country destinations. For ease of reference and for comparison purposes, the data with respect to the component categories, where applicable, are placed in alphabetical order. Percentages are rounded off.

The main purpose of this publication is to discern and highlight export and import trends, to prioritise export country destinations, to prioritise countries of origin, to identify opportunities via potential growth country and region destinations as well as to identify growth in products exported to specific country destinations. The publication also serves as a guide to track the export and import performance of the South African automotive industry under the new APDP. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components and certain categories may contain a small percentage of non-APDP components.

25

EXPORTS TO COUNTRIES

South Africa has strong bilateral ties with a substantial number of the world’s largest economies. China is the nation’s largest trading partner while other key economic partners include the EU, the US and Saudi Arabia. There are in the order of 2 000 firms from the EU and 600 from the US plying their trade in South Africa. The country is an active member of the World Trade Organisation (WTO). For South Africa to remain competitive in the global trade environment, the country would have to adapt its policies to fit in with the new emerging patterns of trade. Trade has changed and is now characterised by global value chains as opposed to being limited to only two countries at a time. Focusing on global trade value chains would not only promote international trade but could also increase trade between neighbouring countries and with other African countries.

The focus of the South African automotive industry is to build on existing exports and to explore and exploit new opportunities. All markets are not the same. All have unique challenges and opportunities. Furthermore, the world is interconnected and what happens in one country or continent inevitably affects all others, especially when it comes to globally integrated sectors such as the automotive sector.

The following table reveals that the reach in respect of the number of destinations of total automotive exports (vehicles and automotive components) from South Africa remain high. The number of export destinations, for values in excess of R1 million, reached 148 in 2014 with 22 countries recording export values in excess of R1 billion and 60 countries recording export values in excess of R100 million. The main destinations for South African vehicles and automotive components remain first-world markets. However, diversification into new emerging markets is a continuing trend and underlines the automotive industry’s competitiveness drive and a widening of the country’s traditional trading base.

EXPORTS

26

Total automotive export value and ranking by country 2014 vs. 2013

Country 2014R115 739,0

million

2014Ranking

2013R102 696,2

million

2013Ranking

Germany 21 651,5 1 19 138,7 1United States 17 145,0 2 18 660,9 2Namibia 8 322,1 3 6 622,7 3Belgium 8 157,9 4 3 004,7 8Japan 6 616,8 5 5 160,0 4United Kingdom 5 497,4 6 4 616,5 5Botswana 4 386,1 7 3 632,4 6Australia 3 939,3 8 2 555,8 9Mozambique 2 937,6 9 2 083,5 11Zambia 2 541,4 10 2 224,3 10Spain 2 338,0 11 1 847,5 14Zimbabwe 1 959,7 12 1 849,5 13Singapore 1 813,9 13 264,6 41Nigeria 1 766,9 14 2 046,7 12Swaziland 1 547,6 15 1 308,1 18France 1 543,5 16 1 796,6 15Canada 1 324,8 17 242,0 45Brazil 1 091,8 18 410,6 34Argentina 1 056,2 19 1 527,0 17Angola 1 047,9 20 1 031,4 21Democratic Republic of Congo 1 035,4 21 1 085,4 20Thailand 1 025,0 22 1 087,9 19

22 COUNTRIES ABOVE R1 BILLION

Netherlands 936,3 23 951,0 22Algeria 923,3 24 3 109,3 7Kenya 909,4 25 766,6 24Czech Republic 864,0 26 950,0 23Lesotho 823,8 27 743,4 26Poland 789,2 28 756,8 25Saudi Arabia 635,8 29 310,3 37India 561,0 30 440,7 32Tanzania 531,4 31 519,9 29Taiwan 522,2 32 439,8 33Hungary 520,4 33 364,7 36Korea Republic South 508,0 34 305,4 38United Arab Emirates 495,7 35 376,6 35Ghana 494,2 36 625,8 28Russia 467,7 37 723,1 27

EXPORTS

27

Malawi 448,4 38 516,0 30Turkey 438,6 39 441,3 31New Zealand 375,2 40 180,4 50China 354,8 41 1 719,9 16Malaysia 271,1 42 157,5 55Mauritius 256,8 43 213,7 48Mexico 224,6 44 235,3 46Hong Kong, China 208,1 45 256,9 43Italy 204,1 46 270,7 40Madagascar 188,3 47 188,0 49Uganda 186,6 48 139,4 57Gabon 186,0 49 249,3 44Gibraltar 182,5 50 125,0 58Sweden 178,7 51 295,8 39Austria 173,1 52 142,2 56Romania 170,2 53 167,5 53Bulgaria 156,2 54 222,6 47Ivory Coast 151,4 55 117,8 60Portugal 142,5 56 86,1 66Chile 120,2 57 108,3 62Oman 108,5 58 258,0 42Kuwait 102,0 59 103,4 63Ethiopia 101,6 60 158,3 54

60 COUNTRIES ABOVE R100 MILLION

Greece 98,4 61 73,4 70Norway 95,1 62 171,6 52Switzerland 91,0 63 102,1 64Qatar 88,3 64 25,6 96Sudan 78,7 65 30,1 93Liberia 76,4 66 55,3 76Estonia 73,4 67 117,6 61Djibouti 67,3 68 93,3 65Rwanda 63,0 69 34,7 90Sierra Leone 61,6 70 47,8 81Senegal 60,6 71 55,5 75Egypt 60,0 72 56,2 74Cameroon 46,7 73 48,8 78Tunisia 45,0 74 59,9 73Mauritania 43,5 75 48,4 80Mali 42,5 76 48,5 79Indonesia 42,0 77 39,6 85Mongolia 41,9 78 0,6 -

EXPORTS

28

Ireland 39,3 79 77,4 68Seychelles 37,8 80 34,7 89Republic of Congo 36,8 81 62,4 71Guadeloupe 36,0 82 40,5 83Trinidad &Tobago 32,1 83 118,3 59Israel 31,2 84 17,1 106Finland 31,0 85 39,9 84Ecuador 30,0 86 6,0 123Denmark 29,6 87 28,5 94Lebanon 25,4 88 25,4 97Burkina Faso 25,0 89 35,6 88Martinique 23,6 90 24,6 98Reunion 23,4 91 36,2 86Guinea 22,8 92 30,3 92Slovenia 20,7 93 11,9 112Brunei 19,5 94 14,5 109French Guiana 18,5 95 20,3 101Ukraine 16,4 96 12,6 111Philippines 14,9 97 3,2 134Burundi 13,4 98 7,9 118Morocco 13,4 99 61,3 72Somalia 13,3 100 22,8 99Panama 13,1 101 73,9 69Iceland 12,2 102 7,4 119Bahrain 11,9 103 8,8 117Jordan 11,7 104 34,6 91Benin 10,3 105 10,7 113Colombia 9,9 106 9,6 116Togo 9,9 107 3,1 135Kazakhstan 8,8 108 6,7 121St Helena 8,6 109 5,8 125Jamaica 7,6 110 16,5 107Peru 7,5 111 9,9 114Luxembourg 6,4 112 0,2 -Sri Lanka 6,1 113 1,0 152Central African Republic 5,9 114 19,2 103Costa Rica 5,7 115 52,6 77Slovak Republic 5,6 116 2,4 140Comoros 5,5 117 3,9 132Pakistan 5,5 118 1,2 149Equatorial Guinea 5,1 119 4,9 127Syria 5,0 120 - -

EXPORTS

29

Eritrea 4,7 121 5,0 126Venezuela 4,6 122 18,8 104Vietnam Republic 4,6 123 1,2 148Dominican Republic 4,6 124 5,9 124Barbados 4,4 125 9,7 115Cyprus 4,1 126 6,5 122Niger 3,3 127 4,8 128Haiti 3,3 128 44,0 82Surinam 2,9 129 20,1 102Cambodia 2,7 130 0,3 -New Caledonia 2,3 131 0,9 -Gambia 2,2 132 3,0 136Fiji 2,1 133 0,4 -Guatemala 2,0 134 20,7 100Uruguay 1,9 135 1,0 151Bangladesh 1,8 136 0,1 -Honduras 1,8 137 82,2 67Iran 1,5 138 1,3 147Libya 1,3 139 25,8 95Guyana 1,3 140 0,1 -El Salvador 1,2 141 14,7 108Chad 1,2 142 2,7 137Puerto Rico 1,1 143 - -Cape Verde Islands 1,1 144 0,1 -Belize 1,0 145 0,6 -Mayotte 1,0 146 3,5 133Grenada 1,0 147 2,6 138Papua New Guinea 1,0 148 1,4 145

148 COUNTRIES ABOVE R1 MILLION Source: AIEC, SARS

From 2013 to 2014, the total export values more than doubled in the case of 25 countries, which include: Belgium, Singapore, Canada, Brazil, Saudi Arabia, New Zealand, Qatar, Sudan, Mongolia, Ecuador, Philippines, Togo, Luxembourg, Sri Lanka, Slovak Republic, Pakistan, Syria, Vietnam Republic, Cambodia, New Caledonia, Fiji, Bangladesh, Guyana, Puerto Rico and Cape Verde Islands.

EXPORTS

“From 2013 to 2014, the total export values

more than doubled in the case of 25 countries.”

30

EXPORTS TO REGIONS

South Africa benefits from a strong network of trade agreements with a number of major partners and blocs, both within the region and further afield. In view of the trade arrangements enjoyed by South Africa, the country is extremely open to many of its largest import partners from the EU, the European Free Trade Association (EFTA) and SADC countries. New trade and business links in Africa, Asia, the Middle East, South America and, importantly, the new emerging automotive giants, China and India, are being forged. South Africa continues to seek beneficial trade agreements with individual countries and trading blocs. Regional integration is an African priority and South Africa is well positioned to capitalise on opportunities on the continent as Africa is the fastest-growing continent after Asia.

From an automotive perspective, South Africa forms an important part of international supply chains by being fully integrated into the global automotive environment and has escalated the importance of trading with new poles of economic growth over recent years. Globally, more countries are entering into bilateral and multilateral trade agreements, and, as a result, the challenge for the South African automotive industry is how to accommodate its policy regime in such agreements without affecting the integrity of the APDP.

The following tables reveal the South African automotive industry’s trade patterns with major trading blocs, including the EU, NAFTA, Africa, SADC and Mercosur.

EXPORTS

“South Africa benefits from a strong network of trade agreements with a number

of major partners and blocs, both within the region and further afield.”

31

European Union

Europe remained the South African automotive industry’s most important trading partner, accounting for R109,2 billion or 44,2% of the country’s total automotive trade of R247,2 billion under the APDP in 2014. Accounting for 48,4% of total automotive component exports and more than one third of the country’s vehicle exports in volume terms, developments in the EU have a direct and measurable impact on the local automotive industry’s overall performance.

Initially the EU consisted of just six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. Denmark, Ireland and the United Kingdom joined in 1973, Greece in 1981, Spain and Portugal in 1986 and Austria, Finland and Sweden in 1995. In May 2004, the biggest ever enlargement took place with ten countries joining: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia and Slovakia. On 1 January 2007 the EU welcomed its 26th and 27th members, Bulgaria and Romania. Croatia became the 28th member of the EU on 1 July 2013. The Czech Republic, Slovakia, Poland and Romania are significant players in the automotive sector. The new countries will also be bound by the current free trade agreement.

South Africa’s trade relations with the EU have been governed by the Trade, Development and Co-operation Agreement (TDCA). The main objective of the TDCA was to create a free-trade area between South Africa and the European Union (EU) over a 12-year period: thereby removing 90% of all trade barriers. The EU and South Africa will, in terms of the agreement, open their markets to each other at a different pace. The EU-SA Free Trade Agreement on Trade, Development and Co-operation became effective on 1 January 2000. The agreement was based on preferential rates of import duties for certain products having been deemed to originate in the partner country. South Africa would have granted duty-free status to 86% of its EU imports by 1 January 2012, while the EU have provided duty-free status to 95% of South Africa’s exports since 1 January 2010.

As from 15 December 2006, with the finalisation of the automotive part of the SA-EU Free Trade Agreement, the import duty on automotive components was reduced to duty-free on 15 December 2006 while the 10% import duty on passenger cars was reduced to 3,5% on 15 December 2006, to 1,5% on 1 January 2007 and fell away completely in January 2008. Passenger cars into the EU normally attract an import duty of 10% while original equipment components an import duty of 3% and aftermarket automotive parts an import duty of 4,5%. As far as commercial vehicles were concerned, South African commercial vehicle exports to the EU were already duty-free and unaffected by the agreement. South Africa returned the compliment with a 7% preference to the EU on passenger cars and light commercial vehicles and an 8% preference on medium and heavy commercial vehicles and buses. Original equipment components received no preference but a large number of aftermarket automotive parts qualified for lower import duties. In order to qualify for zero tariffs into the EU, South African vehicles and components must contain at least 60% local content. The definition of local content includes South African raw materials, labour, parts, transport, manufacturing costs and profit margins, as well as the value of components and subcomponents originally sourced from Europe.

A recent development is that on 15 July 2014 the Southern African Development Community and the EU initialed the European Partnership Agreement (EPA), which is a reciprocal trade arrangement. The EPA, once ratified, will replace the trade components of the current Trade, Development and Co-operation Agreement, which has governed relations between the EU and the Southern African Customs Union (SACU). The seven countries making up the Southern African Development Community EPA group comprise Angola, Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa. It was anticipated that the new arrangement should come into force during the course of 2015. Member countries view the conclusion of the EPA as important in consolidating political, strategic and trade relations. Overall the EPA represented a commercial improvement over the TDCA, which would begin translating into a better trade performance. South Africa opted to enter the EPA negotiations in a bid to seek improvements in the TDCA and to further harmonise trade relations within the region as well as further African

EXPORTS

32

integration, given that there are also EPA talks under way with regional blocs in West, East and Central Africa. The new deal preserves coherence within SACU, particularly in regard to maintaining the common external tariff, and improves the country’s access to the EU market. The EPA rules of origin represented an improvement over the TDCA, while an agreement was also secured that the EU would eliminate export subsidies on agricultural goods destined to SACU, as well as more effective safeguards to address damaging surges of imports.

In 2014 total automotive exports (vehicles and components) to the EU amounted to R43,8 billion or 37,9% of South Africa’s total automotive exports of R115,7 billion. Exports to the 13 new member countries forming part of the expanded EU comprised R2,6 billion or 5,9% of the R43,8 billion export value in 2014 compared to the R2,6 billion or 7,4% of the R35,1 billion export value to the EU in 2013. Total automotive exports to the EU increased by 24,8% or R8,71 billion from 2013 to 2014 in line with the year-on-year improvement of 4,5% in vehicle production in the region as well as an average weakening of 12,3% in the value of the rand compared to the Euro in 2014.

EXPORTS

“Total automotive exports to the EU increased by 24,8%

or R8,71 billion from 2013 to 2014 in line with the year-on-year

improvement of 4,5% in vehicle production in the region

as well as an average weakening of 12,3% in the value of the

rand compared to the Euro in 2014.”

33

Exports to the EU by product category – 2010 to 2014

Component 2010 2011 2012 2013 2014

TOTAL (R million) 33 116,4 38 577,4 34 030,7 35 096,2 43 801,2

TOTAL (average Euro million) 3 410,5 3 827,1 3 225,7 2 737,6 3 041,8

Air conditioners 4,4 17,7 22,1 22,1 31,2

Alarm systems 41,0 35,0 29,6 39,0 22,2

Automotive tooling 56,7 104,0 160,6 161,5 202,3

Axles 34,8 125,7 92,5 186,6 146,0

Batteries 20,8 35,5 28,7 68,8 103,0

Body parts / panels 28,2 25,8 22,1 30,9 59,4

Brake parts 31,9 37,4 21,7 21,7 33,2

Car radios 11,0 30,0 36,1 0,5 1,1

Catalytic converters 11 886,1 16 013,7 12 389,9 13 288,6 14 124,0

Clutches / shaft couplings 198,0 143,8 140,1 169,8 196,9

Engines 17,6 6,1 16,3 7,5 9,2

Engine parts 728,1 741,0 834,0 1 019,3 1 366,8

Filters 143,0 165,3 131,7 157,0 164,3

Gaskets 31,5 29,6 34,2 42,7 41,7

Gauges / instruments / parts 38,1 45,2 42,9 44,7 94,9

Gear boxes 7,0 68,8 14,8 4,5 18,3

Glass 284,1 256,0 210,6 324,9 380,4

Ignition / starting equipment 35,5 22,2 15,4 21,7 35,6

Jacks 20,4 14,2 22,8 10,6 0,9

Lighting equipment 137,7 139,2 131,4 154,7 145,0

Radiators / parts 489,2 642,3 577,3 672,6 690,3

Road wheels / parts 323,3 401,4 251,5 123,7 81,7

Seats 0,3 0,6 0,3 0,5 1,6

Seat belts 0,5 1,1 0,7 0,4 1,3

Stitched leather seats / parts 2 871,1 2 157,3 1 693,4 1 499,3 1 244,1

Shock absorbers / suspension parts 296,6 373,8 366,5 386,6 388,6

Silencers / exhausts 1 415,9 1 790,4 1 326,8 839,7 214,3

Springs 21,3 21,5 7,8 7,3 6,3

Steering wheels / columns 131,0 110,0 123,9 131,8 13,1

Transmission shafts 159,6 230,5 247,0 217,1 286,0

Tyres 381,3 624,3 392,5 274,4 443,6

Wiring harnesses 40,4 61,1 63,9 75,9 94,5

Other parts 714,2 1 423,5 1 250,0 1 240,7 1 472,5

Light vehicles 12 446,2 12 619,2 13 327,2 13 841,6 21 653,5

Medium / Heavy vehicles 69,6 64,2 4,4 7,5 33,4Source: AIEC, SARS

EXPORTS

34

Top export destinations in the EU with export value – 2014

EXPORTS

35

NAFTA (North American Free Trade Area)

The North American Free Trade Area consists of the USA, Canada and Mexico and represented South Africa’s second largest trading region in 2014. Exports to NAFTA amounted to R18,7 billion or 16,2% of total automotive exports of R115,7 billion in 2014.

South Africa is a beneficiary of the USA’s Generalised System of Preferences (GSP), which was instituted on 1 January 1976 and grants duty-free status to some goods. Since 2001 trade with the US has been significantly increased due to the African Growth and Opportunity Act (AGOA), which was an extension of the GSP and allows duty-free access of additional products into the US. The African Growth and Opportunity Act (AGOA) represents a non-reciprocal gesture by the US aimed at liberalizing trade and assisting the growth and development of sub-Saharan African countries by extending duty-free and quota-free access into the US market in respect of a broad range of products. The effective commencement date of the duty-free access provisions in terms of AGOA was 1 January 2001 to last until 30 September 2008, which was subsequently extended until 30 September 2015. AGOA provides three important benefits to sub-Saharan African exporters. Firstly, it extends the duty-free treatment under the GSP programme to September 2015. Secondly, AGOA eliminates most of the limitations of the GSP programme for sub-Saharan African countries. Thirdly, AGOA expands the product coverage of the GSP programme exclusively for products of sub-Saharan Africa. Under AGOA, 98% of South African exports to the US enter the country without tariffs or quotas. A major portion of the country’s exports to the US are manufactured goods, such as vehicles, which have assisted to enhance manufacturing in the South African domestic market.

The cornerstone of AGOA is the expansion of development and trade with Africa, providing diverse opportunities to grow and integrate the continent into the global economy. South Africa, together with 39 other African countries, has been designated as eligible countries in terms of the Act. In October, 2011 President Barack Obama signed a presidential proclamation adding Niger, Ivory Coast and Guinea to the 37 countries already eligible for AGOA benefits. AGOA builds on existing US trade programmes and extends the 4 650 products previously only available under the Generalised System of Preferences programme (GSP) by an additional 1 835 items. The exported products must be of South African origin as defined in the rules of origin provisions. Various automotive components and, importantly, motor cars as well as motor vehicles for the transportation of persons and of goods now qualify for a duty-free and quota free access into the US. Duty rates into the US normally range from 2,5% to 25% in respect of various types of vehicles.

The elimination of tariffs enhances a country’s potential to compete against the same products not accorded similar tariff benefits in the relevant countries and South Africa is one of the few countries in Africa being able to take advantage of the market access provided for manufactured products under AGOA, including vehicles. Under AGOA, trade in automotive products between the US and South Africa has grown substantially in recent years as American consumers benefit from the reduced import duties. Imports of vehicles, original equipment components as well as replacement parts into South Africa have also increased substantially. The interests of American automotive corporations are well represented in South Africa. AGOA and its extension beyond 2015 will be supportive of the continent’s regional-integration aspirations, which the US supports, and will also be beneficial to US companies hoping to tap into new growth markets in Africa. Allowing the programme to expire or excluding South Africa from AGOA would disrupt trade flows between the two regions, significantly diminish its value to Africa and substantially reduce intra-African trade and regional integration.

In 2014 exports to NAFTA at R18,69 billion declined by 2,4% compared to the R19,14 billion exported in 2013. The decline could be attributed to the drop in vehicle exports to the US from 63 457 units in 2013 to 42 230 units in 2014. The US was the sole export destination for the previous Mercedes-Benz C-class model manufactured in South Africa. The new generation Mercedes-Benz C-Class model, launched in 2014 in South Africa, is now also manufactured in the US, resulting in no more exports of this model from South Africa to the US. Vehicle exports to the US in 2014 comprised mainly of the left hand drive BMW 3-series.

EXPORTS

36

Exports to NAFTA by product category – 2010 to 2014

Component 2010 2011 2012 2013 2014

TOTAL (R million) 16 496,0 20 912,1 20 900,7 19 138,2 18 691,1

TOTAL (average US$ million) 2 253,6 2 884,4 2 545,8 1 983,2 1 724,3

Air conditioners 1,3 0,2 0,1 0,1 3,1

Alarm systems 2,6 1,9 2,8 2,9 1,5

Automotive tooling 38,1 77,4 36,9 46,5 45,4

Axles 41,6 119,3 80,9 40,6 125,0

Batteries - - 0,3 0,1 0,6

Body parts / panels 1,2 3,0 3,4 1,3 3,4

Brake parts 1,0 1,6 3,7 2,6 2,0

Catalytic converters 1 810,6 2 263,0 2 416,1 2 399,7 3 241,0

Clutches / shaft couplings 10,3 14,6 19,9 26,2 35,2

Engines 2,1 44,2 13,4 6,5 3,5

Engine parts 370,8 807,0 791,9 675,1 814,7

Filters 37,5 20,1 39,5 25,0 3,5

Gaskets 2,1 1,5 1,9 2,9 6,6

Gauges / instruments / parts 17,9 50,4 54,1 18,7 30,8

Gear boxes 25,3 31,0 41,4 33,7 49,4

Glass 3,8 1,3 0,5 0,1 0,4

Ignition / starting equipment 3,7 2,9 10,2 4,0 4,1

Jacks 28,8 39,4 34,0 17,3 1,4

Lighting equipment 37,4 19,7 12,9 24,6 8,7

Radiators / parts 146,1 199,9 163,4 194,4 248,4

Road wheels / parts 3,5 13,3 5,7 5,5 19,4

Seats 0,2 0,4 4,8 0,1 0,5

Seat belts 0,1 0,3 - - -

Stitched leather seats / parts 15,4 16,0 16,7 16,1 11,2

Shock absorbers / suspension parts 1,4 9,0 22,5 3,6 43,7

Silencers / exhausts 178,4 221,9 257,8 262,2 165,0

Springs 0,2 0,5 0,8 0,4 0,3

Steering wheels / columns 21,9 27,5 31,7 47,5 14,2

Transmission shafts 8,9 20,4 28,0 9,9 20,8

Tyres 27,0 106,7 128,9 58,5 48,4

Wiring harnesses 2,6 5,1 7,4 2,1 6,5

Other parts 162,2 339,6 736,9 258,9 260,5

Light vehicles 13 454,9 16 336,9 15 928,8 14 951,1 13 471,2

Medium / Heavy vehicles 37,1 116,1 3,4 - 0,7Source: AIEC, SARS

EXPORTS

37

Top export destinations in NAFTA with export value – 2014

EXPORTS

38

Africa

Africa’s economic development over the past decade has been noteworthy and with its economy projected to continue growing at between 2% and 3% above the global average over the next five years, the continent now commands a prominent position on the world stage. Six of the world’s fastest growing economies are currently in Africa, including Angola, Nigeria, Ethiopia, Chad, Mozambique and Rwanda, while several others are expanding at growth rates of over 6% a year. The African middle class is already estimated to have expanded by 30% over the past decade to 120-million people while 60% or 680 million of the continent’s population are younger than 25. Investors look to tap into the continent’s growing consumer markets and a key investment theme therefore is increasing consumption expenditure underpinned by a growing middle class.

Africa’s infrastructure remains one of the major hindrances to the moving of goods in the region. Exporting goods within Africa is more costly than exporting them between Africa and other parts of the world. Road transport is the main mode of transport, accounting for up to 90% of all freight movements in Africa. Infrastructure development is therefore a key driver for progress across Africa and a critical enabler for sustainable and socially inclusive growth. This will unlock the economic potential of the continent and provide development opportunities for communities, cities and regions. Other than infrastructure bottlenecks, Africa has to contend also with the diverse set of tariffs that complicates multilateral and even bilateral trade on the continent. Non-tariff barriers have been an even more complicated obstacle to intra-African trade as they are presented in an array of complex situations. An approach across Africa, led by some major economic powerhouses to see regional integration fast-tracked, could have the effect of increasing intra-Africa trade. Countries need to increase investments in infrastructure and eliminate or significantly reduce non-tariff barriers as practical steps to increase intra-regional trade on the continent. Governments play a significant role in this and could do a lot to create an enabling environment that would entice entrepreneurship, investments, and business growth.

Government policies should focus on ensuring that the economies of countries continue to grow, that more people will become part of the emerging middle class who would then be able to afford a new vehicle, and that Africa does not become a dumping ground for low quality used car imports. Used car imports dominate sales and will continue to hinder new car sales on the continent. Government intervention could assist in this regard to either ban used car imports or to adjust the import duties to create a more level playing field between new and used car imports. A more robust automotive market with more sophisticated market structures, proper dealerships and workshops and even component manufacturing and assembly plants would contribute to industrialization and benefits for the continent.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production in Africa grew by 9,6% from 758 000 units in 2013 to 831 000 units in 2014 with the continent’s global market share slightly up to 0,93% in 2014 compared to 0,87% in 2013. South Africa accounted for 68% of Africa’s total vehicle production while, mainly Morocco with 231 986 units and Egypt with 27 020 units, accounted for the balance. In 2014 new passenger car sales of 1,1 million units were recorded in Africa, along with 456 000 commercial vehicle sales. South Africa and northern African countries constituted the main markets. Used car imports are not allowed in South Africa and in northern African countries but comprise the bulk of sales in the rest of countries on the continent. Companies having a strong distribution system have a distinct competitive advantage on the continent.

The following table reflects South African automotive exports to the African continent. Annual comparisons should take account of the following – the 2013 and 2014 total automotive export data to Africa provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to Africa, excluding BLNS country data, declined by 7,4% from the R17,89 billion in 2013 to R16,56 billion in 2014. Total automotive exports, including BLNS country data, increased by 4,7% from the R30,19 billion in 2013 to R31,62

EXPORTS

39

billion in 2014. Although the export values to sub-Saharan countries reflected year-on-year increases, vehicle exports of the domestic industry’s top destinations in Africa, namely to Algeria and Nigeria, reflected a substantial decline due to new vehicle import regulatory changes being implemented on new vehicle imports in 2014. Vehicle exports to 41 African countries declined from 78 787 units in 2013 to 61 593 units in 2014.

EXPORTS

“Although the export values to sub-Saharan countries reflected

year-on-year increases, vehicle exports of the domestic

industry’s top destinations in Africa, namely to Algeria

and Nigeria, reflected a substantial decline due to

new vehicle import regulatory changes being implemented on new vehicle imports in 2014.”

40

Exports to Africa by product category – 2010 to 2014Component 2010 2011 2012 2013* 2014* 2013** 2014**

TOTAL (R million)Including BLNS country data 17 707,4 19 997,2 25 862,2 30 194,5** 31 621,2**

TOTAL (R million) Excluding BLNS country data 8 719,2 11 588,9 17 796,9 17 887,9* 16 562,5*

Air conditioners 10,7 12,6 18,6 18,1 36,4 30,1 45,6

Alarm systems 22,3 14,7 21,4 21,6 51,8 36,6 85,3

Automotive tooling 88,5 99,7 314,8 291,1 283,7 396,8 442,1

Axles 13,7 20,9 42,9 61,4 57,9 87,3 87,0

Batteries 94,3 106,3 146,7 166,6 203,7 209,8 278,3

Body parts / panels 26,2 23,6 80,8 77,6 22,8 144,9 122,5

Brake parts 49,1 33,6 54,4 70,6 75,4 145,7 165,9

Car radios 8,6 5,8 9,9 8,2 9,7 24,2 20,4

Catalytic converters 29,2 63,8 90,2 86,1 88,3 107,0 104,3

Clutches / shaft couplings 16,2 20,9 31,9 29,6 39,4 72,5 85,9

Engines 97,8 104,7 194,2 187,3 238,8 238,8 319,9

Engine parts 181,2 182,5 339,5 334,1 469,1 585,0 732,4

Filters 99,1 110,4 162,4 154,7 202,5 207,7 294,5

Gaskets 35,0 33,1 59,1 79,1 83,4 106,7 114,8

Gauges / instruments / parts 126,1 164,6 210,5 244,7 311,2 312,8 403,8

Gear boxes 16,7 19,3 31,6 41,2 25,8 74,3 82,6

Glass 10,8 11,9 13,4 15,7 17,9 54,6 64,1

Ignition / starting equipment 37,1 61,1 73,3 64,5 105,3 136,2 192,2

Jacks 7,8 14,3 15,0 24,0 31,7 26,9 36,3

Lighting equipment 22,7 25,6 34,5 42,6 44,4 53,8 71,6

Radiators / parts 16,4 22,2 32,4 29,5 26,7 58,4 59,8

Road wheels / parts 21,0 21,3 70,8 68,3 30,4 110,3 68,9

Seats 2,9 2,0 3,7 4,3 8,9 9,7 16,1

Seat belts 1,2 1,5 1,5 1,7 2,5 4,2 4,9

Stitched leather seats / parts 3,4 10,0 2,4 4,7 7,2 11,0 17,0

Shock absorbers / suspension parts 19,3 31,7 33,1 33,8 37,3 58,5 63,9

Silencers / exhausts 6,4 4,6 8,7 5,7 8,3 15,5 16,6

Springs 2,2 4,7 6,8 10,2 6,8 16,9 13,4

Steering wheels / columns 7,3 5,9 11,0 12,1 10,8 20,1 22,9

Transmission shafts 172,6 219,7 267,2 322,9 426,8 448,6 573,8

Tyres 583,4 685,6 810,8 725,3 941,8 1 352,6 1 616,3

Wiring harnesses 2,9 2,8 12,3 12,2 17,4 33,2 159,2

Other parts 1 494,4 1 768,4 2 517,2 2 846,8 3 385,8 5 325,8 6 384,6

Light vehicles 4 627,5 6 917,7 10 857,2 10 598,9 7 555,5 16 958,1 15 176,8

Medium / Heavy vehicles 765,2 761,4 1 216,7 1 192,7 1 697,1 2 719,9 3 677,5Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

EXPORTS

41

Top export destinations in Africa with export value – 2014

EXPORTS

42

Southern African Development Community (SADC)

South Africa’s automotive exports to SADC comprised 81,8% or R25,86 billion of its R31,62 billion automotive exports to the continent and 22,4% of its total automotive exports of R115,7 billion in 2014.

While sub-Saharan Africa’s growth had outstripped global growth for the past 15 years, this has slowed down somewhat, owing to a number of challenges, including the drop in commodity prices. Global economic forecasts have been revised down and this slower growth has implications for Africa which is now more integrated into the global economy than ever before. Lower growth prospects in emerging economies, to which sub-Saharan African countries export, is a major external risk as it would reduce demand for commodities. Sub-Saharan Africa is facing downside risks especially because of its links to China’s economy which grew by 7,4% in 2014, a level not seen since 1990 when the country was hit by sanctions. China’s economic growth is expected to slip further to 7% in 2015. Sub-Saharan Africa could be negatively affected by a sharper than expected slowdown in China or further deterioration in commodity prices. However, global investors are progressively positioning themselves for the evolving growth and development throughout Africa and momentum will come from major infrastructure projects, industrialization and regional integration.

South Africa’s participation in the Southern African Development Community (SADC), comprising of 15 sub-Saharan African countries, allows access to a market of approximately 300 million people and an estimated regional GDP of US$600 billion. SADC operates as a Free Trade Area. The 15 SADC countries include Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. South Africa joined the SADC in August 1994. The SADC Protocol on Trade was signed on 24 August 1996 and came into force on 25 January 2000. The SADC Free Trade Area was initiated in 2000; its original members were the SACU countries (South Africa, Botswana, Lesotho, Namibia, and Swaziland). Next to join were Mauritius, Zimbabwe, and Madagascar. In 2008 Malawi, Mozambique, Tanzania, and Zambia joined, bringing the total number of SADC FTA members to 12. Currently Angola, Seychelles and the Democratic Republic of Congo remain outside the agreement. The SADC FTA was launched in 2008 when 85% of tariff lines became duty-free. The remaining 15% of tariff lines were deemed sensitive and were accorded a longer liberalisation time frame up to 2012, except for Mozambique, which would complete its tariff phase down with respect to imports from South Africa by 2015. Eleven members implemented the Protocol in September 2000 after ratification. To date all signatories except for Zimbabwe have translated their commitments into domestic enabling legislation. Angola has not yet made an offer or implemented the SADC Trade Protocol while the Democratic Republic of Congo and Seychelles, even though members of SADC, are not party to the SADC Trade Protocol. The Seychelles, however, is in the process of becoming a party to the Trade Protocol. Its tariff offer was accepted on a technical level and had been submitted in June 2014 to the Committee of Ministers of Trade for approval. Seychelles would, after approval, be in a position to complete its internal processes and ratify its accession and implement the tariff phase down schedule.

The intention is that the agreement encourages economies of scale, creating competitive SADC-wide industries and thereby increasing intra-regional trade and enhancing foreign investment into the region. Given the high level of competition for foreign direct investments among emerging markets, South Africa has placed greater importance on forming strong economic trading blocs in order to gain access to key markets. The SADC agreement consists of general objectives rather than specific obligations. The key policy objective is to strengthen trade and development linkages between South Africa and the other SADC countries. By 2012 about 98% of SADC merchandise trade would be subject to zero tariffs. The phase-down offers are country-specific on the principle of reciprocity, for example, tariff preferences will be extended only to member states that have submitted their instruments of implementation.

EXPORTS

43

The following table reflects South Africa’s automotive exports to SADC. Annual comparisons should take account of the following – the 2013 and 2014 total automotive export data to SADC provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to SADC, excluding BLNS country data, increased by 13% from the R9,56 billion in 2013 to R10,80 billion in 2014. Total automotive exports, including BLNS country data, increased by 18,3% from R21,87 billion in 2013 to R25,86 billion in 2014. Several SADC countries have consistently remained amongst the South African automotive industry’s top export destinations over the past two decades and the increase in export sales of commercial vehicles and aftermarket replacement parts reflects this continuing trend.

EXPORTS

“Several SADC countries have consistently remained amongst the

South African automotive industry’s top export destinations

over the past two decades and the increase in export

sales of commercial vehicles and aftermarket replacement

parts reflects this continuing trend.”

44

Exports to SADC by product category – 2010 to 2014Component 2010 2011 2012 2013* 2014* 2013** 2014**

TOTAL (R million)Including BLNS country data

13 880,7 14 331,4 17 521,8 21 865,2** 25 860,3**

TOTAL (R million) Excluding BLNS country data

4 907,1 5 930,9 9 456,4 9 558,6* 10 801,4*

Air conditioners 3,9 11,8 16,2 12,0 32,8 24,0 42,0

Alarm systems 12,3 10,4 14,5 14,5 31,6 29,5 65,0

Automotive tooling 44,9 68,3 145,3 157,1 201,5 262,8 359,8

Axles 12,9 19,5 40,8 59,5 37,0 85,4 66,1

Batteries 92,9 105,2 145,5 164,2 200,8 207,4 275,4

Body parts / panels 21,9 21,7 74,2 72,7 18,9 140,0 118,6

Brake parts 24,5 28,3 43,5 56,1 62,3 131,2 152,9

Car radios 7,1 5,4 6,6 7,6 7,9 23,6 18,7

Catalytic converters 18,4 57,4 75,6 64,9 72,2 85,8 88,2

Clutches / shaft couplings 14,1 17,1 25,3 24,0 33,2 66,9 79,7

Engines 86,2 79,6 161,6 178,2 225,6 229,7 306,8

Engine parts 157,3 152,8 277,2 277,9 394,5 528,8 657,8

Filters 88,9 101,4 144,5 137,0 168,4 190,0 260,3

Gaskets 29,4 26,7 48,1 70,2 73,8 97,8 105,2

Gauges / instruments / parts 83,8 112,5 159,4 181,9 228,1 250,0 320,6

Gear boxes 14,2 18,6 28,2 38,0 24,3 71,1 81,1

Glass 8,9 9,6 10,4 11,9 14,3 50,8 60,6

Ignition / starting equipment 33,4 55,7 67,0 56,5 93,8 128,2 180,8

Jacks 6,1 11,1 12,6 19,5 26,3 22,4 30,9

Lighting equipment 19,4 20,6 26,0 35,6 35,9 46,8 63,2

Radiators / parts 14,1 18,8 27,9 25,8 22,9 54,7 56,1

Road wheels / parts 19,8 20,3 66,2 65,8 28,8 107,8 67,2

Seats 2,5 1,9 3,2 3,6 8,2 9,0 15,4

Seat belts 1,0 1,4 1,2 1,4 2,1 3,9 4,6

Stitched leather seats / parts 3,3 1,4 2,2 4,2 5,7 10,5 15,4

Shock absorbers / suspension parts 17,8 30,8 31,4 31,5 36,0 56,2 62,7

Silencers / exhausts 5,2 3,9 7,5 5,3 6,0 15,1 14,2

Springs 1,8 4,5 4,4 8,9 6,0 15,6 12,6

Steering wheels / columns 5,6 5,3 9,2 7,8 9,3 15,8 21,4

Transmission shafts 111,9 153,2 198,5 243,1 360,7 368,8 507,7

Tyres 432,5 450,5 596,2 555,0 750,4 1 182,3 1 424,9

Wiring harnesses 2,2 2,3 10,8 11,6 16,0 32,6 157,8

Other parts 1 204,4 1 438,6 2 093,6 2 386,8 2 808,2 4 865,8 5 807,0

Light vehicles 1 561,8 2 130,0 3 724,1 3 440,0 3 129,0 9 799,2 10 750,3

Medium / Heavy vehicles 742,7 734,3 1 157,5 1 128,5 1 628,9 2 655,7 3 609,3Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

EXPORTS

45

Top export destinations in SADC with export value – 2014

EXPORTS

46

Mercosur (Mercado Común del Sur – Common Market of South America)

Mercosur was created by Argentina, Brazil, Paraguay and Uruguay in 2001, with Mexico and Venezuela recently being accepted to join Bolivia and Chile as associate members. The commercial free trade agreement negotiations between Mercosur and South Africa began formally with the signing of a Framework Agreement in December 2000. Until December 2002 the parties opted to negotiate an Agreement on Fixed Tariff Preferences as an intermediate stage towards the free trade agreement. Since June 2003 the negotiations were expanded to include the other countries under the Southern African Customs Union (SACU). A preferential trade agreement (PTA) between SACU and Mercosur was signed in December 2004. The aim of the agreement was to strengthen existing relations, promote the expansion of trade, and establish the conditions for the creation of a free trade agreement between Mercosur and SACU. The previously concluded “Framework Agreement for the Creation of a Free Trade Area between Mercosur and the Republic of South Africa” provides for actions aimed at increasing trade, including the mutual granting of tariff preferences. The understanding also makes provision for, amongst others, additional protocols on the automotive sector and customs co-operation, as well as further negotiations to broaden and deepen the Agreement, including further exchanges of trade preferences. Discussions are continuing on issues such as rules of origin, sanitary and phyto-sanitary regulations, customs procedures and additional products and future negotiations may involve the granting and winning of tariff concessions in respect of automotive products.

During 2011 Brazil increased the tax on industrialized products supplied to the vast automobile industry by 30 percentage points for manufacturers who fail to meet stricter local content rules. To avoid the higher tax, car manufacturers must meet at least six of the 11 requirements. These include the use of at least 65% of local/regional steel and 80% of automotive parts content to be local. In addition, car and truck manufacturers must invest in R&D to the equivalent of 0,5% of their gross income. The tax rise will mostly be felt by those automotive component manufacturers and OEMs without plants in Brazil, or those that only assemble vehicles in the country with a high level of imported parts. The Inovar-Auto program is currently being developed under the supervision of the Ministry of Development, Industry and Foreign Trade and is aimed at stimulating innovation throughout the entire supply chain in the automotive industry by assisting it to become more competitive and increasingly orientated to deliver strategic sustainable and eco-friendly solutions.

Trade with Mercosur remains relatively small in the context of South Africa’s overall trade regime and in respect of automotive exports (vehicles and components) comprised only R2,27 billion or 2% of South Africa’s total automotive exports of R115,7 billion in 2014. The bulk of exports was destined for Brazil and Argentina and consisted of a limited range of products.

EXPORTS

“Trade with Mercosur remains relatively small in the context of South Africa’s overall trade regime and in respect of automotive exports (vehicles and

components) comprised only R2,27 billion or 2% of South Africa’s total automotive

exports of R115,7 billion in 2014.”

47

Exports to Mercosur by product category – 2010 to 2014

Component 2010 2011 2012 2013 2014

TOTAL (R million) 972,1 998,8 1 503,2 2 047,0 2 270,8

Air conditioners - - 0,1 0,1 0,1Alarm systems 0,1 3,9 3,8 2,1 0,5Automotive tooling 2,9 6,3 52,7 41,6 44,7Axles - 0,3 0,2 0,2 1,5Batteries - - - - 0,2Body parts / panels 1,5 - 0,9 0,8 5,0Brake parts - - 1,0 0,5 0,1Car radios - - - - 0,9Catalytic converters 13,5 9,6 129,7 228,1 243,4Clutches / shaft couplings 35,3 2,1 2,6 3,4 5,7Engines 603,8 532,7 248,9 2,7 0,5Engine parts 82,8 57,6 216,8 279,6 215,2Filters 2,2 3,1 2,7 3,8 2,2Gaskets 2,3 1,3 0,3 1,0 0,5Gauges / instruments / parts 3,3 1,7 3,8 2,5 3,3Gear boxes - - 0,1 0,6 0,1Glass 0,7 1,4 0,2 0,4 0,9Ignition / starting equipment - - 0,1 0,3 0,1Jacks - 0,7 0,1 - -Lighting equipment 3,8 4,3 2,6 0,2 0,2Radiators / parts 56,4 52,0 52,7 0,7 0,1Road wheels / parts - - 56,3 207,9 152,1Seats - - - - 0,2Stitched leather seats / parts 0,3 0,1 0,9 0,1 2,1Seat belts 0,2 - -Seats - - - 0,2Shock absorbers / suspension parts - - 0,1 - 0,2Silencers / exhausts 12,1 12,5 12,7 20,4 27,1Steering wheels / columns 6,3 5,0 0,8 8,7 0,1Springs 3,9 - 0,2Transmission shafts 35,3 36,8 71,0 81,7 67,6Tyres 90,5 221,7 114,8 90,2 14,0Wiring harnesses 0,2 1,8 1,0 2,0 1,3Other parts 17,5 40,7 475,1 1 012,0 540,3Light vehicles 0,5 1,8 47,1 54,5 939,3Medium / Heavy vehicles 0,8 1,4 - 0,9 0,9

Source: AIEC, SARS

EXPORTS

48

Top export destinations in Mercosur with export value – 2014

EXPORTS

49

EXPORTS OF VEHICLES

The export performance of the industry illustrates that South Africa is meeting the cost and quality requirements of international customers as well as those of company head offices. The efficiencies required to successfully achieve the level of export penetration into the growing number of export markets have had significant benefits for South African consumers with the affordability of new vehicles having improved significantly over the past decade. South African manufactured left and right hand drive passenger cars and light commercial vehicles were exported to 88 destinations in 2014. Toyota continued to be the pace-setter in terms of exported vehicles. Passenger car exports comprised 156 570 units or 56,6%, light commercial vehicles 118 891 units or 42,9% and medium and heavy commercial vehicles and buses 1 412 units or 0,5% of the total of 276 873 units exported in 2014.

During 2014, five models achieved production volumes in excess of 40 000 units of which one model achieved a production volume in excess of 100 000 units. A key challenge that remains is to raise local content, particularly in the vehicles being exported in large volumes. Apart from creating additional jobs, higher local content would lend stability to the industry and substantially reduce logistics costs.

The following table reflects that the UK, followed by the US, Australia and Japan were South Africa’s top destinations for light vehicle exports in 2014. Exports to the EU reflected a noteworthy improvement increasing to 101 522 units, thus exceeding the 100 000 mark for the first time.

Top 10 destinations and regions for light vehicles (passenger cars and light commercial vehicles) exported – 2010 to 2014

Country 2010 2011 2012 2013 2014

TOTAL (R billion) 37,9 42,3 48,7 57,7 66,3

TOTAL (units) 238 604 271 654 276 916 275 198 275 461

RANKING OF EXPORTERSNumber 1 to Number 5

VWToyotaMBSABMWFord

ToyotaVW

BMWMBSANissan

ToyotaVW

MBSABMWFord

ToyotaBMWVW

MBSAFord

ToyotaBMWVW

FordMBSA

UK 39 865 43 688 41 111 40 763 57 739USA 58 370 68 948 66 219 63 457 42 230Australia 18 112 8 612 14 325 14 975 28 346Japan 21 348 22 475 17 226 24 869 25 097Algeria 11 757 24 191 24 281 29 917 15 356France 13 389 13 549 11 558 11 461 11 175Nigeria 7 151 11 671 14 874 11 704 10 401Angola 931 1 911 7 758 7 476 7 547Germany 10 961 8 362 7 060 5 121 6 738Russia 217 1 455 6 082 5 158 6 587Other 66 477 73 952 68 113 60 297 64 245EU 90 734 98 044 87 620 79 811 101 522NAFTA 58 370 68 948 66 219 63 457 47 985AFRICA 42 533 67 442 79 228 77 589 60 189

Source: NAAMSA/Lightstone Auto, SARS

EXPORTS

50

Exports of medium and heavy commercial vehicles and buses, in relation to passenger cars and light commercial vehicles, have been relatively insignificant in terms of volumes, although the thousand unit export level had been exceeded for the third year in a row and this trend is set to continue. The main export destinations for trucks and buses have consistently been South Africa’s neighbouring countries in the SADC region.

Top destinations and regions for medium, heavy commercial vehicles and buses exported – 2010 to 2014

2010 2011 2012 2013 2014

TOTAL (R billion) 0,9 1,0 1,3 2,8 3,7

TOTAL (units) 861 803 1 076 1 201 1 412

RANKING OF EXPORTERSNumber 1 to Number 5

UD TrucksMAN

ScaniaIvecoGMSA

UD TrucksMAN

ScaniaPowerstar

Iveco

UD TrucksScaniaMANIvecoVW

MANScania

UD TrucksIveco

GM/Isuzu Trucks

MANScaniaIveco

UD TrucksGM/Isuzu Trucks

Zambia 69 91 303 174 392Zimbabwe 272 316 246 262 315Kenya 71 105 127 175 191Tanzania 120 59 109 214 159Mozambique 173 60 145 168 153Angola 3 23 25 94 130Malawi 134 129 105 107 42Other 19 20 16 12 30EU - - - 8 8AFRICA 859 803 1 063 1 198 1 404

Source: NAAMSA/Lightstone Auto, SARS

EXPORTS

“The main export destinations for trucks and buses have

consistently been South Africa’s neighbouring countries in the SADC region.”

51

AUTOMOTIVE COMPONENTS – EXPORTS BY COUNTRY

Consolidation across the supply chain has led to the emergence of multinational suppliers that serve OEMs globally. The high volume production results in economies of scale benefits for these suppliers accompanied by on-going access to investment in technology and R&D. It is important for domestic automotive component manufacturers to forge and secure links with these multinational suppliers and to attract them to South Africa. A strong supplier base is vital for the future sustainability of the automotive industry in South Africa and hence the APDP’s particular focus on the development of the component sector in the country as well as the increased support for component suppliers under the Automotive Investment Scheme (AIS) effective from July, 2014. Linked to higher volume production under the APDP, opportunities of mutual benefit are set to increase in future concerning parts supplied to OEMs, for replacement parts and for export business. In this regard, multiple areas of collaboration exist between South African component manufacturers and outside partners for market access, technology transfer, process know-how, joint production or strategic alliance, amongst others. The following table reveals that the main destinations for automotive component exports remain first-world markets, although emerging markets are starting to feature as export destinations, indicating progress in the South African component manufacturers’ ability to compete globally. The increases in rand value exports to the domestic industry’s top export destinations could mainly be attributed to vehicle production growth in 2014 compared to 2013 in those countries as well as the weakening of the rand against the currencies of major trading partners.

EXPORTS

“A strong supplier base is vital for the future sustainability of the automotive

industry in South Africa and hence the APDP’s particular focus on the

development of the component sector in the country as well as the increased support for component suppliers under

the Automotive Investment Scheme (AIS) effective from July, 2014.”

52

Automotive component export value and ranking by country – 2014 vs. 2013Country 2014

R million2014

Ranking2013

R million2013

Ranking

Germany 12 486,9 1 12 045,3 1USA 4 721,0 2 3 706,2 2UK 2 862,5 3 2 427,5 3Namibia 2 660,9 4 2 060,7 4Spain 1 979,6 5 1 562,3 6Botswana 1 894,5 6 1 567,2 5Mozambique 1 611,2 7 938,7 13Zambia 1 526,0 8 1 370,7 9Belgium 1 064,6 9 1 505,7 8Argentina 1 054,9 10 1 526,6 7Thailand 1 020,5 11 1 087,9 10Zimbabwe 985,8 12 839,6 15Democratic Republic of Congo 922,8 13 953,4 11Netherlands 916,0 14 951,0 12Czech Republic 807,4 15 920,2 14Poland 735,1 16 683,8 16Swaziland 561,2 17 529,5 18India 560,3 18 435,7 19Korea Republic South 505,6 19 305,4 26Angola 465,5 20 353,9 24Turkey 415,3 21 374,8 22Hungary 367,7 22 247,4 28France 361,0 23 317,3 25Lesotho 347,1 24 262,1 27Japan 309,7 25 370,8 23China 303,2 26 554,2 17Australia 301,0 27 381,0 21Canada 273,8 28 241,9 29Brazil 232,2 29 407,5 20Tanzania 230,9 30 240,8 30Malawi 225,1 31 207,3 34Mexico 224,3 32 235,3 31Nigeria 210,8 33 139,6 38Kenya 207,0 34 209,9 33United Arab Emirates 175,1 35 136,5 39Ghana 164,2 36 174,6 37Bulgaria 156,2 37 222,6 32Italy 136,4 38 182,7 35Romania 124,1 39 80,6 -Madagascar 113,5 40 70,5 -

Source: AIEC, SARS

EXPORTS

53

The following tables reveal the automotive component export details for the 40 export destinations recording an export value above R100 million or 0,2% of the total automotive component export value of R45,68 billion in 2014.

(1)Country Germany R12 486,9 million

1Catalytic converters

R8 101,7

2Stitched leather seats

& partsR753,7

3Engine parts

R734,3

4Shock absorbers

R385,8

5Tyres

R267,1

6Transmission shafts

R199,8

7Clutches & shaft

couplingsR174,8

8Axles

R136,2

9FiltersR120,4

10Lighting equipment

R107,4

(2)Country USA R4 721,0 million


R2 904,5

2Engine parts

R813,9

3Radiators & parts

R200,7

4Silencers & exhausts

R159,0

5Axles

R124,8

6Gear boxes

R48,4

7TyresR47,6

8Shock absorbers

R43,4

9Automotive tooling

R31,0

10Gauges & instrument

partsR28,7

(3)Country United Kingdom (UK) R2 862,5 million


R1 803,5

2Engine parts

R159,9


& partsR120,4

4Glass

R109,7

5Batteries

R97,3

6Automotive tooling

R58,6


partsR56,4

8Air conditioners

R30,2

9TyresR25,5


R25,0

(4)Country Namibia R2 660,9 million

1Tyres

R211,9

2Automotive tooling

R130,7

3Engine parts

R127,1


partsR47,9

5Body parts & panels

R43,0


R42,1

7FiltersR39,8

8Batteries

R30,1

9Ignition & starting

equipmentR30,1

10Brake parts

R27,4

EXPORTS

54

(5)Country Spain R1 979,6 million


R1 248,5

2Engine parts

R436,9

3Radiators & parts

R121,1


& partsR69,9

5TyresR30,4

6GlassR22,1

7Road wheels & parts

R20,9

8Automotive tooling

R11,8


R9,8


R4,4

(6)Country Botswana R1 894,5 million

1Tyres

R249,5

2Wiring harnesses

R138,2

3Engine parts

R104,6


R81,0

5EnginesR54,2


equipmentR39,9

7FiltersR39,9


partsR35,1

9Batteries

R33,5


R33,2

(7)Country Mozambique R1 611,2 million

1Tyres

R194,2

2Engine parts

R116,5

3Batteries

R97,3


R91,6

5Automotive tooling

R83,7

6EnginesR56,0

7FiltersR33,3


partsR27,6


equipmentR18,2


R15,8

(8)Country Zambia R1 526,0 million

1Tyres

R179,4


R107,7

3EnginesR104,3

4Engine parts

R80,7

5Batteries

R49,5

6Automotive tooling

R48,4


partsR47,1

8FiltersR36,0


equipmentR27,5


R20,7

(9)Country Belgium R1 064,6 million


R634,6

2Radiators & parts

R102,9

3GlassR87,8


R51,3

5TyresR46,2

6Brake parts

R23,6

7Engine parts

R23,3

8FiltersR18,1

9Clutches & shaft

couplingsR13,0

10Gear boxes

R12,5

EXPORTS

55

(10) Country Argentina R1 054,9 million


R214,6

2Engine parts

R205,1


R81,0


R40,7


R13,1


R4,8

7Car radios

R0,9

8Engines

R0,4

9Automotive tooling

R0,3

10AxlesR0,2

(11) Country Thailand R1 020,5 million

1Engine parts

R490,5


R334,5


R84,3

4Automotive tooling

R13,9


R10,5

6AxlesR7,7

7Brake parts

R4,6


equipmentR4,3

9TyresR2,3


partsR1,8

(12) Country Zimbabwe R985,8 million

1Tyres

R182,3

2FiltersR73,6

3Engine parts

R54,4


R42,1


partsR35,9

6Shock absorbers

R23,5

7Batteries

R23,4

8EnginesR22,9


equipmentR20,2

10Brake parts

R17,0

(13) Country Democratic Republic of Congo (DRC) R922,8 million


R85,6


partsR85,0

3Engine parts

R61,7

4EnginesR30,9

5Automotive tooling

R28,6

6GasketsR27,3

7AxlesR24,1


equipmentR20,2


R18,9

10TyresR11,8

(14) Country Netherlands R916,0 million


R706,0

2TyresR47,9

3Radiators & parts

R26,6

4Automotive tooling

R13,8


R8,1

6Alarm systems

R6,8


equipmentR6,7

8FiltersR6,6

9Engine parts

R4,6

10Brake parts

R4,5

EXPORTS

56

(15) Country Czech Republic R807,4 million


R727,5

2Automotive tooling

R28,5


R23,1

4Radiators & parts

R2,0


R1,5

6Alarm systems

R1,3


& partsR0,5

8AxlesR0,2

9Engines

R0,1

-

(16) Country Poland R735,1 million


R424,6


& partsR159,7

3GlassR12,0

4Automotive tooling

R6,4

5Wiring harnesses

R3,8


R3,4

7Radiators & parts

R3,3

8Engine parts

R0,6


partsR0,3

10Alarm systems

R0,3

(17) Country Swaziland R561,2 million

1Tyres

R167,2

2Engine parts

R23,7

3Brake parts

R22,5


R18,8


R16,7


equipmentR12,0

7Clutches & shaft

couplingsR10,7

8FiltersR9,0

9Gaskets

R6,5

10GlassR5,8

(18) Country India R560,3 million


R346,3


R66,5

3Automotive tooling

R66,3


R25,6

5TyresR7,7

6Clutches & shaft

couplingsR5,7

7Engine parts

R5,3


R2,0


partsR1,8

10Alarm systems

R1,6

(19) Country Korea Republic South R505,6 million


R432,9


R34,5

3Automotive tooling

R5,7

4Engine parts

R0,4

5FiltersR0,1

6TyresR0,1


R0,1


partsR0,1

- -

EXPORTS

57

(20) Country Angola R465,5 million

1TyresR88,7

2Engine parts

R42,8

3FiltersR14,3


R13,1


partsR11,8

6Automotive tooling

R11,7

7Gaskets

R7,1

8Batteries

R6,9

9Brake parts

R5,7


R5,4

(21) Country Turkey R415,3 million


R383,1


R9,4

3Automotive tooling

R3,5

4Springs

R3,3


R2,3

6Engine parts

R2,0

7TyresR1,7

8Radiators & parts

R1,3

9Clutches & shaft

couplingsR1,3

10Gaskets

R1,1

(22) Country Hungary R367,7 million


R269,9

2Wiring harnesses

R61,9


& partsR17,2


partsR0,4

-

(23) Country France R361,0 million


R111,0

2GlassR65,2


R20,4

4Lighting equipment

R16,2

5Automotive tooling

R9,9

6FiltersR9,4

7TyresR7,6

8Gaskets

R6,2


partsR5,9


equipmentR4,3

(24) Country Lesotho R347,1 million

1TyresR45,9

2Batteries

R9,7

3Brake parts

R8,5

4Engine parts

R8,0


R7,2


equipmentR4,9


R4,8

8Automotive tooling

R3,9


partsR3,8

10FiltersR3,4

EXPORTS

58

(25) Country Japan R309,7 million


R212,7


R10,4


& partsR9,2

4Brake parts

R7,1

5Automotive tooling

R5,1

6Springs

R4,5

7TyresR3,5

8Engine parts

R2,7

9Clutches & shaft

couplingsR1,5


R1,4

(26) Country China R303,2 million

1Radiators & parts

R59,1


R20,0

3Shock absorbers

R18,9

4EnginesR18,6

5Clutches & shaft

couplingsR17,1

6Automotive tooling

R16,8


R7,4

8Engine parts

R5,4


R3,1

10Air conditioners

R2,6

(27) Country Australia R301,0 million


R48,4


partsR32,9


R21,3

4TyresR11,4

5Lighting equipment

R6,6

6Engine parts

R6,4

7Clutches & shaft

couplingsR6,2


R4,8

9FiltersR4,3

10Automotive tooling

R4,0

(28) Country Canada R273,8 million


R225,9

2Air conditioners

R3,0

3Automotive tooling

R1,8


R1,6


equipmentR1,6


partsR1,6

7Gear boxes

R1,0


& partsR0,7

9Wiring harnesses

R0,7


R0,6

(29) Country Brazil R232,2 million


R71,1

2Automotive tooling

R42,6


R28,8

4TyresR14,0


R13,3

6Engine parts

R9,7


R9,6

8Clutches & shaft

couplingsR5,6


partsR3,3

10FiltersR2,0

EXPORTS

59

(30) Country Tanzania R230,9 million

1TyresR42,5

2Engine parts

R20,8


R14,0


partsR12,9

5Automotive tooling

R8,5

6Batteries

R7,1

7Engines

R4,7

8Clutches & shaft

couplingsR4,0


R3,9

10FiltersR2,4

(31) Country Malawi R225,1 million

1TyresR42,4

2Engine parts

R12,8

3Batteries

R7,5

4Brake parts

R5,8


partsR5,7

6FiltersR5,3


R4,2


R3,2

9Alarm systems

R3,0

10Clutches & shaft

couplingsR2,8

(32) Country Mexico R224,3 million


R110,6

2Automotive tooling

R12,5

3Clutches & shaft

couplingsR8,7


R4,4


R4,3

6Steering wheels &

columnsR1,1

7TyresR0,8


partsR0,6

9Engine parts

R0,4

10Shock absorbers

R0,4

(33) Country

Nigeria R210,8 million

1Engine parts

R28,4

2TyresR25,3


partsR15,3

4Alarm systems

R7,6

5Automotive tooling

R5,3

6FiltersR4,9


R4,8

8Gaskets

R3,3

9Brake parts

R3,3


R3,2

(34) Country Kenya R207,0 million

1TyresR69,7


partsR21,9

3Engine parts

R12,2

4Automotive tooling

R12,1


R5,2

6FiltersR4,3

7Brake parts

R3,5

8Alarm systems

R2,9


R2,2


R1,9

EXPORTS

60

(35) Country United Arab Emirates (UAE) R175,1 million


partsR26,4

2Clutches & shaft

couplingsR21,8

3TyresR19,3


equipmentR12,8

5Automotive tooling

R9,1

6Engine parts

R7,1


R2,9

8Alarm systems

R2,9

9Car radios

R2,4


R2,4

(36) Country Ghana R164,2 million

1TyresR23,3


R13,9

3Automotive tooling

R7,9


partsR7,4

5FiltersR6,8

6Engine parts

R3,3


R2,2

8Engines

R1,8

9Brake parts

R1,8


R1,4

(37) Country Bulgaria R156,2 million


& partsR95,4

2Lighting equipment

R2,1

- - -

(38) Country Italy R136,4 million


R27,4


R26,6

3GlassR23,8

4TyresR15,3

5Gaskets

R8,9

6FiltersR3,0

7Automotive tooling

R1,8

8Engine parts

R1,7

9Radiators & parts

R1,4

10Gear boxes

R1,4

(39) Country Romania R124,1 million


R64,5


& partsR25,4

3Automotive tooling

R3,2

4Batteries

R1,8

5Seat belts

R0,1

(40) Country Madagascar R113,5 million


partsR11,0


R5,4

3Automotive tooling

R2,1


R1,9

5FiltersR1,6

6Engine parts

R1,5

7Engines

R1,3

8Alarm systems

R0,5

9Lighting equipment

R0,5


equipmentR0,5

EXPORTS

61

AUTOMOTIVE COMPONENTS – EXPORTS BY PRODUCT

Automotive component exports, including sales to the BLNS (Botswana, Lesotho, Namibia and Swaziland) countries, increased by 8,3% to R45,7 billion in 2014, from R42,2 billion in 2013. Catalytic converters maintained their dominant export position under the APDP in 2014 as the focus of exporters tend to be on high value domestically beneficiated, logistics-friendly automotive components. Contributing factors that supported automotive component exports in 2014 included a weakening rand exchange rate, year-on-year vehicle production gains in the industry’s top export destinations, the domestic component suppliers’ production flexibility advantages as well as South Africa’s trade arrangements with the EU, SADC and the US.

The integration of the South African automotive industry into the global automotive environment has increased its export expansion as well as its degree to improve competitiveness. In competing with world best prices, the automotive component suppliers’ strategies depend on aspects such as the specific company’s international links, technology and licenses or equity, the type of product, position in the aftermarket, volume requirements and the dependence on OEMs. The exporting link for the majority of multinational automotive component suppliers in South Africa remains the domestically-based OEMs and their parent companies. However, to be linked into complex global supply chains means that reliability of supply is critical and competition is fierce for companies to maintain their position in exports. Increased automotive component production benefits will relate to foreign exchange savings, introduction of new technologies to South Africa and the creation of new job opportunities. For 2014, the turnover of the entire component manufacturing sector in South Africa was estimated at R 78,4 billion.

The following table reveals the automotive component export ranking by product category from 2010 through to 2014. Annual comparisons should take note of the following – the 2013 and 2014 total automotive component exports provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries, in order to facilitate historical comparisons.

EXPORTS

“The integration of the South African automotive industry into the global

automotive environment has increased its export expansion as well as its degree to improve

competitiveness.”

62

Automotive component export ranking by product category – 2010 to 2014

COUNTRY 2010 2011 2012 2013* 2014* 2013** 2014**

% of total

export value

2014Ranking

TOTAL (R million)Including BLNS country data

35 283 42 534 39 883 42 176** 45 682**

TOTAL (R million) Excluding BLNS country data

30 802 38 823 36 867 37 771* 40 594*

Catalytic converters 14 761 19 639 16 347 17 620 19 479 17 641 19 493 42,7% 1Engine parts 1 505 2 058 2 875 2 938 3 491 3 189 3 732 8,2% 2Tyres 1 133 1 675 1 522 1 215 1 531 1 842 2 206 4,8% 3Stitched leather seats / parts 2 898 2 190 1 719 1 524 1 277 1 530 1 286 2,8% 4Radiators / parts 951 1 118 945 1 088 1 144 1 117 1 172 2,6% 5Transmission shafts / cranks 415 569 771 800 970 926 1 102 2,4% 6Automotive tooling 447 438 782 671 780 777 936 2,0% 7Gauges / instruments / parts 241 319 401 367 553 435 640 1,4% 8Shock absorbers / suspension parts 329 430 440 449 497 474 518 1,1% 9

Silencers / exhausts 1 696 2 139 1 730 1 214 497 1 225 504 1,1% 10Filters 337 312 353 354 392 407 475 1,0% 11Automotive glass 305 277 230 347 409 386 451 1,0% 12Batteries 116 143 180 237 310 280 383 0,8% 13Clutches / shaft couplings 270 236 225 267 347 310 383 0,8% 14Axles 111 320 252 309 341 335 377 0,8% 15Road wheels / parts 383 494 466 413 331 455 367 0,8% 16Engines 965 819 559 211 286 263 364 0,8% 17Body parts / panels 75 140 146 196 188 263 269 0,6% 18Wiring harnesses 51 78 94 97 123 118 264 0,6% 19Ignition / starting equipment 83 103 109 113 180 185 255 0,6% 20Lighting equipment 229 199 198 237 215 248 239 0,5% 21Brake parts 93 82 97 117 157 192 225 0,5% 22Gaskets 75 69 100 132 150 160 176 0,4% 23Gear boxes 67 69 100 89 100 122 153 0,3% 24Alarm systems 73 61 62 72 94 87 125 0,3% 25Air conditioners 35 36 42 43 79 55 94 0,2% 26Steering wheels / columns 170 155 182 202 44 210 51 0,1% 27Jacks 83 92 103 54 35 57 39 0,1% 28Springs 30 43 33 24 30 31 35 0,1% 29Car radios 20 39 47 10 16 26 25 0,1% 30Seats 5 6 11 8 15 13 21 0,1% 31Seat belts 33 28 24 5 5 8 7 - 32Other parts 2 817 4 447 5 722 6 348 6 528 8 809 9 315 20,4% 33

Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

EXPORTS

63

The following tables reveal the top five destinations for the automotive product category exports from South Africa from 2010 through to 2014.

Catalytic converters (1)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 14 760,7 19 638,9 16 347,0 17 640,9 19 492,7Germany 36% 39% 40% 41% 42%USA 10% 8% 11% 12% 15%UK 8% 10% 8% 9% 9%Spain 12% 7% 6% 7% 6%Czech Republic 4% 4% 5% 5% 4%

Engine parts (2)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 1 505,0 2 058,0 2 875,1 3 188,7 3 732,4USA 25% 39% 28% 21% 22%Germany 19% 15% 21% 24% 20%Thailand - 5% 13% 15% 13%Spain - - - - 12%Argentina - 1% 4% 6% 5%

Tyres (3)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 1 132,6 1 675,2 1 521,5 1 842,1 2 205,8Germany 18% 26% 12% 10% 12%Botswana 13% 10% 10% 11% 11%Namibia 10% 9% 10% 11% 10%Mozambique 8% 6% 8% 7% 9%Zimbabwe 10% 8% 11% 8% 8%

Stitched leather seats and parts (4)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 2 897,5 2 189,7 1 718,7 1 530,4 1 285,9Germany 92% 88% 74% 68% 59%Poland - 1% 1% 5% 12%UK 2% - - - 9%Bulgaria - - 10% 10% 7%Spain 4% 8% 7% 11% 5%

EXPORTS

64

Radiators and parts (5)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 950,7 1 117,9 945,2 1 116,7 1 172,1Netherlands 2% - - 18% 26%USA 17% 17% 19% 15% 17%Germany 28% 21% 47% 24% 12%Belgium - - - 6% 9%China 12% 7% 4% 5% 5%

Transmission shafts and cranks (6)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 415,1 568,8 770,7 925,6 1 102,1Germany 31% 27% 23% 17% 18%Zambia 9% 7% 7% 7% 10%Mozambique 4% 4% 4% 5% 8%Democratic Republic of Congo 5% 8% 6% 8% 8%Thailand - 3% 9% 10% 8%

Automotive tooling (7)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 446,9 438,1 782,0 776,8 935,8Namibia 10% 1% 7% 9% 14%Mozambique 2% 4% 3% 3% 9%India 1% 8% 1% 1% 7%UK 2% 1% 2% 1% 6%Zambia 2% 4% 5% 7% 5%

Gauges, instruments and parts (8)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 240,8 319,4 401,4 435,1 640,3Democratic Republic of Congo 7% 12% 11% 13% 13%UK 11% 10% 6% 6% 9%Namibia 5% 5% 5% 8% 7%Zambia 8% 6% 9% 9% 7%Zimbabwe 4% 6% 5% 6% 6%

EXPORTS

65

Shock absorbers and suspension parts (9)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 329,0 430,4 439,6 474,1 517,7Germany 90% 86% 83% 81% 75%USA - 2% 5% 1% 8%Zimbabwe 2% 3% 3% 4% 5%China 3% 3% 4% 5% 4%Namibia 1% 2% 2% 3% 2%

Silencers and exhausts (10)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 1 696,4 2 138,7 1 729,6 1 225,4 503,8USA 8% 8% 14% 15% 32%Germany 21% 27% 28% 36% 18%Korea Republic South - - 1% 2% 7%Italy 8% 4% 4% 3% 5%UK 1% 1% 1% 1% 5%

Filters (11)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 337,4 312,2 353,0 407,4 474,8Germany 31% 38% 27% 29% 25%Zimbabwe 11% 14% 18% 15% 16%Botswana 5% 6% 4% 5% 8%Namibia 3% 3% 2% 6% 8%Zambia 5% 6% 8% 7% 8%

Automotive glass (12)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 305,4 277,3 230,4 386,4 450,6UK 22% 24% 29% 27% 24%Belgium 20% 30% 27% 28% 19%France 12% 10% 13% 14% 14%Germany 21% 17% 7% 13% 12%Namibia 3% 4% 6% 5% 6%

EXPORTS

66

Batteries (13)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 116,4 143,2 180,0 280,0 383,4Mozambique 44% 41% 38% 30% 25%UK 12% 19% 11% 20% 25%Zambia 22% 20% 21% 15% 13%Botswana 11% 10% 6% 11% 9%Namibia 1% 1% 2% 1% 8%

Clutches and shaft couplings (14)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 270,4 235,9 224,8 309,5 382,8Germany 69% 56% 56% 49% 46%USA 2% 4% 6% 6% 7%United Arab Emirates 11% 11% 3% 4% 6%Namibia 3% 3% 5% 5% 5%China - 1% 2% 3% 4%

Axles (15)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 111,4 319,6 251,7 334,8 377,3Germany 31% 37% 35% 53% 36%USA 37% 37% 32% 12% 33%Democratic Republic of Congo 2% 1% 3% 3% 6%Botswana 4% 2% 4% 6% 5%Sudan - - - - 5%

Road wheels and parts (16)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 382,7 494,2 466,0 454,8 367,1Argentina - - 7% 16% 22%Brazil - - 5% 29% 19%Germany 71% 52% 29% 13% 14%India 1% - 1% - 7%Spain 11% 12% 8% 9% 6%

EXPORTS

67

Engines (17)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 964,9 819,0 558,9 262,8 363,7Zambia 5% 5% 16% 36% 29%Mozambique 1% 1% 3% 11% 15%Botswana 4% 5% 7% 11% 15%Democratic Republic of Congo 1% 1% 4% 9% 8%Zimbabwe 1% 1% 4% 7% 6%

Body parts and panels (18)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 75,2 139,6 145,8 263,1 269,4India 16% 46% 20% 30% 25%Namibia 13% 8% 10% 10% 16%Germany 15% 11% 8% 6% 14%Botswana 17% 14% 12% 7% 12%Swaziland 15% 4% 6% 7% 7%

Wiring harnesses (19)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 51,3 77,6 94,0 118,2 264,4Botswana 2% 4% 10% 14% 52%Hungary 3% 43% 45% 42% 23%Germany 67% 21% 14% 11% 9%USA 3% 2% 5% 1% 2%Democratic Republic of Congo - - 3% 3% 2%

Ignition and starting equipment (20)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 83,2 102,8 108,8 184,9 255,2Botswana 12% 11% 9% 16% 16%Namibia 15% 10% 13% 15% 12%Zambia 8% 18% 13% 5% 11%Zimbabwe 13% 14% 17% 9% 8%Democratic Republic of Congo 5% 6% 12% 6% 8%

EXPORTS

68

Lighting, signalling and wiping equipment (21)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 229,0 199,3 198,4 248,1 239,0Germany 47% 60% 53% 50% 45%France 1% - - 1% 7%Namibia 2% 1% 2% 1% 6%UK 5% 2% 10% 6% 5%Zimbabwe 3% 3% 3% 3% 4%

Brake parts (22)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 92,7 82,4 97,3 192,0 225,2Botswana 9% 19% 22% 17% 14%Namibia 8% 8% 9% 11% 12%Belgium 26% 30% 18% 10% 10%Swaziland 10% 12% 10% 9% 10%Zambia 5% 6% 8% 10% 8%

Gaskets (23)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 75,0 69,3 100,2 160,2 176,1Democratic Republic of Congo 5% 8% 11% 17% 16%UK 7% 12% 8% 6% 9%Zambia 14% 10% 13% 10% 8%Mozambique 4% 5% 6% 8% 7%Namibia 8% 6% 8% 7% 7%

Gear boxes (24)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 66,6 68,8 99,9 121,9 153,4USA 37% 44% 41% 25% 32%Botswana 14% 18% 19% 13% 21%Namibia 15% 10% 11% 10% 13%Belgium - - - 1% 8%Zambia 5% 8% 10% 8% 8%

EXPORTS

69

Alarm systems (25)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 73,2 60,7 61,5 86,9 124,5Botswana 9% 10% 9% 9% 13%Namibia 8% 9% 8% 6% 11%Mozambique 2% 4% 3% 4% 7%Nigeria 3% 1% 3% 3% 6%Zambia 8% 4% 7% 6% 6%

Air conditioners (26)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 34,5 35,7 42,2 55,4 94,2UK 4% 49% 41% 39% 32%Singapore - - - - 11%Mozambique 2% 16% 5% 2% 10%Namibia 26% 10% 10% 6% 7%Botswana 4% 11% 19% 11% 7%

Steering wheels, columns and boxes (27)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 170,2 154,8 181,8 210,1 50,5USA 9% 17% 16% 22% 25%Belgium 2% 3% 4% 12% 12%Namibia 1% 1% - 1% 10%Germany 74% 68% 63% 50% 8%Zimbabwe 1% 1% 2% 1% 8%

Jacks (28)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 82,6 92,3 103,3 57,2 39,1Zambia 1% 5% 4% 9% 22%Zimbabwe 2% 3% 4% 10% 18%Angola 1% - - 1% 9%Democratic Republic of Congo 1% 1% 3% 7% 9%Egypt 1% - - 1% 9%

EXPORTS

70

Springs (29)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 30,0 43,2 32,9 31,1 35,2UK 11% 5% 5% 10% 13%Japan 3% 8% 8% 14% 13%Israel - 2% 3% 3% 12%Turkey - 1% - - 9%Namibia 6% 6% 8% 13% 8%

Car radios (30)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 20,0 39,2 46,7 25,9 25,4Namibia 19% 16% 13% 29% 21%Zambia 5% 3% 3% 5% 16%Botswana 14% 13% 8% 19% 13%United Arab Emirates - - - - 9%Swaziland 9% 4% 3% 6% 6%

Seats (31)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 5,4 5,7 11,4 13,2 21,3Botswana 20% 20% 24% 25% 20%Mozambique 5% 7% 9% 9% 18%Zambia 11% 9% 10% 11% 10%Namibia 10% 12% 12% 12% 9%Singapore 10% 15% 10% 11% 9%

Seat belts (32)

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R million) 32,9 27,6 24,1 7,7 6,8Botswana 6% 3% 4% 15% 15%Namibia 3% 3% 3% 13% 14%Mozambique - 2% 1% 5% 8%Zambia 1% 1% 2% 4% 8%Zimbabwe 1% 1% 1% 5% 8%

EXPORTS

71

IMPORTS BY COUNTRY OF ORIGIN

Imports of automotive products into South Africa remain a function of the success of the APDP, of domestic market demand and of currency movements. Imports of vehicles, in line with domestic market demand, imports of original equipment components to accommodate vehicle production, as well as imports of replacement parts for the growing vehicle parc (also defined as the number of registered vehicles) of 11,37 million vehicles, remain high. Exchange rate weakness resulted in sharp increases in both inflation rate and new vehicle price increases growing above the CPI index in 2014. The rand exchange rate has reacted differently to different countries and this is particularly important with regard to the exchange rates of the source countries for South African imports.

The countries of origin for vehicles and automotive components imported into South Africa generally reflect the global linkages with the head offices of parent companies. The notable exception is China where most of the imports were for aftermarket parts. Growing import competition in the domestic market and that of low-cost products sourced from a global pool are the order of the day.

The following table reveals the import values and rankings for the 55 countries of origin for vehicles and automotive component imports into South Africa, above the R20 million threshold, for 2014 versus 2013.

IMPORTS

72

Import value and ranking by country of origin – 2014 vs. 2013

Country 2014R million

2014Ranking

2013R million

2013Ranking

Germany 52 962,3 1 46 024,0 1

Japan 23 270,1 2 21 875,6 2

Thailand 12 268,4 3 13 361,5 3

USA 11 817,2 4 10 020,0 5

China 10 392,0 5 9 705,6 6

India 10 104,4 6 10 125,9 4

Korea Republic South 7 321,1 7 8 699,5 7

United Kingdom 7 273,5 8 8 572,5 8

Spain 5 222,3 9 5 404,3 9

Brazil 4 319,3 10 3 764,7 10

Italy 2 914,7 11 3 243,2 11

Sweden 2 901,3 12 2 370,4 14

Czech Republic 2 548,7 13 2 826,7 12

France 2 398,0 14 2 645,3 13

Turkey 2 048,8 15 1 552,2 15

Poland 1 413,9 16 1 422,4 16

Netherlands 1 324,8 17 1 137,3 19

Indonesia 1 220,5 18 1 371,4 17

Mexico 1 201,8 19 1 362,4 18

Romania 1 135,6 20 268,0 32

Taiwan 1 060,1 21 981,2 20

21 COUNTRIES ABOVE R1 BILLION

Belgium 943,1 22 735,1 24

Slovak Republic 923,0 23 799,4 23

Hungary 867,4 24 501,1 28

Argentina 792,5 25 834,1 22

Austria 783,9 26 951,8 21

Philippines 617,3 27 617,3 25

Malaysia 550,3 28 520,6 27

Portugal 519,0 29 523,8 26

Canada 382,3 30 347,8 29

Switzerland 349,4 31 292,7 31

Australia 318,9 32 296,4 30

IMPORTS

73

Finland 201,8 33 192,2 33

Denmark 153,0 34 134,4 34

Israel 134,7 35 134,2 35

Luxembourg 134,1 36 118,3 36

Slovenia 125,9 37 114,4 37

United Arab Emirates 99,3 38 61,5 40

Singapore 89,9 39 84,7 38

Hong Kong, China 67,5 40 65,0 39

Vietnam Republic 59,5 41 51,5 41

Norway 52,2 42 32,8 44

Zimbabwe 50,2 43 47,6 42

Tunisia 49,4 44 29,6 45

Ireland 46,1 45 40,6 43

Morocco 42,4 46 27,0 47

Togo 40,8 47 - -

Zambia 29,9 48 16,0 -

New Zealand 28,5 49 14,1 -

Bulgaria 25,8 50 22,6 48

Croatia 25,6 51 20,9 49

Chile 22,0 52 0,8 -

Malta 20,4 53 11,2 -

Estonia 20,3 54 17,2 -

Jordan 20,3 55 10,0 -

55 COUNTRIES ABOVE R20 MILLION

Source: AIEC, SARS

IMPORTS

74

IMPORTS OF VEHICLES

The foundation of the South African automotive sector is based on the relationship between imports and domestic production as governed by the previous MIDP and current APDP. The policy regimes encourage the domestic OEMs to produce high volumes of selected models linked to export contracts in order to obtain economies of scale coupled with low volume models imported to complement domestic market mixes from a sales and competitive perspective. The domestic model mix is thus arranged to provide the most effective marketing combination of domestically manufactured and imported models to satisfy a consumer-driven market. South African consumers benefit from access to new models, a wide variety of choice and a highly competitive pricing environment.

Imports of light vehicles (passenger cars and light commercial vehicles) declined from 377 994 units in 2013 to 353 338 units in 2014 in line with a slowdown in the domestic market. In 2014, new vehicle imports originated from 31 different countries around the world. India delivered more passenger cars and LCVs to South Africa than any other nation in 2014 and the 95 940 units landed here represented 27,2% of the 353 338 light vehicles imported. Almost all of the high-volume entry-level models available in South Africa are manufactured overseas, mainly in India. Volkswagen’s Polo Vivo and General Motor’s Chevrolet Spark, which are manufactured in South Africa, are the two exceptions.

The following table reveals that in value terms, Germany, followed by India, Japan, South Korea, the US and the UK were the top countries of origin for vehicles imported into South Africa. Although the volume leader in respect of imports was India, the value of Indian imports, however, was less than half of those imported from Germany, which included the premium brands such as Audi, BMW, Mercedes-Benz and Porsche.

Top 10 countries of origin for light vehicles (passenger cars and light commercial vehicles) imported – 2010 to 2014

2010 2011 2012 2013 2014

Total value (R billion) R33,5 R42,0 R47,4 R60,6 R53,7

Country of origin

Germany 24% 25% 24% 26% 30%

India 7% 9% 11% 14% 15%

Japan 20% 13% 12% 10% 10%

Korea Republic South 14% 16% 15% 11% 10%

USA 6% 8% 9% 7% 9%

UK 9% 8% 10% 9% 7%

Spain 3% 2% 2% 5% 4%

Thailand 2% 4% 3% 5% 3%

Czech Republic - 1% 1% 1% 2%

Turkey 4% 2% 2% 1% 1%

Other 11% 12% 11% 11% 9%

Number of light vehicle imports 260 301 312 153 360 723 377 994 353 338Source: NAAMSA/Lightstone Auto, SARS

IMPORTS

75

A process of homologation must be carried out before any motor vehicle model is introduced into the South African market. The South African Bureau of Standards (SABS) homologation is a procedure intended to ensure that all new vehicle models comply with the relevant South African legislation, standards and specifications, as well as codes of practice, before use by the public on public roads. This eliminates the risk of having to withdraw a sub-standard motor vehicle model from the market and reduces the possibility of resultant legal action against the supplier. A process of homologation is also required for new models of motor vehicle tyres introduced into the South African market.

Used vehicle imports are not allowed into South Africa. Strict control measures ensure that only a limited number of legal import permits are issued to allow used vehicles into South Africa. In terms of current legislation, used vehicles qualifying for an import permit include those for returning residents and immigrants, vintage cars, racing cars, donated vehicles for welfare organisations and adapted vehicles for persons with physical disabilities. Without a legal import permit, imported used vehicles cannot be registered on the National Transport Information System (NaTIS). The system also combats stolen and non-complying vehicle registrations. All vehicle manufacturing plants in South Africa have been linked on-line to the system to facilitate the collation of data of vehicles produced. Left hand drive vehicles are also not allowed into the country. More information in respect of used vehicle imports and relevant application forms can be accessed at www.itac.gov.za.

IMPORTS

“Used vehicle imports are not allowed

into South Africa.”

76

AUTOMOTIVE PARTS AND COMPONENTS – IMPORTS

A significant portion of the value of automotive imports comprises original equipment components, which are subsequently exported as part of completely built-up vehicles after local value-adding processes. Capital-intensive components such as engines, gearboxes and interior electronic components are mainly imported by the OEMs and the remainder sourced in the domestic market. The EA111 engine for the VW Polo and Polo Vivo and the Duratorq TDCi engine for the Ford Ranger, both linked to export programmes, however, are manufactured in South Africa illustrating the country’s manufacturing capabilities. The OEMs perceive increasing local sourcing and local value addition levels in South African manufactured vehicles as a prerequisite for establishing a more sustainable vehicle production base. The development and deepening of the local component supplier base under the APDP is an important focal point as it will reduce the risks associated with exchange rate fluctuations and logistics costs. Higher volumes relating to the doubling of vehicle production in the country under the APDP by 2020 and various supplier competitiveness initiatives could improve the viability of further FDIs, export contracts and localization efforts in future.

Original equipment component imports by the OEMs amounted to R70,2 billion in 2014 in line with higher vehicle production in the country coupled with a weakening exchange rate. The following table reveals that imports of original equipment components originated mainly from Germany, Japan and Thailand.

Top 10 countries of origin for original equipment components imported (Chapter 98) – 2010 to 2014

COUNTRY 2010 2011 2012 2013 2014

TOTAL (R billion) 37,9 43,8 51,4 59,0 70,2

Germany 38% 37% 35% 35% 38%Japan 22% 24% 25% 22% 20%Thailand 9% 9% 12% 14% 12%Brazil 6% 6% 6% 5% 5%USA 2% 4% 3% 3% 3%China 1% 1% 2% 3% 3%Sweden 3% 3% 3% 3% 3%UK 3% 3% 2% 2% 3%Spain 5% 3% 2% 2% 2%India - - 1% 1% 1%Other 11% 10% 9% 10% 10%

Source: AIEC, SARS

The following table reveals the increasing trend in the import of aftermarket replacement parts to complement the parts not manufactured in the domestic market and more particularly to service the increasing imported vehicle parc for which most parts are imported. The growth of cheaper products, imported mainly from China, has exacerbated this trend. Replacement parts imports in 2014 increased by a significant 11,4% compared to 2013. With the exception of automotive tooling, which is used in the production processes of vehicles and automotive components, the replacement parts imports are not linked to value addition under the APDP.

IMPORTS

77

Top 10 replacement parts imported (R million) – 2010 to 2014

Part category 2010 2011 2012 2013 2014

Tyres 2 900 3 206 3 610 3 990 4 856

Automotive tooling 1 596 2 369 2 798 4 090 4 095

Engine parts 2 549 2 960 3 074 3 546 3 879

Transmission shafts / cranks 1 076 1 302 1 414 1 774 1 913

Engines 705 1 181 1 243 1 361 1 707

Gauges / instruments / parts 984 1 244 1 303 1 607 1 622

Stitched leather seats / parts 1 139 1 138 1 206 1 543 1 592

Brake parts 774 918 887 1 116 1 212

Wiring harnesses 479 558 670 799 1 011

Lighting equipment / parts 746 805 746 933 1 004

Other 14 370 17 207 18 189 22 388 25 156

Total 27 318 32 888 35 140 43 147 48 047

Source: AIEC, SARS

The following table reveals that the countries of origin for the aftermarket parts imported were aligned with the main countries of origin for new passenger cars and commercial vehicles. Imports from China, however, have increased, indicating the cost competitiveness of this increasingly dominant automotive force, not just in South Africa, but in the global automotive arena in general.

Top 10 countries of origin for replacement parts imported – 2010 to 2014

Country of origin 2010 2011 2012 2013 2014

Germany 20,4% 24,9% 20,4% 19,9% 19,3%

China 14,0% 14,6% 15,9% 16,0% 16,1%

USA 9,0% 10,0% 10,2% 9,4% 9,6%

Japan 7,5% 8,2% 7,9% 7,1% 6,6%

Thailand 2,5% 3,8% 4,6% 5,0% 4,5%

UK 3,1% 3,5% 4,6% 5,3% 4,1%

Italy 3,5% 3,7% 3,9% 4,0% 3,8%

Korea Republic South 0,1% 0,1% 2,6% 2,5% 2,7%

Spain 2,5% 2,7% 2,3% 2,0% 2,5%

France 3,0% 2,8% 2,8% 2,5% 2,4%

Other 34,4% 25,7% 24,8% 26,3% 28,4%

Source: AIEC, SARS

IMPORTS

78

MAIN AUTOMOTIVE TRADING PARTNERS

Considering the expanding levels of South African automotive trade over recent years, South Africa forms an important part of international supply chains. South Africa’s main automotive trading partners (exports and imports combined) for 2014 reflected the country’s global linkages with the OEMs’ parent companies in Germany, the US and Japan. The following tables reveal details and rankings of the South African automotive industry’s top 10 automotive trading partners in 2014, and also reflect the top 10 products exported and imported, where applicable.

1. Germany (Total trade R74 613,8 million) – 2014

Main products Exports from SAR21 651,5 million Main products Imports into SA

R52 962,3 million

Light vehicles 9 145,9 Original equipment components 26 903,8

Catalytic converters 8 101,7 Light vehicles 15 857,5

Stitched leather seats / parts 753,7 MCV / HCV vehicles 942,7

Engine parts 734,3 Engine parts 733,6

Shock absorbers / suspension parts 385,8 Transmission shafts / cranks 468,4

Tyres 267,1 Tyres 445,4

Transmission shafts / cranks 199,8 Automotive tooling 437,1

Clutches / shaft couplings 174,8 Steering wheels / columns 375,9

Axles 136,2 Catalytic converters 350,5

Filters 120,4 Gauges / instruments / parts 337,1

Other 1 631,8 Other 6 110,3

2. USA (Total trade R28 962,2 million) – 2014


R11 817,2 million

Light vehicles 12 419,9 Light vehicles 4 720,6

Catalytic converters 2 904,5 Original equipment components 2 426,0

Engine parts 813,9 Engine parts 730,9

Silencers / exhausts 159,0 Engines 395,2

Axles 124,8 Automotive tooling 360,7

Gear boxes 48,4 Transmission shafts / cranks 345,3

Tyres 47,6 Tyres 255,4

Shock absorbers / suspension parts 43,4 Gauges / instruments / parts 238,6

Radiators / parts 40,8 Catalytic converters 88,4

Automotive tooling 31,0 Gaskets 71,2

Other 511,7 Other 2 184,9

79

3. Japan (Total trade R29 886,9 million) – 2014


R23 270,1 million

Light vehicles 6 307,1 Original equipment components 14 302,2Catalytic converters 212,7 Light vehicles 5 638,4Silencers / exhausts 10,4 Tyres 432,2Stitched leather seats / parts 9,2 Automotive tooling 362,5Brake parts 7,1 Engine parts 295,8Automotive tooling 5,1 MCV / HCV vehicles 175,1Springs 4,5 Ignition / starting equipment 160,6Tyres 3,5 Engines 113,0Engine parts 2,7 Brake parts 108,8Clutches / shaft couplings 1,5 Transmission shafts / cranks 108,7Other 53,0 Other 1 572,8

4. Thailand (Total trade R13 293,4 million) – 2014


R12 268,4 millionEngine parts 490,5 Original equipment components 8 508,3Catalytic converters 334,5 Light vehicles 1 578,3Transmission shafts / cranks 84,3 Tyres 300,4Automotive tooling 13,9 Stitched leather seats / parts 270,4Road wheels / parts 10,5 Car radios 125,2Axles 7,7 Wiring harnesses 122,3Brake parts 4,6 Gauges / instruments / parts 98,3Ignition / starting equipment 4,3 Road wheels / parts 92,1Light vehicles 4,2 Filters 68,2Tyres 2,3 Engine parts 65,1Other 68,2 Other 1 039,8

5. UK (Total trade R12 770,9 million) – 2014


R7 273,5 millionLight vehicles 2 629,9 Light vehicles 3 500,2Catalytic converters 1 803,5 Original equipment components 1 797,6Engine parts 159,9 Automotive tooling 341,3Stitched leather seats / parts 120,4 Engines 245,0Automotive glass 109,7 Engine parts 200,2Batteries 97,3 Gauges / instruments / parts 141,5Automotive tooling 58,6 Tyres 83,3Gauges / instruments / parts 56,4 Transmission shafts / cranks 69,5Air conditioners 30,2 Alarm systems 59,0Tyres 25,5 Catalytic converters 45,0Other 406,0 Other 790,9

80

6. China (Total trade R10 746,8 million) – 2014

Main products Exports from SAR354,8 million Main products Imports into SA

R10 392,0 millionRadiators / parts 59,1 Original equipment components 2 178,5Light vehicles 44,7 Tyres 1 544,5Silencers / exhausts 20,0 Automotive tooling 640,9Shock absorbers / suspension parts 18,9 Engine parts 530,4Engines 18,6 Light vehicles 391,0Clutches / shaft couplings 17,1 Stitched leather seats / parts 252,5Automotive tooling 16,8 Road wheels / parts 249,3Transmission shafts / cranks 7,4 Transmission shafts / cranks 243,1MCV / HCV vehicles 6,9 Brake parts 228,2Engine parts 5,4 Automotive glass 163,7Other 139,9 Other 3 969,9

7. India (Total trade R10 665,4 million) – 2014


R10 104,4 millionCatalytic converters 346,3 Light vehicles 8 316,4Body parts / panels 66,5 Original equipment components 672,8Automotive tooling 66,3 Gauges / instrument parts 129,4Road wheels / parts 25,6 Engine parts 120,0Tyres 7,7 Automotive tooling 101,9Clutches / shaft couplings 5,7 MCV / HCV vehicles 80,4Engine parts 5,3 Engines 49,5Transmission shafts / cranks 2,0 Ignition / starting equipment 39,2Gauges / instruments / parts 1,8 Tyres 37,0Alarm systems 1,6 Transmission shafts / cranks 36,3Other 32,2 Other 521,5

8. Korea Republic South (Total trade R7 829,1 million) – 2014


R7 321,1 millionCatalytic converters 432,9 Light vehicles 5 345,8Silencers / exhausts 34,5 Original equipment components 591,9Automotive tooling 5,7 Automotive tooling 243,8Engine parts 0,4 Tyres 221,6Filters 0,1 Batteries 154,6Tyres 0,1 MCV / HCV vehicles 82,0Transmission shafts / cranks 0,1 Engines 51,9Gauges / instruments / parts 0,1 Filters 50,7Other 34,1 Engine parts 50,6

Clutches / shaft couplings 46,8Other 481,4

81

9. Spain (Total trade R7 560,3 million) – 2014


R5 222,3 million

Catalytic converters 1 248,5 Light vehicles 2 002,1

Engine parts 436,9 Original equipment components 1 370,4

Light vehicles 357,9 MCV / HCV vehicles 625,8

Stitched leather seats / parts 69,9 Tyres 219,4

Tyres 30,4 Automotive tooling 206,0

Automotive glass 22,1 Brake parts 52,8

Road wheels / parts 20,9 Engine parts 42,2

Automotive tooling 11,8 Lighting equipment 36,8

Silencers / exhausts 9,8 Body parts / panels 26,5

Body parts / panels 4,4 Batteries 25,9

Other 125,4 Other 614,4

10. Brazil (Total trade R5 411,1 million) – 2014


R4 319,3 million

Light vehicles 858,7 Original equipment components 3 482,8

Road wheels / parts 71,1 Axles 143,1

Automotive tooling 42,6 Engine parts 85,5

Catalytic converters 28,8 Body parts / panels 70,0

Tyres 14,0 Batteries 53,0

Silencers / exhausts 13,3 Transmission shafts / cranks 33,1

Engine parts 9,7 Clutches / shaft couplings 25,2

Transmission shafts / cranks 9,6 Steering wheels / columns 20,7

Clutches / shaft couplings 5,6 Brake parts 19,5

Gauges / instruments / parts 3,3 Stitched leather seats / parts 15,9

Other 35,1 Other 370,5

82

AUTOMOTIVE INDUSTRY TRADE BALANCE

As the leading manufacturing sector in South Africa’s economy, the automotive industry’s export value under the APDP in 2014 amounted to R115,7 billion, which comprised 11,7% (11,1% in 2013) of total South African exports of R988,2 billion, while the industry’s imports of R131,5 billion under the APDP comprised 12,1% (12,7% in 2013) of total South African imports of R1 083,5 billion.

The South African automotive industry has remained a net user of foreign exchange under the APDP. Due to relatively low volume manufacturing in the country, comprising a global market share of vehicle production of 0,63% in 2014, the industry’s reliance on global design, technologically sophisticated plant and machinery and on imported high-value components has contributed to the outflow of foreign exchange. The doubling of vehicle production in the country by 2020 and projects such as the Automotive Supply Chain Competitiveness Initiative (ASCCI) could well change the situation by improving the viability of FDIs and export contracts. ASCCI is a joint initiative between the major national stakeholders, namely NAAMSA, NAACAM, the Dti and the National Union of Metalworkers of South Africa (NUMSA). One main objective is to implement the national strategic imperative of sustained and progressive competitiveness improvement while other key focus areas of the initiative include improving component supplier operational capabilities, increasing levels of localisation and achieving increased levels of manufacturing value addition in the country. The initiative is in support of the APDP’s vision to manufacture around 1,2 million vehicles per annum by 2020 and should have a positive impact on employment creation, enabling supplier capabilities and an increase in value addition, thus ensuring the long term sustainability of the South African automotive industry.

The following table reveals data in respect of the domestic automotive industry’s trade balance from 2010 through to 2012 previously under the MIDP’s import/export complementation scheme where vehicles and identifiable automotive parts and components eligible under the programme were imported and exported.

MIDP trade balance for the automotive industry: 2010 – 2012

Year Imports into SA(R billion)

Exports from SA(R billion)

Net forex usage (R billion)

2010 102,2 79,3 (22,9)2011 122,1 90,5 (31,6)2012 137,2 94,9 (42,3)

Source: AIEC, SARSRevised to include BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

Under the APDP, as was the case under the MIDP, the level of imports remain a function of the success of the programme as the benefits could only be used to rebate the import duties on vehicles and eligible automotive components imported. A key strategy of the OEMs operating in South Africa is to expand market share. The OEMs seek to achieve this through a combination of domestic production of one or two relatively high-volume models for the domestic and export markets and to import models not manufactured in the country to complement their domestic model mixes.

Under the APDP, the basis for calculating the duty-free import credits is based on value-added through the supply chain in the automotive manufacturing industry. There are certain eligibility requirements under the programme

83

to ensure that the beneficiaries are companies producing substantial quantities of components for vehicle manufacturing, and to exclude accessories. Component manufacturers have to supply at least 25% of their total turnover or R10 million annually as part of an OEM supply chain locally and/or internationally to comply under the APDP. In this regard, with the exception of automotive tooling which is used in the production processes of vehicles and automotive components, the imported replacement parts are not linked to value addition in the country under the APDP and are therefore not included in the automotive trade balance which is used to monitor the progress of the APDP.

The following table reveals that the South African automotive industry reflected a trade deficit of R15,8 billion in 2014 compared to the R24,0 billion in 2013. The narrowing trade deficit could be attributed to an increase in vehicle and automotive component exports to the EU, by far the domestic automotive industry’s main trading partner, coupled with a weakening rand. Automotive exports registered a new record of R115,7 billion or an improvement of 12,7% compared to the R102,7 billion in 2013. The more subdued year-on-year rise of 3,8% in imports amounting to R131,5 billion could be attributed to new vehicle sales declining in 2014 for the first time over the past five years. Exchange rate weakness resulted in sharp increases in both the inflation rate and new vehicle price increases above the CPI index in 2014 which subsequently impacted negatively on vehicle affordability and sales. The rand exchange rate fluctuations have different impacts with different currencies and this is particularly important with regard to the exchange rates of the source countries for South African imports. Similarly, at a micro firm level, depending on the particular firm’s exposure to imports and exports and the firm’s balance of trade, the impact of exchange rate fluctuations may be very different. Africa provided by far the biggest trade surplus than any other global region with which South Africa conducts automotive business, followed by NAFTA. Elsewhere the country’s automotive trade was in deficit in 2014.

APDP trade balance for the automotive industry: 2013 – 2014




2013 126,7 102,7 (24,0)

2014 131,5 115,7 (15,8)

EU 65,4 43,8 (21,6)NAFTA 8,5 18,7 10,2AFRICA (incl. SADC) 1,2 31,6 30,4MERCOSUR 4,2 2,3 (1,9)OTHER REGIONS 52,2 19,3 (32,9)

2014 131,5 115,7 (15,8)

Vehicles 57,2 70,0 12,8

Automotive components 74,3 45,7 (28,6)Source: AIEC,SARSIncluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

“Automotive exports registered a new record

of R115,7 billion.”

84

Memo item:

For purposes of comparison, based on a holistic view of total automotive exports and imports (including vehicles, OE components and aftermarket parts), as under the MIDP, total automotive imports would have amounted to R175,4 billion in 2014 compared to the R166,5 billion in 2013. The imported replacement parts, not linked to value addition in the country under the APDP, with the exception of automotive tooling, amounted to R48,0 billion in 2014 reflecting an increase of 11,4% compared to the R43,1 billion imported in 2013. The trade deficit would have amounted to R59,7 billion in 2014 compared to the R63,8 billion in 2013.




2013 166,5 102,7 (63,8)

2014 175,4 115,7 (59,7)

Vehicles 57,2 70,0 12,8

Automotive components 118,2 45,7 (72,5)Source: AIEC,SARS

New vehicle and automotive component export growth in 2015 will be driven by global demand, which is expected to grow on the back of somewhat higher world economic growth, domestic OEMs’ export programmes as well as an expected weaker rand exchange rate compared with 2014.

“New vehicle and automotive component export growth in

2015 will be driven by global demand, which is expected to grow on the back of somewhat higher world economic growth,

domestic OEMs’ export programmes as well as an expected weaker rand

exchange rate compared with 2014.”

85

POTENTIAL OPPORTUNITIES VIA TRADE AND CO-OPERATION

ARRANGEMENTS

South Africa has pursued participation at regional, bilateral and multilateral levels, promoting collaborative agreements with both existing trade partners and fast-growing emerging markets. The challenge for the South African automotive industry is how to accommodate its automotive policy regime in such agreements without affecting the integrity of the APDP by having different rules applying to different countries and/or regions.

In addition to the SACU-EU free trade agreement, the SADC free trade area and the African Growth and Opportunity Act (AGOA) arrangement with the US, South Africa’s international stature is increasingly being recognised and as a result trade and investment opportunities for the country’s economy in general and for its automotive sector in particular are emerging.

BRICS

South Africa officially became a member nation of BRICS (Brazil, Russia, India, China and South Africa) on December 24, 2010. As a bloc, the BRICS account for almost US$16 trillion (R185 trillion) or 20% to 25% of global GDP and some 40% of the world’s population.

South Africa’s participation in BRICS presented important opportunities for the country to build its domestic manufacturing base and expand trade and investment opportunities. China is South Africa’s biggest trading partner and has proven to be a particularly important destination for South African exports. Although the bull market in commodities that helped propel growth in the BRICS nations has since ended making it difficult for these countries to repeat their remarkable growth rates during the first decade of this century, the average growth of about 6% per annum for the BRICS countries for this decade would still be double the average for the G7 countries. Their share of global gross domestic product will rise sharply and with China and India spurring that growth, the BRICS will remain the most dominant and positive force in the world economy. The founding of the BRICS bank signalled that the group’s influence in global economic affairs will rise.

Africa’s growth in the past decade has been closely linked to China’s economic boom. While China will remain a major export market, African countries will have to accelerate the diversification of their economies, as well as their regional integration to unlock the continent’s full market potential. However, overcoming infrastructure bottlenecks remains critical to realising this vision. Extensive infrastructure is critical for ensuring the efficient functioning of an economy and a well-developed network is vital for enabling local and global businesses to transport their goods and services to markets securely and timely. A key advantage for Africa, in particular, is that the BRICS–Africa co-operation will support Africa’s efforts to diversify and modernise its economy through infrastructure development, knowledge exchange, increased access to technology, enhanced capacity-building and investment in human capital. The proposed establishment of a BRICS-led development bank will contribute to enhanced financial support for infrastructure development on the continent and benefits derived from increased regional integration of the high growth markets in Africa could offer continuous opportunities for South African companies. Sustained growth of the African continent remains key to South Africa’s prosperity.

China, with 23,7 million units, was the top vehicle producing country in 2014 with India in 6th position, Brazil 7th and Russia 11th. China, India and Brazil were amongst South Africa’s top 10 automotive trading partners in 2014. The following table reveals that the automotive trade balance, however, remains in favour of these countries, except

86

for Russia. In 2014, the automotive import to export value ratio was 29,3 to 1 in favour of China, 18,0 to 1 in favour of India and 4,0 to 1 in favour of Brazil.

Automotive trade balance and ratio 2014 – imports vs. exports

Country 2014 imports into SA(R million)

2014 exports from SA(R million)

China 10 392,0 354,8Ratio 29,3 1India 10 104,4 561,0Ratio 18,0 1Brazil 4 319,4 1 091,8Ratio 4,0 1Russia 18,9 467,7Ratio 0,04 1

Source: AIEC, SARS

As a gateway into the continent, South Africa is expected to play a unique role in promoting BRICS-African co-operation. As China grows, so will Africa grow and South Africa, with its know-how and built-for-Africa vehicles, is ideally placed to benefit from the increased demand for vehicles and automotive components on the continent.

SADC – EAC – COMESA Tripartite Free Trade Area

The Tripartite Free Trade Area (TFTA) consisting of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA), launched on 12 June 2011, represents opportunities of a larger market comprising of 26 countries, from Egypt in the north to South Africa at the continent’s southern tip. The countries involved in the so-called “Cape-to-Cairo” FTA have a combined gross domestic product of US$1.2 trillion and some 626 million citizens, representing more than half of Africa’s overall population. The Tripartite initiative is a key African-led project aimed at promoting economies of scale, enabling competitiveness, diversification, fostering regional value-chains, intra-regional trade and investment, and cross-border infrastructure. The TFTA is also being viewed as a possible precursor to a continent-wide FTA. South Africa is negotiating its participation as part of the Southern African Customs Union (SACU), which typically enters such trade deals as a single entity.

Economic consolidation is a prerequisite for Africa to take its rightful place among the top global economies. The reality is that regional integration is not a choice for Africa – it is a must. Building bigger, more integrated sub-regional markets deeply embedded in the global economy are one of the most urgent tasks for Africa in order to sustain its recent economic performance. Unlocking this potential will lead to stronger growth. The South African government views the TFTA as key to raising intra-African trade and investment levels, while improving prospects of aligning the South African economy with some of the world’s fastest-growing economies. Regional integration is being viewed by government as the best way to widen South Africa’s markets as this has placed the country, with its solid industrial infrastructure, a diverse manufacturing base, and a reputation for quality products, in a leadership position.

The current membership of the three Regional Economic Communities (RECs) is summarised in the following table. The countries in red font are the ones to which South Africa does not yet have preferential access.

87

Membership of the three Regional Economic Communities (RECs)

SADC EAC COMESA

Angola Burundi Burundi

Botswana Kenya Comoros

Democratic Republic of Congo Rwanda Democratic Republic of Congo

Lesotho Tanzania Djibouti

Madagascar Uganda Egypt

Malawi Eritrea

Mauritius Ethiopia

Mozambique Kenya

Namibia Libya

Seychelles Madagascar

South Africa Malawi

Swaziland Mauritius

Tanzania Rwanda

Zambia Seychelles

Zimbabwe Sudan

Swaziland

Uganda

Zambia

Zimbabwe

As far as opportunities for the South African automotive industry are concerned, South Africa produced 68% of Africa’s vehicle production in 2014. Vehicle and automotive component exports to the three individual regional economic communities in 2014 continued to grow and amounted to R25,9 billion (R21,9 billion – 2013) in respect of SADC, R1,7 billion (R1,5 billion – 2013) in respect of the EAC and R9,5 billion (R8,7 billion – 2013) in respect of COMESA. Harmonisation of trade regimes, increased market liberalisation and various other areas of co-operation could present the South African automotive industry with increased export opportunities.

SACU – India preferential trade agreement (PTA)

The Southern African Customs Union (SACU) and India have been engaged in a formal process of trade negotiations since 2008 that is intended to lead to a preferential trade agreement (PTA). The PTA is confined to product or tariff lines of special interest to the parties. A consultative process to compile a list of products of export interest to South African economic operators and exporters was undertaken within the National Economic Development and Labour Council (NEDLAC). SACU and India have since exchanged their offensive lists of products of export interest and SACU member states, namely Botswana, Lesotho, Namibia, South Africa and Swaziland are in the process of formulating their respective responses and national positions to the request from India. Automotive products also feature in these offensive lists and could enhance trade and investment opportunities in the domestic automotive sector.

Many synergies between South Africa and India already exist that could be used to enhance two way automotive trade between the two countries. Both countries form part of the BRICS coalition while India was South Africa’s seventh largest automotive trading partner in 2014. Automotive exports to India amounted to R561 million in 2014 and consisted mainly of catalytic converters, body parts and panels and automotive tooling. Automotive imports from India amounted to R10,1 billion in 2014 and consisted mainly of light vehicles and original equipment components.

88

SACU – EFTA free trade agreement

In 2005 the Southern African Customs Union (SACU) and the European Free Trade Association (EFTA) concluded an agreement to establish a free trade agreement (FTA) between the two regions. Norway and Switzerland were among the founding member states of EFTA in 1960. Iceland joined EFTA in 1970, followed by Liechtenstein in 1991. The free trade agreement provides for reciprocal preferential market access between EFTA and SACU states.

The SACU–EFTA FTA which entered into force on 1 May 2008 provides for South African economic operators to take advantage of trade opportunities offered by the agreement and also for the consolidation of trade relations with Western Europe. In terms of access to EFTA, the latter offered South Africa full duty- and quota-free access for industrial products. For its part, South Africa offered EFTA what it had already offered the EU on both processed agricultural products and industrial products, with some marginal adjustments. The following table reveals the South African automotive industry’s trade balance with EFTA countries in 2014.

Automotive trade balance 2014 – EFTA countries

EFTA countries 2014 imports into SA(R million)

2014 exports from SA(R million)

Switzerland 349,4 91,0Norway 52,2 95,1Iceland 0,1 12,2Liechtenstein 0,5 -

Source: AIEC, SARS

The FTA brings about a number of benefits to South African exporters which include duty-free market access for SACU products, including vehicles and automotive components, into EFTA markets.

“The FTA brings about a number of benefits to

South African exporters which include duty-free market access for SACU

products, including vehicles and automotive components,

into EFTA markets.”

89

SOUTH AFRICAN AUTOMOTIVE INDUSTRY – PROSPECTS AND

IMPERATIVES TO GROW

The South African automotive industry remains well-positioned to continue to make a positive contribution to the South African economy. The official vision of 1,2 million vehicles produced per annum by 2020, or a more realistic target of one million vehicles produced, is consistent with industry’s vision to remain a premier supplier of high quality and competitive vehicles, original equipment components, and parts to international markets. Continuous efforts to grow the South African automotive industry’s export business are imperative, especially in view of the vision of substantially increasing vehicle production in the country by 2020. Since the South African automotive sector is export-market oriented, international competitiveness is critical to success. The improvement of the automotive industry’s competitiveness is centred on supplier development, localisation, achieving economies of scale and competitive logistics costs.

The South African automotive industry’s profile is expanding internationally for a number of reasons and the country’s attractiveness as a sub-contracting hub for automotive manufacturing includes:

• Longtermpolicycertaintyandpredictability

• Internationallycompetitiveincentivesandsupportmeasures

• FavourabletradearrangementswiththeEU,EFTA,theUSandSADC

• World-classlogisticssuitableforimportandexportoperations

• Abundantandcostcompetitivelabourpool

• First-worldbusinesssector

• Highqualityofficeandbusinessparkfacilities

• Superiorqualityprivateschools,sophisticatedcosmopolitancitiesandunmatchedqualityoflife

• ThecommonuseofEnglish

• Europeantimezone

The imperatives for the successful realization of the automotive industry’s 2020 vision and to ensure a sustainable automotive industry in South Africa include:

• Agloballycompetitivelocalsupplierbasethatsourcesmaterialsfromlocallyproducedsecondandthirdtier

suppliers and local resources

• Alocalsteelindustrythatproducesinternationalqualitysteelatcompetitiveprices

• Arobust,well thought-outandcompetitivelogisticsnetworkwhichincludesaccessviamultipleportsand

incorporates sea, rail and road freight

• Topqualityandproductiveportswhichoperateathigh levelsofefficiencyat internationallycompetitive

prices

• Maintenanceandenhancementsoftradeagreements

• On-goingsupportintermsoftheAPDPpre-andpost-2020

90

• Cohesivegovernmentplanningwhichincorporatesallaspectsoftheindustryincludingdutiesandrebates,

exchange rate volatility, environmental taxation, fuel legislation and standards, vehicle benefit taxation,

transformation policy and industrial policy

• Developmentofbasicskillsandeducationatalllevels

• A social compact/accordbetween the industry, employersandworkforce that recognises the long-term

success of the industry overall is more important than its individual parts

The Dti’s latest Industrial Policy Action Plan (IPAP) places greater emphasis than was the case in the previous five versions on raising the country’s export competitiveness as part of a “Smart Re-industrialisation” strategy. The latest iteration, which will cover the period 2014 to 2017, will place greater emphasis on trade competitiveness by directing incentives to recipients who demonstrate the potential to become active exporters. IPAP outlines the interventions that industries in South Africa need to implement to generate a structurally new path of industrialisation for the country. It sets out transversal and sector-specific programmes and action plans to retain, grow and diversify South Africa’s industrial base. It also aims to bring structural change in the economy by focusing on value-adding activity in the production sectors, particularly labour-intensive and export-oriented sectors, led by manufacturing.

The Dti remains convinced that efforts to grow manufacturing in South Africa remain fundamental to placing the economy on a new path of sustainable growth. Growth translates into employment opportunities and ultimately economic development. IPAP continues to champion sectors in which South Africa has attained global success, such as the automotive sector. The South African automotive industry has been and will remain a vital contributing element to the success of the national economy and the sustainable growth of the country at large.

“The South African automotive industry has been and will remain a vital contributing element to the success of the national economy and the sustainable growth of

the country at large.”

91

KEY MOTOR INDUSTRY ADDRESSES

Automotive Industry Export Council (AIEC)P O Box 40611,Arcadia,0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.aiec.co.za

Department of Trade & Industry (the dti)Trade and Investment South Africa (TISA)Export Marketing & Investment Assistance Scheme (EMIA)Private Bag X84,Pretoria,0001Telephone: +27 12 394-9500 (International)Telephone: 0861 843 384 (Customer Care Centre)Website: www.thedti.gov.za

National Association of Automotive Component & Allied Manufacturers (NAACAM)P O Box 9558,Edenglen,1613Telephone: +27 11 392 4060Telefax: +27 86 659 0494Website: www.naacam.co.za

National Association of Automobile Manufacturers of South Africa (NAAMSA)P O Box 40611,Arcadia,0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.naamsa.co.za

Retail Motor Industry Organisation (RMI)P O Box 2940,Randburg,2125Telephone: +27 11 789-2542/886-6300Telefax: +27 11 789-4525Website: www.rmi.org.za

92

Standard disclaimer

The trade data is based on eligible APDP products. The AIEC cannot vouch for the accuracy of the information obtained from the source. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components. The main purpose of this trade data is to discern trends in exports and export destinations as well as imports and countries of origin.

ISBN: 978-0-620-65335-0

IN ASSOCIATION WITH:

Inspiring new ways

IN ASSOCIATION WITH:

automotive export manual 2015 · 5 automotive export manual – 2015 – south africa publication...

Documents