1. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
EDD Parliamentary Portfolio Committee Presentation on SA Automotive Sector Department of Trade and Industry
Broaden participation

2. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Automotive Industry: OEM Representation
European light motor vehicle manufacturers represented in SA - Mercedes Benz, BMW, and Volkswagen - are all wholly owned subsidiaries
Japanese and American manufacturers - Toyota, General Motors, and Ford - are also 100% controlled subsidiaries
Other major marques imported: European (Peugeot/Citroen, Volvo), Japanese (Daihatsu, Honda, Subaru), Korean (Hyundai/Kia), Indian (Tata, Mahindra), with Chinese brands also growing in the SA market
OEM employment levels: approx

3. SA Automotive Industry: Component Manufacturing
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Automotive Industry: Component Manufacturing
Widespread base of auto component suppliers including global first tier suppliers such as Faurecia, Johnson Controls, Mothersons, Yazaki, Sumitomo, Bosch and Behr
120 1st tier suppliers, 75% of them multinationals
Over 200 2nd and 3rd tier suppliers, mostly local
Supplier Employment Level‏: approximately in 2014

4. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Automotive Industry: Economic Contribution
The Automotive Industry is the largest manufacturing sector in the SA economy and in 2014 the wider industry contributed approximately 7.2% of GDP
The export-led growth model came under pressure in 2009 as a result of the global economic crisis
Since then, there has been growth in both export and domestic business (post-2010 and projected through the APDP period)
Approximately vehicles produced in SA 2014; 2015 projection: (approximately 0.63%)
Auto product exports 2014: R115.7bn (12.7% of total SA exports)
OEM focus on high quality and competitive production e.g. Mercedes Benz Plant, JD Power Platinum Quality Award

5. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Major SA Automotive Exports
OEMS
Nissan – 1-ton pickup into Africa
Volkswagen - Polo series to EU
BMW – 3 Series to Japan, Australia and USA
Mercedes Benz – C Class
Toyota - Corolla/Hilux to EU and Africa
Components
(Quoted in R million) – See table
Major export destinations: EU, Africa, USA, Brazil, Japan, followed by Australia, S Korea, India and China
Component (R m)
1995
2000
2013
2014
Catalytic Converters
389
4 683
17 620
19 479
Seats, Stitched Leather
1 019
1 915
1 524
1 277
Engines and Parts
111
485
2 938
3 491
Tyres
213
682
1 215
1 531
Silencers/Exhausts 76
377
1 214
497
Radiators 55
127
1 088
1 144
Wheels
157
551
413
331

6. PPC PRESENTATION: AUTOMOTIVES Supportive Trade Environment
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Supportive Trade Environment
SADC FTA – market of 200 million consumers
EU FTA; AGOA into US
Possible future FTA with SADC, COMESA & EAC - with a market of 700 million consumers
Regional Industrialisation: opportunity for SA components/sub-assemblies to support initial-stage assembly in other countries looking to industrialise

7. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA vehicle population:
(Registered vehicles and projections for 2015 & 2017)
2011
2012
2013
2015
2017
Motor cars
Minibuses
Buses
49 254
51 687
54 281
60 597
67 897
Medium trucks
Heavy trucks
Other vehicles
TOTAL VEHICLES
Source: NAAMSA

8. PPC PRESENTATION: AUTOMOTIVES SA Autos Support Policy History
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Autos Support Policy History
Impact of industrial policy instruments have been limited (the private sector must come to the procurement localisation table for local supplier development and strategic sourcing by large private sector companies in the mining; health services and telecommunications sector could make a very significant impact on the manufacturing sector.

9. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Key Performance Indicators: Post 1995
Activity
1995
2012
Capital expenditure by OEMs
R847 million
R4.7 billion
Export value (vehicles and components)
R4.2 billion
R86.9 billion
Total vehicles exported (units)
15 764
Top vehicle export destinations
China
Zimbabwe
Malawi
USA UK
Algeria
Top automotive components exported
Stitched leather seat parts
Catalytic converters
Tyres
Engine parts
Silencers/exhaust pipes
Top vehicle countries of origin: imports
Germany
Japan
India
Productivity (avg. no. of vehicles produced per employee)
10.0
18.5
Automotive industry contribution to GDP
6.5%
7.0%
No. of passenger car model derivatives
356
2 159
Export destinations for vehicles and components 62
152
Total vehicles produced (units)
Total new vehicle sales (units)
No. of model platforms 41 13
Models with production volumes > units 5

10. Post 1995: Increase in SA automotive global market share
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Post 1995: Increase in SA automotive global market share

11. SA Assembly Investment Trends
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Assembly Investment Trends
The revised Preferential Procurement Policy Framework Act (PPPFA) regulations of 7 December 2011, gave power to the dti to designate industries, sectors and sub-sectors for local production, at specified levels of local content. Products already designated for local production are: rail rolling stock; power pylons; bus bodies; canned/processed vegetables; certain pharmaceutical products; furniture products; electricity meters; valves and actuators; electrical and telecommunication cables; components of solar water heaters; the Clothing, Textile, Leather and Footwear (CTLF) sector; and working waterborne vessels.

12. Automotive Production and Development Programme: 1
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Automotive Production and Development Programme: 1
The APDP consists of 4 pillars aimed at supporting and developing the SA automotive industry
Stable import tariffs: 25% for CBUs; 20% for CKD components
Vehicle Assembly Allowance (VAA): manufacturers with a minimum plant volume of pa allowed to import a percentage of their components duty free (20% - decreasing to 18% over 3 years)
Production Incentive (PI): an allowance for duty free import of vehicles or components, calculated at:
55% of value added in the SA supply chain; reducing to 50% over 5 years
Special dispensation for vulnerable industries
At around 20% of GDP, South Africa’s investment levels are too low in absolute terms (The private sector venture capital market in South Africa is weak). The scarcity of readily available working capital acts as a brake on the operational performance of many firms, particularly in the start-up, new technology commercialisation and systems-building phases.

13. Automotive Production and Development Programme: 2
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Automotive Production and Development Programme: 2
Automotive Investment Scheme (AIS)
Purposes:
To stimulate investment and job creation in SA’s automotive sector - in particular:
Investment in technologically advanced automotive production & new and replacement models/components
Increased plant production volumes
Overall strengthening of the automotive value chain
Mechanisms:
A non-taxable cash grant paid over 3 years with minimum benefit calculated at 20% for OEMs and 25% for suppliers
An additional 5% and 10% benefit - subject to Economic Benefit criteria
Available to OEMs and component suppliers
At around 20% of GDP, South Africa’s investment levels are too low in absolute terms (The private sector venture capital market in South Africa is weak). The scarcity of readily available working capital acts as a brake on the operational performance of many firms, particularly in the start-up, new technology commercialisation and systems-building phases.

14. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
APDP: Cumulative Annual Support : 1
Financial Year
Budget Committed (R)
Total Payments since inception (R)
Total
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing
Industry support that is of physical cost to the fiscus is the grant offered under the AIS.
The total investment approved since inception amounts to R25 145 843 725
Total of incentives approved since inception amounts to R  593
Since inception 245 projects have been approved under AIS; associated new jobs created = 11 351.

15. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
APDP: Cumulative Annual Support : 2
Maximum (theoretical) Duty Loss
2009
2010
2011
2012
2013
2014
Vehicles R R R R R R
Components R R R R R R
DFA/VAA R R R R R
PAA R R R R R R
TOTAL R R R R R
Table above provides not “on budget” support, but support generated through the duty credit system.
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing

16. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Policy Developments: 1
Electric Vehicles and Green Production
Finalisation of SA EV Roadmap: multi-departmental approach
Framework rests on two main pillars:
Creating an environment in which electric vehicles can be operated on South African roads
Supporting the development and production of electric vehicles and relevant EV components
Supporting emerging regional production locations
Other SSA countries looking to kick-start nascent auto industry
Assembly in such countries presents opportunities for expanded SA supply chain developement in the short to medium term

17. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Policy Developments: 2
Medium Heavy Commercial Vehicle (MHCV) segment
Significant MHCV opportunity:
Encourage higher levels of localisation e.g. through Preferential Procurement
Support increased levels of R&D spend; encourage commercialisation of R&D
Support deepening of component manufacture
Widen distribution and after-sales support in regional markets
Review of APDP under way in consultation with all stakeholders - in the context of maintaining policy certainty
The four institutions responsible for implementing technical infrastructure policies are the South African National Accreditation System (SANAS), the National Regulator for Compulsory Specifications (NRCS), the South African Bureau of Standards (SABS) and the National Metrology Institute of South Africa (NMISA). The technical infrastructure framework in South Africa ensures that products manufactured, exported and imported are safe and fit for purpose and meet regulatory and legislative requirements.

18. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Policy Developments: 3
The present policy implementation in the MHCV segment has facilitated an improved operating environment for the industry
A number of positive developments have since emerged:
Bus bodies have been designated for public procurement, further catalysing local manufacturing
The Automotive Investment Scheme (AIS) package has been extended to people-carriers/mini-buses, trucks and buses
Large new investments from companies like Iveco, Tata, BAW, Toyota, FAW and Hyundai have recently been announced
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing

19. PPC PRESENTATION: AUTOMOTIVES
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
Policy Developments: 4
Strengthening the Supply Chain
Auto Supply Chain Competitiveness Initiative (ASSCI)
Collaboration between all major industry role-players
Wide ranging, 3-year Business Plan activities - all aimed at competitiveness improvement and supplier development
Co-ordinating, measuring and targeting value-adding opportunities
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing

20. SA Automotive Sector - Now and Beyond: 1
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Automotive Sector - Now and Beyond: 1
Vision 2020
Stimulate expansion of automotive vehicle production to 1.2 million vehicles p/a by with associated deepening of the components industry
(To be accomplished through long-term partnerships and relationships built with the industry)
Sector-specific Support Programmes - APDP and related:
Encouraging higher levels of investment and value addition
Support for firm- and industry-level competitiveness improvement and supply chain development
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing

21. SA Automotive Sector - Now and Beyond: 2
9 June 2015
PPC PRESENTATION: AUTOMOTIVES
SA Automotive Sector - Now and Beyond: 2
Recent Investment Announcements:
Mercedes Benz: R5bn
General Motors: R1bn
Ford: R3.6bn
Metair Group: R400mill ( )
Johnson Controls: R380m
Opportunities:
Engine parts/components, vehicle interiors, electronic, drive train components, body parts and exterior finishes, aluminium forgings and castings (vis-à-vis OEM project-specific opportunities)
Attract new vehicle assembly opportunities
Examples of ‘R&D-led industry development’ programmes are: Titanium metal powder manufacturing development; Fuel cell development; Additive manufacturing