5 questions for Michael Mabasa, CEO of the National Association of Automobile Manufacturers of SA

Michael Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (Naamsa) is a transport economist with an extensive background in the aviation industry.

He is still involved in the aviation ecosystem where he is currently serving as a chairperson of the Air Services Licensing Council.

Fin24 asked Mabasa for his views on the local auto manufacturing industry. Here is what he said:

What is the state of the SA auto manufacturing industry?

For this year, our manufacturing output is set to rebound in the second quarter of 2019 following a sluggish first quarter performance disrupted by load shedding and low consumer confidence before our general elections in May.

The underlying demand conditions for new vehicles in the country remains weak, which limits the possibility of sustained recovery in output going forward.

The domestic new vehicle market remains under pressure and has been in a declining trend over the past 5 years.

The vehicle export growth trajectory in 2019 continues to provide strong support for higher vehicle production as well as automotive component supply levels.

For the first half of the year vehicle exports are nearly 30 000 units, or 19.3%, ahead of the corresponding period last year and on track for a further new record of around 400 000 vehicles in 2019.

What are the challenges for the local industry?

There is a close correlation between new vehicle sales, as a leading economic indicator and the country’s gross domestic product growth rate.

The projected GDP growth in South Africa has been reduced by the SA Reserve Bank, IMF and other organisations which result from the slowdown in the global economy, declines in business and consumer confidence, and growing pressure on household disposable income.

The global nature of the automotive industry requires the profitable and timely delivery of quality products at competitive international prices.  

Failure to do so will ultimately force multinational automotive corporations to locate elsewhere.

What are positives and opportunities for the local industry?

Under the SA Automotive Masterplan 2021-2035 the future is paved with numerous opportunities revealing the extent of the potential for the long-term development of the SA automotive industry.

It includes attracting new vehicle assembly opportunities through improved competitiveness and exports; increased localisation of automotive components at all tier levels; increased vehicle and automotive component exports into Africa; pursuing new trade partnerships in Africa with other vehicle assembly countries; improved access into the BRICS markets; produce more "affordable vehicles"; beneficiation of materials fabricated for the automotive industry; introducing more environment-friendly and fuel efficient vehicles, including electric vehicles.

Which auto manufacturers have withdrawn from South Africa in recent years and what about the Chinese project near Port Elizabeth?

Due to global restructuring, General Motors South Africa, one of various closures around the world, the Port Elizabeth manufacturing plant and head office facilities have been sold to Isuzu Motors SA, which was previously a joint venture between Isuzu Japan and GMSA.

It is now a wholly-owned Isuzu entity. Isuzu will also run the Port Elizabeth parts distribution centre and its dealers will attend to the substantial car parc of GM vehicles.

The biggest news for the Coega IDZ in 2016 was the announcement of an R11bn investment by Chinese state automotive manufacturer, Beijing Automotive International Corporation (BAIC) and South Africa’s Industrial Development Corporation (IDC). BAIC is taking a 65% stake in a joint venture with the IDC, at 35%, in the Coega IDZ.

This follows the R600m investment of First Automotive Works (FAW), also a Chinese enterprise. The BAIC SA investment is the single largest investment in South Africa in 40 years. The R2bn Phase 1 of the BAIC SA plant, comprises a 4 200m² office block and an assembly and body shop of 42 000m² fitted with robotic equipment.

Construction will start shortly on the 21 000m² paint shop, which is scheduled to be completed by the end of 2019. Production at the plant will be ramped up over a three-year period from the commencement of production to 50?000 vehicles a year, with production thereafter up-scaled to 100?000 units a year.

Of this, 40% were destined for sale in South Africa and 60?percent for export markets, including countries in Africa and South America.

How do I see the way forward for the industry?

In line with the industry's overall strategic objectives, we plan to grow vehicle production to 800 000 units - from 600 000 currently - in the next 5 years.

We also want to aggressively stimulate the local market and amplify regional markets and industrial partnership opportunities, which will substantially contribute to the growth of our economy and in particular the creation of new permanent jobs throughout the components manufacturing value chains.

In line with one of our strategic objectives, transformation for the automotive sector is not just a nice to have, but an imperative to the success and the sustainability of the industry.

The sector remains committed to contribute meaningfully towards Broad-Based Black Economic Empowerment.

Skills development initiatives will continue to be an important priority for the sector.

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