THE motor industry will have to step up its competitiveness or risk being a casualty of the "juggernaut" of rapidly increasing vehicle and component exports from Asia, most notably China,
This was according to Justin Barnes, chairman of B&M Analysts, who spoke at the 10th annual meeting of the Durban Automotive Cluster yesterday. The cluster is a public-private partnership between eThekwini municipality and the motor industry in KwaZulu-Natal. It aims to improve the competitiveness of the industry.
There are seven major vehicle assemblers in SA and about 360 component manufacturers.
Durban-based Toyota SA is the only local assembly operation producing volumes close to the threshold for world-scale production. The motor industry is a major employer in SA.
Mr Barnes said trade deficits between SA and China, Brazil and India were high, but these countries were likely to step up increasingly competitive exports to markets such as SA as their local economies were slowing.
SA’s motor and component manufacturers were already struggling to be competitive against these markets, he said.
Mr Barnes said the industry was vulnerable due to the "crutches" of government support such as the Automotive Production and Development Programme (APDP), duty-free exports to the US under the "Agoa" agreement, and to the European Union under the EU-SA free-trade agreement.
The Agoa agreement, which expires in 2015, is a concession from the US towards Africa.
He questioned how one could build a sustainable export platform based on such charity.
Mr Barnes said government support programmes such as the APDP — to be rolled out next year — were needed in SA. "The problem is if we become dependent on it… when do we build a sustainable motor industry?" Mr Barnes said "pockets of excellence" in SA — where some component and assembly manufacturers had proven to be globally competitive — needed to be expanded.
He said the heart of the lack of competitiveness lay in component manufacturing — the trade deficit generated from motor part imports was so large it would drag down overall economic growth, even if the rest of the economy was growing. Component exports were about R38bn last year, against R44bn in completely knocked-down imports and about R33bn to import after-market components.
Mr Barnes said while the industry’s focus on growing exports was commendable, it was just as important that a strong base of domestic production be maintained.
Department of Trade and Industry deputy director-general Nimrod Zalk said the local motor industry had proven "extremely resilient" in the face of the weak global economy since early 2009.
Mr Zalk said the "transition" from the export-focused Motor Industry Development Programme to the APDP was mostly complete and all that remained was for the APDP to "come into effect" next year.
He said the government’s Automotive Investment Scheme was part of a R15bn investment by vehicle assemblers and component manufacturers.
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