Exports have soared under government automotive policy and forecasts suggest they will continue to grow in coming years. But the uncertain global economic environment makes it unwise to rely exclusively on exports for long-term industry growth.
The automotive production and development programme (APDP), which came into being this year, runs to 2020. To achieve the 1,2m target, the industry will have to more than double 2012's 539,538, which included cars and commercial vehicles. Immediate plans are to grow that to 635,300 this year and 739,500 in 2015.
As things stand, says Ford SA president Jeff Nemeth, the 1,2m figure will require another 500,000 annual exports on top of the 277,893 vehicles that were shipped out last year. By 2015, the industry expects to be exporting 421,500.
That depends on foreign economies remaining strong but as the crisis-ridden European market - an important destination for SA vehicles - has shown, there are no guarantees.
Volkswagen SA's managing director David Powels wants government to take a two-tiered policy approach that also encourages domestic sales growth.
He says there needs to be a concerted plan to reduce the cost of finance, insurance and taxes. This would go against the government tradition, not exclusive to SA, of treating motorists as convenient cash-cows. Proposed Gauteng and Cape Town toll roads are but the latest expression.
Powels says: "If we are serious about the 1,2m, we have to grow the local market. We have to look at how we can make cars more affordable.
"More motorists means more income from tolling, more tax and more jobs. We need to put some real pressure into this debate," he said.
To be fair, the motor industry development programme (MIDP), which ran from 1995 to 2012 - and its APDP successor - have made considerable progress in affordability.
Import duties on new cars have fallen from 115% pre-MIDP to 25% today. The resulting flood of competitively priced imported vehicles has encouraged local manufacturers to restrain their own prices. In recent years, new-vehicle price increases have generally lagged behind the inflation rate.
Mercedes-Benz SA's chief executive Martin Zimmermann expects little change this year, even as he says motor companies can't continue indefinitely to absorb above-inflation cost increases.
The National Association of Automobile Manufacturers of SA (Naamsa) believes prices could actually breach inflation levels this year - "as a result of the sharply weaker exchange rate and the April increase in CO² vehicle emission taxes on new cars and certain categories of new light commercials".
However, Nissan SA's managing director Mike Whitfield doesn't expect the bubble to burst just yet. He thinks average car prices will rise by between 5% and 6% in 2013. "The market won't allow us to pass on all our costs," he says.
The weak rand has made the situation worse. In 2012 over 70% of new cars sold in SA were imported - some by local manufacturers to add to their SA-built ranges but many more by independent importers.
Stanley Anderson, SA head of sales and marketing for imported Korean brand Hyundai, says the rand's sharp drop against the euro is causing considerable pain. "For once," he argues, "it is local manufacturers who hold the whip-hand on local pricing because, in terms of the APDP, they can negate part of the exchange rate impact by exporting more and using production incentives to import duty-free."
The industry is anxious to do nothing to halt the steady growth in new-vehicle sales. In the first five months of this year, total new-vehicle sales were up 7% on the corresponding 2012 period: cars by 5,9%, light commercial vehicles 18,2%, medium commercials 7,7%, heavy trucks 6,8% and extra-heavies 7,3%. Bus sales fell 14,7%.
Most pundits expect growth to slow later this year. According to Naamsa: "The outlook for the automotive sector for the balance of the year looks less promising than at the beginning of 2013."
Source: Financial Mail via I-Net Bridge
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