Operational review / Diversified industrial

Automotive components

1 118 228 accessories sold per annum

2 555 employees

5 680 tonnes of foam produced

2 347 tonnes of offcut material recycled back into products

26.9 million components produced annually

Revenue increased by 26%

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The automotive components division is well placed through its economy of scale and international technology agreements and partnerships to benefit from continued new model introductions in South Africa.

Manufacture of components used in new vehicle assembly and retail vehicle accessories

Revenue spLIt by DIvIsIOn

24% Autovest

76% Feltex

Manufacturing plants

East London

Durban

Port Elizabeth

Pretoria

Johannesburg

17

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With world-class quality and manufacturing capabilities, South Africa remains an attractive production destination for international original equipment manufacturers (OEMs) as a strategic gateway to the African continent. Annual vehicle production by international OEMs in South Africa remained flat at 555 597 units compared to 552 876 units in the prior year. The industry’s objective is to reach 1 000 000 units produced per annum by 2020. South Africa’s vehicle build is spread over seven OEMs that build 15 models, with approximately 55% of all vehicles produced being exported.

The Automotive Production and Development Programme (APDP), which currently runs to 2020, provides an element of certainty to the business environment. As a result of this, replacement models are being secured by the South African OEMs as the current models reach the end of their production periods. It is anticipated that this programme will be replaced with a similar programme after 2020.

The trend of centrally manufacturing ‘stripped down’ model configurations for global distribution, with the fitment of accessories taking place in-country according to regional requirements, provides a sound base for the sale of aftermarket automotive accessories like those manufactured by Autovest and Maxe.

The increased demand for SUVs*and LCVs• is also encouraging as these vehicles provide greater scope for accessorising.

business environment

Automotive componentsOperational review / Diversified industrial

products

* Sport utility vehicle• Light commercial vehicle

Feltex Automotive TrimTextile-based automotive acoustic

Maxe Premium automotive accessories made from mild and stainless steel, supplying the LCV•, SUV* and truck markets

Feltex Foam Polyester and polyether flexible, semi-rigid and rigid thermoformable foams for use in vehicles and high-tech industrial products

SA CanopySupplier of locally manufactured and imported fibreglass canopies

CaravelleOverlay carpets/loose-lay vehicle mats

Rhino LiningsSupplier of locally developed spray-on bin linings for LCV• and selected industrial applications

Feltex Fehrer Polyurethane flexible foam, moulded seats, conventional and pour-in-place headrests, foam pads, side bolsters and armrests

Kilber ProductsSteel products to the independent aftermarket, including towbars, bullbars, rollbars and sidesteps

IAC Feltex Acoustically engineered tufted automotive carpet and A, B and C pillars

Auto ArmorSupplier of a range of vehicle protection products that include window and paint protection film, as well as paint and interior surface treatments

Autoneum Feltex Underfloor systems for thermal and impact protection and aluminium heatshields

Autovest118 franchise fitment centres for automotive accessories

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key factsGroup strategy

“Our aim is to be the supplier of choice with leading technology and globally competitive manufacturing capabilities.”

ugo frigerio, CeO: Automotive components division

R22.4 million investment in training 102 learnerships/apprenticeships during the year

Acquisition and integration of Autovest Limited

R167.2 million investment in new technology to facilitate new models

R8.1 million investment in technology systems during the year

Just-in-time and just-in-sequence supply to all OEM fitment centres in close proximity to dealerships

Close relationship with local OEMs and dealerships, expanding African footprint

Rebranded 17 franchises to Autovest

Market leadership

High barriers to entry

Leveraging our African base

Industry diversification

Adding value through specialisation

Feltex Automotive commands high market share throughout the sector in terms of the products that it produces, while Autovest, with its leading brands, has a national network of 118 franchised fitment centres serving as an execution platform.

International technology partnerships, OEM-approvals, the five to ten-year model life cycles and economies of scale facilitate a globally competitive cost base.

The automotive components division is balanced between components for new vehicle build across all seven OEMs and aftermarket accessories across a broad range of products.

Based on its balance across all seven OEMs the division is highly skilled at implementing new model introductions and extending the technology benefits thereof throughout its operations.

The division is competitively placed to take advantage of export opportunities as vehicle assembly is initiated in African countries.

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The automotive components division reported a 26% increase in revenue and a 68% increase in operating profit for the year. This was primarily as a result of the acquisition of Autovest in April 2016, increased parts penetration, and continued automation initiatives and technology upgrades following recent new model introductions. Operating margin was further enhanced by improved product mix. The Autovest operation performed to expectation for the year in spite of lower industry new vehicle sales and received strong support from the launch of the new Toyota Hilux in January 2016.

Significant progress was made in the rationalisation of the Autovest business model, with increased focus and investment in the sales and marketing function, improved efficiency in the franchised fitment network as an execution platform, and improved information systems during the year.

Automotive components

Commentary

The automotive components division reported a 26% increase in revenue and a 68% increase in operating profit for the year.

Operational review / Diversified industrial

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The automotive components division is well placed to benefit from the success of recently introduced models such as the Mercedes Benz C Class and Toyota Hilux, and anticipated new model introductions like the Volkswagen Polo and BMW X3. New model introductions provide Feltex with the ability to increase its parts penetration (market share) and to employ new technology. Focus on localisation of component manufacturing, in line with the APDP incentive scheme, remains a priority for the business, as does continuous improvement through training and development, technology investments, and research and development.

Outlook

KAP Integrated Report 2017 41

Diversified industrial / Automotive components

Together Feltex and Autovest own a bigger ‘share’ per vehicle

Case study

High barriers to entry

the acquisition of the Autovest group of brands added scale to the automotive components division, positioning it to become a market leader in providing OeMs, automotive dealerships and individual customers with high-quality vehicle accessories.

In addition to the components produced by Feltex, which are used in the assembly of vehicles, aftermarket accessories, which include towbars, bullbars, rollbars, canopies, vehicle protection products and spray-on bin linings, increase the division’s total ‘share’ per vehicle.

For both new vehicle component and aftermarket products, the automotive components division can build on its reputation of supplying world-class OEM-approved products. Feltex brings years of experience and intellectual property at improving manufacturing efficiencies and quality, which is also beneficial to the manufacture of products for Autovest’s aftermarket sales. With increased expertise in manufacturing and processes adding to the quality of products, it is geared to grow its market penetration.

As part of the process to integrate Autovest into the KAP automotive components division and to streamline its offering to the market, Autovest consolidated five stand-alone businesses into two. Instead of operating independently branded outlets, Autovest franchise outlets are being rolled out nationally where all product brands can be bought and installed as part of the aftermarket service to customers.

the integration includes benefits for:

kAp Automotive

There is a clear focus to service the automotive industry by providing assembly components and aftermarket accessories. It provides the opportunity to service OEMs with component parts for locally manufactured vehicles and aftermarket accessories for locally produced and imported vehicles.

Autovest

A consolidated, one brand approach translates into a co-ordinated growth plan, which improves manufacturing, logistics, administrative, sourcing and sales efficiencies. The focus is to build one brand and to improve the customer experience.

the franchisee

More than 118 franchisees nationwide are serviced by one team providing a basket of products and with a co-ordinated marketing, training and network expansion plan. The strategy is to grow the franchisee network to offer an inclusive basket of products to OEMs and dealerships.

the customer

Dealerships and OEMs are provided with a broad range of approved quality products from a single supplier. This reduces the risk for dealership customers and improves their ability to service their customers, ensuring quality and OEM-approved products fitted through a highly skilled franchisee network. Accessories can be fitted on-site at the dealership or through the Autovest network.

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