South Africa Automotive Export Manual

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ACKNOWLEDGEMENTSThe information and analysis in this report were produced and compiled by Dr Norman Lamprecht on behalf of the Automotive Industry Export Council. The contributions and assistance by NAAMSA, NAACAM and the Department of Trade and Industry are hereby gratefully acknowledged. The data processing and editing by Dr Alet Tolmay, and design and outlay of the publication by Dr Selma Schiller are also acknowledged with appreciation.

AIECP O Box 40611

Arcadia0007

Tel: +27 12 807 0086Fax: +27 12 807 0481

Website: www.aiec.co.za

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CONTENTSAutomotive Export Manual – 2017 – South Africa .............................................................................................................. 4

South Africa and its automotive industry .............................................................................................................................. 5

The Automotive Industry Export Council ............................................................................................................................... 9

Representative South African automotive industry bodies...........................................................................................11

Global new vehicle market features .......................................................................................................................................12

South African new vehicle market features .........................................................................................................................16

Automotive clusters .....................................................................................................................................................................20

Automotive policy regime .........................................................................................................................................................25

Methodology – Automotive trade data ................................................................................................................................30

Exports to countries .....................................................................................................................................................................31

Exports to regions .........................................................................................................................................................................37

Exports of vehicles ........................................................................................................................................................................60

Automotive components – exports by country .................................................................................................................63

Automotive components – exports by product ................................................................................................................73

Imports by country of origin .....................................................................................................................................................83

Imports of vehicles .......................................................................................................................................................................86

Automotive parts and components – imports ...................................................................................................................88

Automotive industry trade balance .......................................................................................................................................90

Main automotive trading partners .........................................................................................................................................93

Imperatives to sustain and grow the South African automotive industry ...............................................................97

Key motor industry contact details.........................................................................................................................................99

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ABBREVIATIONSAGOA African Growth and Opportunity Act

AIEC Automotive Industry Export Council

AIS Automotive Investment Scheme

APDP Automotive Production Development Programme

BLNS Botswana, Lesotho, Namibia and Swaziland

BRICS Brazil, Russia, India, China and South Africa

CBU Completely Built-up

CKD Completely Knocked Down

COMESA Common Market for Eastern and Southern Africa

CPI Consumer Price Index

DTI The Department of Trade and Industry

EAC East African Community

EU European Union

FDI Foreign Direct Investment

FOB Free on Board

FTA Free Trade Agreement

GDP Gross Domestic Product

IDZ Industrial Development Zone

MERCOSUR Mercado Común del Sur – Common Market of South America

MIDP Motor Industry Development Programme

NAACAM National Association of Automotive Component and Allied Manufacturers

NAAMSA National Association of Automobile Manufacturers of South Africa

NAFTA North American Free Trade Area

OEM Original Equipment Manufacturer (Vehicle Manufacturer)

OICA International Organisation of Motor Vehicle Manufacturers

SA South Africa

SACU Southern African Customs Union

SADC Southern African Development Community

SARS South African Revenue Service

WTO World Trade Organisation

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AUTOMOTIVE EXPORT MANUAL – 2017 – SOUTH AFRICA PUBLICATION

Research is a critical enabler within the South African economy, intending to produce the best economic intelligence. The value and insight which data has to offer and the role that data plays are key and integral in formulating policy and defining business strategies. Market intelligence provides companies with a competitive edge in identifying market gaps and opportunities. Accurate and timeous data provides insight into current trading conditions, acts as an indicator as to where the market is headed and assists companies to develop sound and appropriate strategies.

The Automotive Export Manual – 2017 – South Africa publication is an annual publication produced and compiled by the Automotive Industry Export Council (AIEC) – the recognised source of South African automotive trade data. The 2017 publication, as well as the previous 10 publications since 2007, provides a comprehensive guide on the export and import performance of the South African automotive industry, both under the previous Motor Industry Development Programme (MIDP) and the current Automotive Production Development Programme (APDP). The aim of the manual is to identify and report on the major automotive export destinations, the major countries of origin, the main automotive export trade blocs, the most important automotive products being exported and imported, the top growth markets and products, as well as the impact of the trade arrangements enjoyed by South Africa on automotive trade patterns.

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SOUTH AFRICA AND ITS AUTOMOTIVE INDUSTRY

South Africa, as Africa’s largest economy and its most integrated in terms of capital and trade flows, represents the blue chip jurisdiction in the region. Although South Africa offers investors the benefits of a country with first-world standards in business infrastructure, it also offers emerging market vibrancy and opportunity, the ideal formula for growth and profitability. The country, with its sound fundamentals, remains one of the most accessible, dynamic and well-regulated entry points to Africa’s 1,2 billion consumers.

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South Africa has developed an established, diversified manufacturing base that has shown resilience and potential to compete in the global economy. The country’s economy, however, has experienced relatively slow growth in recent years and its gross domestic product (GDP) has not risen by the rates seen prior to the global financial crisis of 2008/2009. South Africa’s GDP growth rates remain marginal, and this, in turn, negatively impacts on the domestic demand for manufactured products. Export-led growth could counter this trend, as domestic manufacturers export to a strengthening global industrial sector. In this regard, the automotive manufacturing sector has been identified as one of the industries with the highest potential for accelerated export growth.

The automotive industry spans the primary, secondary and tertiary sectors of the South African economy, from agriculture and mining, to the manufacturing and service industries. While other industries have been struggling due to the weak macro-economic climate in the country in recent years, automotive firms have proven resilient, primarily due to the segment’s strong degree of integration, a solid policy framework and export diversification.

The automotive industry remains fundamentally important to South Africa’s socio-economic prosperity, growth and development and central to the South African government’s efforts to industrialise and re-industrialise the country’s economy. The manufacturing sector, as the engine of the economy, provides a locus for stimulating the growth of other activities, such as services, and achieving specific outcomes, such as employment creation and economic empowerment. Manufacturing, therefore, presents an opportunity in South Africa to significantly accelerate the country’s growth and development.

As the largest manufacturing sector in the country’s economy, vehicle and component production accounted for 33% of South Africa’s manufacturing output in 2016, while the broader automotive industry’s contribution to the GDP was 7,4% (4,7% manufacturing and 2,7% retail). Exports of automotive products in 2016 accounted for R171,1 billion, a further record, representing 15,6% of total South African exports.

Exports of automotive products in 2016 accounted for

R171,1 billion, a further record,

representing 15,6% of total South African exports.

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The following table highlights the significant social and economic contribution made by the domestic automotive industry in the context of the South African economy for the years 2015 and 2016.

Key performance indicators – 2015 to 2016Indicator Performance

2015 2016

Consumer Price Index (CPI) 4,6% 6,3%

South Africa’s Gross Domestic Product (GDP) (current prices) R4 049,8 billion R4 337,0 billion

Broader automotive industry contribution to GDP 7,5% 7,4%

Vehicle and component production as % of South Africa’s manufacturing output 33,5% 33,0%

Average monthly employment by vehicle manufacturers 31 260 30 953

Automotive component sector employment 82 100 82 000

Capital expenditure – vehicle manufacturers R6,6 billion R6,4 billion

Capital expenditure – component sector R2,8 billion R2,6 billion

Total South African new vehicle sales 617 648 units 547 406 units

Total South African vehicle production 616 082 units 599 004 units

South Africa’s vehicle production as % of Africa’s vehicle production 64% 58,5%

South Africa’s global vehicle production ranking 22nd 22nd

South Africa’s global vehicle production market share 0,68% 0,63%

Vehicle ownership ratio per 1 000 persons 180 180

Total automotive export earnings R151,5 billion R171,1 billion

Automotive export value as % of total South African export value 14,6% 15,6%

Number of export destinations 140 154

Number of export destinations with export values more than doubling year-on-year 30 52

Top automotive country export destination in rand value terms Germany Germany

Total South African vehicle exports 333 847 units 344 859 units

Value of vehicle exports R101,9 billion R118,1 billion

Top vehicle export destination in volume terms UK UK

Value of automotive component exports R49,6 billion R53,0 billion

Top automotive export component category in rand value terms Catalytic converters Catalytic converters

Top automotive trading partner in rand value terms Germany Germany

Top automotive trading region in rand value terms EU EU

Top country of origin for total automotive imports in rand value terms Germany Germany

Top country of origin for vehicle imports India India

Source: AIEC, Econometrix, NAAMSA/Lightstone Auto, NAACAM, OICA, SARS

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For currency comparison purposes, the following table reveals the movement of the rand against the currencies of the South African automotive industry’s main trading partners, namely, the EU, the UK, the US and Japan, from 2012 through to 2016.

Currency indices for the rand versus major trading partners (foreign currency: rand – annual averages)

Currency 2012 2013 2014 2015 2016

Euro 10,55 12,82 14,40 14,14 16,28

Index 2012 100 122 136 134 154

UK Pound 13,01 15,11 17,86 19,49 20,00

Index 2012 100 116 137 150 154

US$ 8,21 9,65 10,84 12,75 14,71

Index 2012 100 118 132 155 179

Japan (100 Yen) 10,29 9,87 10,26 10,53 13,54

Index 2012 100 96 100 102 132Source: South African Reserve Bank

The South African Reserve Bank is responsible for formulating and implementing monetary policy. Its primary objectives are keeping inflation within a targeted range of 3% to 6% and maintaining a stable, competitive currency.

Following significant depreciation against major currencies since the end of 2015, South Africa’s share price, the rand exchange rate, has strengthened since mid-2016. An improvement in South Africa’s growth prospects in 2017 is premised on the easing of the drought conditions, the improvement in commodity prices and a decline in inflationary pressures on the back of a stronger rand. Unforeseen political events and instability could, however, impact on economic growth. Low inflation and a stable exchange rate remain vital to the automotive industry’s cost structure. The global economic outlook, which remains positive, should also continue to lend support to South Africa’s improved vehicle export performance.

Low inflation and a stable exchange rate

remain vital to the automotive industry’s

cost structure.

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THE AUTOMOTIVE INDUSTRY EXPORT COUNCIL

The Automotive Industry Export Council (AIEC) is administered by the NAAMSA offices in Pretoria, and the activities and administration are coordinated by the AIEC Board. The AIEC Board of Directors consists of Mr Renai Moothilal (Executive Director – NAACAM – Chairperson), Mr Nico Vermeulen (Director – NAAMSA), Dr Norman Lamprecht (Executive Manager – NAAMSA) as well as two ex-officio members from the Department of Trade and Industry, Mr Mzwakhe Mbatha and Mr Adriaan Adams.

The AIEC serves as the umbrella body for the export promotion and development activities of the South African automotive industry and represents an important link between the industry and the Department of Trade and Industry (Dti). The AIEC represents the interests of seven major motor vehicle manufacturers/exporters, namely, BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen, as well as the manufacturers/exporters of trucks and buses, and about 500 automotive component suppliers in South Africa. Importantly, the AIEC is the only means of access available to about 350 small enterprises that are not part of the main stream, in respect of trade enquiries, invitations to events and service offerings received from third parties, amongst others. Membership of the AIEC is free.

Mr Renai MoothilalExecutive Director

NAACAM - Chairperson

Dr Norman LamprechtExecutive Manager

NAAMSA

Mr Nico VermeulenDirectorNAAMSA

Mr Mzwakhe MbathaEx-officio MemberDTI

Mr Adriaan AdamsEx-officio Member

DTI

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The Dti undertakes a wide range of activities to promote trade and investment. Among those are national pavilions organised each year to promote various sectors and sub-sectors in overseas and domestic trade shows. One of the AIEC’s key service offerings to stimulate export growth and deepen the export base is to facilitate participation in major automotive events abroad. Historically, there has been a strong correlation between the degree of automotive export revenue growth and the financial support provided by the Dti in the preceding years. National pavilions at international events are regarded as the flagship tool utilised for the promotion of the domestic automotive industry’s world class capabilities.

During 2016, financial assistance under the Dti’s Export Marketing and Investment Assistance (EMIA) scheme allowed automotive manufacturing exhibitors to participate in the Automechanika Middle East, United Arab Emirates (UAE) National Pavilion from 8 to 10 May 2016 and the Automechanika Frankfurt National Pavilion in Germany from 13 to 17 September 2016.

Fiscal constraints, however, have significantly impacted on the Dti’s ability to showcase exporters at international trade pavilions and conferences in the 2017/2018 financial year. In the 2016/2017 financial year the Dti was able to facilitate South Africa’s participation at 29 national pavilions, but for the 2017/2018 financial year the number of national pavilions has been reduced to 17, and consequently no automotive national pavilions have been approved for the 2017/2018 financial year. Automotive manufacturing companies, however, will be invited to participate in the South African National Pavilion at Midest, France from 3 to 5 October 2017 (www.midest.com). Under the EMIA individual participation scheme automotive component manufacturers will still be able to access financial assistance to participate in automotive events abroad. In 2017, South African automotive events include the South African Motoring Experience, powered by the South African Festival of Motoring, which takes place from 1 to 3 September 2017 at the Kyalami Grand Prix Circuit and International Convention Centre, Johannesburg (www. safestivalofmotoring.com); the inaugural NAACAM show, taking place at the Durban International Convention Centre from 5 to 7 April 2017 in partnership with the Durban Automotive Cluster (DAC) and the National Localisation Indaba; and the Automechanika Johannesburg event from 27 to 30 September 2017, along with three co-located B2B fairs, including Futureroad Expo – a commercial vehicle show, Scalex Johannesburg – a trade fair for transport systems, infrastructure and logistics solutions and REIFEN – the world’s largest fair for the tyre industry.

More information on the Automotive Industry Export Council can be accessed at www.aiec.co.za.

www.aiec.co.za.

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REPRESENTATIVE SOUTH AFRICAN AUTOMOTIVE INDUSTRY BODIES

Collectively, members can achieve successes as a group that would otherwise be impossible for individual businesses, for example, to influence legislation. The automotive industry associations/organisations in South Africa represent and provide a host of services to the manufacturing and retail sectors of the industry and include the National Association of Automobile Manufacturers of South Africa (NAAMSA), the National Association of Automotive Component and Allied Manufacturers (NAACAM), and the Retail Motor Industry Organisation (RMI). The major OEMs in South Africa, as well as NAACAM, are also affiliated to the African Association of Automotive Manufacturers (AAAM).

NAAMSA represents the collective, non-competitive interests of the new vehicle manufacturing industry in South Africa and comprises 22 companies involved in the production of passenger cars and commercial vehicles which collectively employ in the order of 31 000 people. NAAMSA also represents the interests of a further 21 companies involved in the importation and distribution of new motor vehicles in South Africa. More information on NAAMSA and its activities can be accessed at www.naamsa.co.za.

NAACAM represents the interests of the automotive component manufacturers in the country. The association has 130 manufacturing members, of which 110 are first-tier suppliers, with 225 regional manufacturing sites, in addition to 32 associate members who provide mainly logistics, information technology and financial services to members. Employment in the component sector, including the enterprises not members of NAACAM, comprised 82 000 people in 2016. More information on NAACAM, including the profiles and contact details of the major automotive component suppliers in South Africa, can be accessed at www.naacam.co.za.

The RMI represents the retail motor trade sector of the automotive industry, which includes 7 500 members across 14 trade associations that are serviced out of six offices around the country. The National Automobile Dealers’ Association (NADA) is one of the 14 trade associations focusing on new vehicle franchise dealerships and qualifying used vehicle outlets. More information on the RMI can be accessed at www.rmi.org.za.

The AAAM was inaugurated in November 2015 with BMW, Ford, General Motors, Nissan, Toyota and Volkswagen as members. The aim of the AAAM is to unlock the economic potential of the African continent by promoting a policy environment that is conducive to the development of the automotive sector. The AAAM’s mandate is therefore to engage with government, industry bodies and representatives from the African motor sector to provide advice on opportunities to formalise, develop and grow all aspects of the relevant domestic automotive industry. This includes promoting an investor-friendly regulatory framework that will support the development and implementation of policies to establish a viable automotive manufacturing industry on the continent that includes both assemblers and automotive component suppliers.

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GLOBAL NEW VEHICLE MARKET FEATURES

The global automotive industry is predicated around trade as not even China or the US can produce every single automotive product. However, demand patterns differ between developed and developing countries which pose implications for exports. Requirements for successful export growth include economies of scale, international cost competitiveness, reliability of supply and just-in-time delivery performance. Internationally and in the domestic market vehicle manufacturers will need to continue focusing on new models and products through sustained investments and new technologies.

Global vehicle production in 2016 rose by 4,5% to reach a record of 94,98 million vehicles, up from the 90,84 million units produced in 2015. Twenty countries exceeded the 1 million vehicle production mark in 2016, which is regarded as an international benchmark. China topped the list with vehicle production rising by 14,5%, or 3,5 million units, from 24,6 million units in 2015 to 28,1 million units in 2016, followed by the US with production of 12,2 million units and Japan with production of 9,2 million units. South African vehicle production declined to 599 004 vehicles in 2016, down 2,8% from the record 616 082 units produced in 2015. However, the country’s global vehicle production ranking remained at 22nd in 2016, with a market share of 0,63%. In respect of global LCV production, South Africa was ranked 15th with a market share of 1,24%, and with regards to global passenger car production, the country was ranked 26th with a market share of 0,46%. The following table reveals global vehicle production by country for 2015 and 2016.

Twenty countries exceeded the 1 million vehicle

production mark in 2016, which is regarded as

an international benchmark.

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Global vehicle production by country – 2015 to 2016Country Total units produced

2015Total units produced

2016Passenger cars Commercial vehicles

1. China 24 567 250 28 118 794 24 420 744 3 698 050

2. USA 12 105 988 12 198 137 3 934 357 8 263 780

3. Japan 9 278 238 9 204 590 7 873 886 1 330 704

4. Germany 6 033 364 6 062 562 5 746 808 315 754

5. India 4 160 585 4 488 965 3 677 605 811 360

6. South Korea 4 555 957 4 228 509 3 859 991 368 518

7. Mexico 3 565 218 3 597 462 1 993 168 1 604 294

8. Spain 2 733 201 2 885 922 2 354 117 531 805

9. Canada 2 283 307 2 370 271 802 057 1 568 214

10. Brazil 2 429 421 2 156 356 1 778 464 377 892

11. France 1 972 000 2 082 000 1 626 000 456 000

12. Thailand 1 909 398 1 944 417 805 033 1 139 384

13. UK 1 682 156 1 816 622 1 722 698 93 924

14. Turkey 1 358 796 1 485 927 950 888 535 039

15. Czech Republic 1 246 533 1 349 896 1 344 182 5 714

16. Russia 1 378 246 1 303 989 1 124 774 179 215

17. Indonesia 1 098 780 1 177 389 968 101 209 288

18. Iran 982 337 1 164 710 1 074 000 90 710

19. Italy 1 014 223 1 103 516 713 182 390 334

20. Slovakia 1 038 503 1 040 000 1 040 000 -

21. Poland 660 692 681 837 554 600 127 237

22. South Africa 616 082 599 004 335 539 263 465

Global 90 843 939 94 976 569 72 105 435 22 871 134

Source: OICA

The global vehicle market continues to expand after its short-lived dip in 2009 as a result of the global financial crisis. Many related facets of the automotive business are changing rapidly as the digital revolution causes major disruption, while consumers are starting to make their voices heard as to which innovations they value most. Total global new vehicle sales increased by 4,7% to 93,86 million units in 2016, compared to the 89,68 million units sold in 2015. Global sales growth was fuelled by strong gains of 13,6% in the largest market, China, which assisted to offset the decline of 20% in a market such as Brazil. South Africa, with 547 406 new vehicles sold in 2016, was ranked 24th in the world in terms of global vehicle sales with a market share of 0,58%. Volkswagen dethroned Toyota Motor Corporation in 2016 to become the world’s best-selling vehicle manufacturer for the first time, propelled by the surging demand in China, Volkswagen’s biggest market. Volkswagen sold a record 10,31 million vehicles, outpacing its rival with a 3,8% gain in global sales from a year earlier. Toyota’s global sales rose marginally by 0,2% to 10,18 million vehicles in 2016.

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The following table reveals the vehicle motorisation rate (vehicle ownership), vehicle parc (number of registered vehicles) and registrations/sales of new vehicles by country for 2015 and 2016.

Vehicle motorisation rate, vehicle parc and registration/sales of new vehicles by country – 2015 to 2016

Country Total vehicle sales 2015 Total vehicle sales 2016 Motorisation rate/1 000 persons

Vehicle parc (million)

1. China 24 661 602 28 028 175 102 142,4

2. USA 17 845 624 17 865 773 808 258,0

3. Japan 5 046 510 4 970 260 607 77,2

4. Germany 3 539 825 3 708 867 578 47,6

5. India 3 424 836 3 669 277 22 28,0

6. UK 3 061 406 3 123 755 575 37,1

7. France 2 345 092 2 478 472 583 38,4

8. Brazil 2 568 976 2 050 321 207 41,7

9. Italy 1 726 079 2 050 292 687 41,9

10. Canada 1 939 517 1 983 745 644 22,9

11. South Korea 1 833 786 1 823 041 406 20,1

12. Mexico 1 389 474 1 647 723 289 35,8

13. Iran 1 222 000 1 448 500 170 13,4

14. Russia 1 440 923 1 404 464 354 50,5

15. Spain 1 277 059 1 347 344 576 27,1

16. Australia 1 155 408 1 178 133 714 16,9

17. Indonesia 1 031 422 1 048 134 83 20,9

18. Turkey 1 011 194 1 007 857 189 14,4

19. Thailand 799 632 768 788 232 15,6

20. Argentina 644 021 709 482 320 13,4

21.Saudi Arabia 830 100 655 500 212 6,2

22. Belgium 571 524 617 854 570 6,3

23. Malaysia 666 677 580 124 405 12,2

24. South Africa 617 648 547 406 180 12,0

Global 89 684 608 93 856 388 180 1 236,3

Source: OICA

China, with vehicle production of 28,1 million units and sales of 28,0 million units in 2016, produced and sold more vehicles than the US and Japan combined. This trend is clearly emphasising the shift from the traditional west to the emerging east in terms of vehicle production and consumption. Heightened competition between countries to attract new vehicle production facilities, as well as efforts to maintain

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their current footprint, has become the norm. Policymakers in developing markets remain primarily focused on economic growth and are keenly aware of the economic benefits that wider car ownership and a large vehicle manufacturing industry can generate.

The South African automotive industry has become increasingly integrated into the global automotive environment and is now playing in the international league. Competitiveness improvement is the key driver to unlock growth opportunities in the country’s automotive industry, based on the trend to shift vehicle manufacturing to low-cost countries. South Africa’s true competitors are other medium-sized market economies, such as Mexico and Thailand, which produce many of the same models as those produced in South Africa. However, they enjoy the advantage of lower costs via economies of scale and greater proximity to major export markets. The current installed capacity at South Africa’s major car and LCV manufacturers is about 850 000 vehicles a year. Several significant capacity expansions over the next two years have recently been announced, including the greenfield Beijing Automotive International Corporation R11 billion investment in a 100 000 vehicle manufacturing plant at the Coega Development Corporation in the Eastern Cape.

The growth opportunity for vehicle exports into Africa is huge, considering its population of 1,2 billion people with low levels of vehicle ownership. South Africa’s various trade agreements, the potential of Africa as a future market for exports, as well as the security that the APDP provides for investors, all combine to offer an attractive proposition to global OEMs so that ongoing investments in the country’s vehicle-manufacturing base continue. Furthermore, with OEMs announcing plans to manufacture new models in South Africa, it creates opportunities for multinational component suppliers to follow these investments. In line with the APDP’s vision of deepening and broadening the component supply base in the country, domestic component manufacturers also stand to benefit, including via their development and in attracting technologies that are not currently available in the country.

South Africa’s various trade agreements, the potential of Africa

as a future market for exports, as well as the security that the APDP

provides for investors, all combine to offer an attractive proposition to global OEMs so that ongoing

investments in the country’s vehicle-manufacturing base continue.

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SOUTH AFRICAN NEW VEHICLE MARKET FEATURES

Statistics related to the size and composition of the new vehicle market provide essential inputs to the planning process in the automotive industry, as well as to several other services sectors, such as the logistics sector. South African new vehicle market demand is met by a range of domestically manufactured and imported vehicles. The country currently has one of the most competitive trading environments in the world and in 2016 offered no fewer than 55 passenger car brands and 3 458 model derivatives for consumers to select from. This afforded car buyers the widest choice to market-size ratio anywhere in the world. Similarly in the light commercial vehicle segment, for the same period, there were 36 brands with 739 model derivatives to choose from. South Africa had a vehicle parc (number of registered vehicles) of 11,96 million at the end of 2016, of which 7,01 million or 58,6% comprised passenger cars. The average age of the passenger car parc in 2016 was 9 years and 5 months and for the total vehicle parc 9 years and 6 months. The vehicle ownership ratio in South Africa is in the order of 180 vehicles per 1 000 persons.

In 2016, for the third successive year, new vehicle sales in South Africa recorded a year-on-year decline. Aggregate sales during 2016 fell by 11,4% in volume terms to 547 406 units compared to sales of 617 648 units in 2015. Consumer demand for new passenger cars has decreased sharply in 2016 as a result of above inflation price increases, underperforming GDP growth and household budgets becoming more strained. The weak rand has impacted negatively on the cost bases of independent vehicle importers and domestic vehicle manufacturers. The latter still source many of their original equipment components from overseas as well as many of their vehicles they sell in South Africa to complement their domestic model mixes. Consumers therefore continue to battle with affordability in the new vehicle market. This was most evident in the premium segments, where sales have markedly declined as the majority of the premium models are imported. However, the more affordable segment of the new-car market has been performing relatively well in the current depressed economy. As far as 2017 is concerned, consumers are set to remain under financial pressure and current indications are that the new passenger and light commercial vehicle market is likely to perform much in line with 2016 sales volumes.

Passenger car sales through the dealer channel, which is representative of consumer activity, comprised 77,0% of total passenger car sales of 361 289 units in 2016, followed by 15,9% to the vehicle rental industry, 5,9% to industry corporate fleet sales and 1,2% to government. Dealer channel passenger car sales fell by 15,7% in 2016 – a shortfall that could not be counteracted by the growth of 13% through the rental channel. The new vehicle-related sales turnover for 2016 consequently reflected a decline of about 2% to reach R233 billion for the year.

Toyota SA Motors has maintained its overall market leadership in 2016 for the thirty-seventh year running with a market share of 21,4%, followed by Volkswagen Group of SA, Ford Motor Company of Southern Africa and Motus, the independent importer group. The seven OEMs based in the South African market, namely, BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota, Volkswagen and Motus, the independent importer group formerly known as AMH, accounted for 85% of new vehicle sales. The following graph reveals the market shares of the top 10 OEMs/Importers in the country in 2016.

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Toyota, 21,4%

VW/Audi, 15,8%

Ford Motor Company, 13,5% Motus, 9,8%

GM, 7,5%

Nissan, 7,5%

Mercedes-Benz, 5,4%

BMW Group, 4,1%

Renault, 3,4%

Mazda, 2,2%

Other, 9,4%

Overall new vehicle market share – 2016

Source: NAAMSA/Lightstone Auto

South African-manufactured vehicles continued to top the sales chart with nine of 2016’s top 10 selling passenger car and light commercial vehicle models manufactured in the country. The top 10 most popular models sold in 2016 included six light commercial vehicle models, namely, the Toyota Hilux, Ford Ranger, Toyota Quantum, Nissan NP200, Isuzu KB and the Chevrolet Utility, and four passenger cars, namely, the VW Polo Vivo, VW Polo, Toyota Corolla/Corolla Quest with the budget Toyota Etios, imported from India, being the only exception. In 2016, the Toyota Hilux, with 35 428 units, was the top-selling vehicle model range overall in South Africa, followed by the Ford Ranger with 32 428 units. Volkswagen maintained its dominance of the passenger car market with the Polo Vivo, with 28 830 units, and the Polo, with 20 388 units, being the best and second best-selling passenger cars, respectively, in 2016.

Passenger car models manufactured in South Africa in 2016 included the following:

BMW 3-Series 4-door Ford EverestGeneral Motors Chevrolet SparkMercedes-Benz C-Class 4-doorToyota Corolla 4-door new and previous series (designated Quest) and Fortuner Volkswagen Polo new and previous series (designated Vivo)

Light commercial vehicle models manufactured in South Africa in 2016 included the following:

Ford Ranger General Motors Chevrolet Utility and Isuzu KBNissan NP200, NP300 HardbodyToyota Hilux and Quantum

The popularity of diesel-engine models has been steadily increasing over recent years, and in 2016, the market share for new diesel passenger car and light commercial vehicle sales accounted for 33,5% of total light vehicle sales, up from 32,2% in 2015. This percentage, however, remains low in contrast with Western Europe where diesel engines are a popular choice amongst passenger car customers, with a share of 49,5% opting for this type of powertrain in 2016. Domestic hybrid petrol and diesel vehicle sales comprised 574 units in 2016, while electric car sales, including the Nissan Leaf and BMW i3, declined from 79 units in 2015 to 41 units in 2016. The following table reveals the split between sales of new petrol and diesel cars and light commercial vehicles in South Africa from 2012 through to 2016.

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Petrol versus diesel passenger cars and light commercial vehicle sales – 2012 to 2016

2012 2013 2014 2015 2016

Diesel cars and diesel LCVs 156 109 183 202 188 867 189 168 173 952

Petrol cars and petrol LCVs 445 826 434 543 422 232 397 430 345 829

Total cars and LCVs 601 935 617 745 611 099 586 598 519 781

Diesel vehicles as % of total car and LCV sales 25,9% 29,7% 30,9% 32,2% 33,5%


In 2015, the South African motor industry boasted its best production figures ever of 616 082 units. Even as domestic new vehicle sales have declined further in 2016, vehicle production remained on a firm footing at 599 004 units. Record vehicle exports compensated to a large degree for the downturn in domestic demand and continued to support the industry’s production levels, employment levels and South Africa’s balance of payments. Passenger car exports comprised 70,8% of passenger car production, and the 237 715 passenger cars exported in 2016 registered the highest export level on record. The following table reveals the number of passenger cars and light commercial vehicles manufactured from 2012 through to 2016.

Production of passenger cars and light commercial vehicles – 2012 to 2016PASSENGER CARS LIGHT COMMERCIAL VEHICLES

Market Exports as a % of total

Market Exports as a % of total Domestic Exports Total Domestic Export Total

2012 120 417 151 659 272 076 55,7 121 638 123 443 245 081 50,4

2013 113 356 151 893 265 249 57,3 127 051 121 345 248 396 48,9

2014 122 610 154 920 277 530 55,8 137 044 118 585 255 629 46,4

2015 112 576 228 459 341 035 67,0 140 790 102 664 243 454 42,2

2016 97 824 237 715 335 539 70,8 130 364 104 987 235 351 44,6


The domestic market remains important to anchor domestic vehicle production. Africa remains a priority focus area for the South African automotive industry as demand for vehicles in African markets is expected to show above-average growth in future. The performance of exports, however, will remain a function of the performance and direction of global markets, as well as OEM policies, which will continue to support South African vehicle production as long as it remains competitive.

The South African new truck and bus market declined by 11,4% to 27 010 units in 2016, compared with the 30 469 units sold in 2015, while exports were down by 1,8%. The country’s commercial vehicle market is facing tough challenges with the industry’s growth closely linked to the country’s macro-economic trends. Many of the economy’s industrial sectors, including agriculture, mining and quarrying have recorded steep contractions in 2016, and this, combined with low business confidence and GDP figures, have had an adverse effect, especially on investment in the heavy commercial vehicle segment. The medium commercial vehicle market showed the biggest decline, at 18,9%, with the drop in sales in the heavy commercial vehicle segment at 4,9%, and the extra-heavy commercial vehicle segment at 10,5%. Bus sales provided the only positive, with sales up 13,8% when compared with 2015, but its small volume contribution was not enough to soften the overall market decline. The following table reveals the number of medium, heavy, extra-heavy commercial vehicles and buses assembled for 2012 through to 2016.

19

Assembly of medium and heavy commercial vehicles and buses – 2012 to 2016

MEDIUM AND HEAVY COMMERCIAL VEHICLES AND BUSES

MarketExports as a % of total

Domestic Exports Total

2012 27 841 1 076 28 917 3,7

2013 30 924 1 206 32 130 3,8

2014 31 558 1 414 32 972 4,3

2015 30 469 1 124 31 593 3,6

2016 27 010 1 104 28 114 3,9

MCV 8 432 198

HCV 5 452 127

XHCV 11 850 725

BUSES 1 276 54Source: NAAMSA/Lightstone Auto

The large number of companies involved in the commercial vehicle sector in South Africa highlights that trucking in itself is a diversified business activity playing an important role in many economic sectors such as agriculture, mining, manufacturing, construction, forestry and distribution, amongst others. The sheer number of options offered, and the high number of variants being built as a consequence, present significant challenges to production operations which generally demand a tailor-made approach. The expectation in the industry is that domestic commercial new vehicle sales would remain fairly flat going into 2017.

In 2016, the following medium, heavy and extra-heavy commercial vehicle companies were represented in South Africa:

Babcock Bell Equipment Eicher Trucks FAW Trucks Fiat Group Ford Motor CompanyGMSA/Isuzu Trucks Iveco JMC MAN Mercedes-Benz SA (Freightliner and Fuso) Motus (Hyundai)Peugeot Citroen SA Powerstar Scania Tata Toyota (Hino) Volkswagen Group SA Volvo Group Southern Africa

In 2016, the following bus companies were represented in South Africa:

GMSA/Isuzu Trucks Iveco MANMarcoPolo Mercedes-Benz ScaniaTata VDL Bus & Coach Volvo Group Southern Africa

The cost and the cost base of transport impact on greater society as road transport in South Africa is by far the most important part of the logistics mix. Medium and heavy commercial vehicles are regarded as productive assets and essential capital inputs in the economy. Therefore, the level of protection on these vehicles has been set at 20% ad valorem, which is lower than the level on light commercial vehicles and passenger cars which attract an import duty of 25% ad valorem. Assembly operations of trucks and buses receive the benefit of the duty-free importation of all driveline components, which include the engines, transmissions, drive-axles and gearboxes. However, tyres, which are manufactured domestically, attract a 15% import duty.

20

AUTOMOTIVE CLUSTERS

21

South Africa’s constitution established nine provinces, each with its own premier, cabinet and legislature. The provinces vary substantially in size, wealth, geography, ethnicity, population and performance. Per capita GDP is highest in Gauteng and lowest in the Eastern Cape. English and Afrikaans are spoken widely throughout the country, while various indigenous languages dominate individual provinces.

The automotive industry makes a huge impact on the economies of Gauteng, the Eastern Cape and KwaZulu-Natal. The OEMs are at the centre of the clusters and, along with their suppliers, are supported across the economic landscape at national, provincial and municipal levels. Incentives are administered by the Dti and are uniform throughout the country. Focus and support to the automotive industry are provided via mechanisms that are effected at national level. These take the form of the APDP and the Automotive Supply Chain Competitiveness Initiative (ASCCI) in addressing common industry challenges in the context of the national economy, such as via duties, tax incentives, competitiveness issues and national engagements, amongst others. Provincial and local governments have trade, investment and tourism offices to promote economic activity in their regions. Regional support mechanisms, by contrast, offer the opportunity to address the specific needs of the industry residing in specific geographic areas, and have the advantage of leveraging the benefits of geographical proximity.

Gauteng

The largest percentage of South Africa’s population of 55,91 million, 24,1% or 13,50 million people, live in Gauteng. The province contributes 35% to South Africa’s GDP, accounts for 40% of the country’s employment and 42% of industrial output. Gauteng remains the economic and industrial hub of the country and the SADC region. The province is strategically located on the African continent which makes it a key investment destination for the rest of the world and a trade gateway for imports and exports. The highest diversity of the country’s automotive profile is in Gauteng with the province housing three OEMs and the highest number of the country’s automotive component suppliers.

The province hosts various national government departments, the Council for Scientific and Industrial Research (CSIR) – one of the largest scientific and technology, research and development (R&D) and implementation organisations in Africa – as well as the City Deep logistics hub – the premier container depot in the country, the largest inland port in Africa and the fifth-largest in the world. The Gauteng Growth and Development Agency (GGDA) is responsible for the promotion of trade and investment and project implementation in the province, and via its two automotive specific subsidiaries, the Automotive Industry Development Centre (AIDC) and the Automotive Supplier Park (ASP), provides support to the automotive industry. The Gauteng Investment Centre (GIC), housed in Sandton and managed by the GGDA, represents a one-stop business services facility to domestic and foreign investors, and provides access to investment services and support from various tiers and agencies of government. The newly launched InvestSA facilitation service at the Dti Campus in Pretoria also aims to review the ease of doing business in the country in serving as a one-stop shop facility, bringing together the various government departments and agencies that investors deal with to secure permits, licences and incentives required to facilitate their investments.

The automotive industry makes a huge impact on the economies of Gauteng, the Eastern Cape and KwaZulu-Natal.

22

Gauteng – key automotive features – 2016Key automotive features Gauteng

OEMs (manufacturing plants) BMW SANissan SA

Ford Motor Company of Southern Africa

Medium, heavy, extra-heavy commercial vehicle and bus companies Babcock, Eicher Trucks, Fiat Group, Ford, Iveco, JMC, MAN Truck & Bus, MarcoPolo, Motus (Hyundai), Peugeot Citroen, Powerstar, Scania, Tata, VDL

Bus & Coach and Volvo Group Southern Africa

Number of automotive component companies 200

Motor vehicle parc as % of South Africa’s total vehicle parc of 11,96 million vehicles

38,6%

Passenger car sales as % of total 2016 passenger car sales of 361 289 units

34,2%

LCV sales as % of total 2016 LCV sales of 159 107 units 32,8%

MCV/HCV sales as % of total 2016 MCV/HCV sales of 27 010 units 37,0%

Light vehicle production by OEMs in the province as % of total 2016 light vehicle production of 570 890 units

31,6%

Light vehicle exports by OEMs in the province as % of total 2016 light vehicle exports of 342 702 units

33,8%

Source: NAACAM, NAAMSA/Lightstone Auto

KwaZulu-Natal

KwaZulu-Natal represents the second largest economy in the country, after Gauteng, and is also the province with the second largest population, with a share of 19,8% or 11,08 million of the country’s 55,91 million population. Durban is South Africa’s second-largest city and the country’s busiest port. Richards Bay is South Africa’s busiest bulk port, with at its centre, the Richards Bay Industrial Development Zone (IDZ), a purpose-built and secure industrial estate. The ports of Durban and Richards Bay handle about three-quarters of the country’s tonnage. The King Shaka International Airport and the Dube TradePort at La Mercy provide easy access to Durban and also to international markets. The Dube TradePort has been earmarked for the development of a Special Economic Zone (SEZ) and is Africa’s first purpose-built aerotropolis. It is the only facility in Africa that brings together an international airport, a cargo terminal, warehousing, offices, a retail sector, hotels, and an agricultural area. The province enjoys the strategic and competitive advantage of being a global gateway for trade into Africa and to the world.

Trade and Investment KwaZulu-Natal and Tourism KwaZulu-Natal are responsible for promoting trade, investment and tourism in the province, with the Durban Investment Promotion Agency (DIPA) concentrating on Durban. These institutions are supplemented by the new Durban KwaZulu-Natal Convention Bureau which has been established to promote both the city and province as top conference destinations in Africa.

Durban is South Africa’s second-largest city and the

country’s busiest port.

23

KwaZulu-Natal – key automotive features – 2016Key automotive features KwaZulu-NatalOEMs (manufacturing plants) Toyota SA Motors

Medium, heavy, extra-heavy commercial vehicle and bus companies Bell Equipment, MAN Truck & Bus and Toyota (Hino)



13,4%


12,6%




21,4%


13,6%


Eastern Cape

The Eastern Cape, comprising 7,06 million or 12,6% of the country’s 55,91 million population, is well served logistically with airports situated in Port Elizabeth, East London, Mthatha and Bisho and with ports situated in Port Elizabeth, Coega and East London. The province has a sound manufacturing base and a pool of skilled and semi-skilled workers, primarily in the automotive sector. The automotive sector remains the province’s leading exporter. The allocation of two of South Africa’s five industrial development zones (IDZs) to the province is confirmation of the potential generated by the shipping traffic that operates between Europe, Asia and the Far East. The Coega IDZ is the largest IDZ in the country and is the main catalyst for Eastern-Cape socio-economic development and the gateway to global markets. The East London IDZ, one of the country’s leading specialised industrial parks, has also established an Automotive Supplier Park. Its location provides investors with connections to major markets, both domestically and across the globe.

The Automotive Industry Development Centre (AIDC), the Eastern Cape Development Corporation (ECDC), the Nelson Mandela Bay Metropolitan Municipality and the Cacadu District Municipality are among several organisations promoting the Eastern Cape as a preferred destination for trade and investment. Three Spatial Development Initiatives (SDIs) – Fish River, Wild Coast and East London/Coega – are also located in the Eastern Cape.

The automotive sector remains the province’s

leading exporter.

24

Eastern Cape – key automotive features – 2016Key automotive features Eastern CapeOEMs (manufacturing plants) Volkswagen Group SA

Mercedes-Benz SAGeneral Motors Southern Africa

Ford Motor Company of Southern Africa engine plant

Medium, heavy, extra-heavy commercial vehicle and bus companies FAW Trucks, General Motors/Isuzu, Mercedes-Benz SA (Freightliner and Fuso) and Volkswagen Group SA



6,7%


3,5%




47,0%


52,6%


25

AUTOMOTIVE POLICY REGIMEIt is the norm globally for governments to offer both financial and non-financial support to their automotive industries, with most countries offering a range of support measures to vehicle manufacturers. The South African government’s support policies for the automotive sector have successfully positioned South Africa as a global participant in automotive production. The Automotive Production Development Programme (APDP) replaced the Motor Industry Development Programme (MIDP) and was fully implemented in January 2013 with a view to steer the automotive industry towards producing around one million vehicles per annum by 2020, with the attendant expansion of the domestic supplier base. The APDP was formulated on the basis of extensive consultation with industry stakeholders and represents a carefully structured set of provisions to support the future growth and development of the industry by balancing the interests of consumers, the broader automotive industry and government’s objectives.

Since the introduction of these policies, exports and capital investments in the industry have surged. One of the attractions of South Africa’s automotive policy regimes over the past two decades has been its long-term vision and consistency. The stability in support has been a significant enhancement for investor confidence. The APDP has reinforced policy certainty and has led to some of the world’s biggest vehicle manufacturers expanding production in South Africa. As a key partner in the development and growth of the automotive industry, government signalled its confidence in the industry’s long-term future through its assurance that policy support will continue beyond 2020. In 2016, the Dti appointed a technical team to assist in the development of a post-2020 master plan that aims to ensure the long-term sustainability of the sector in terms of policy and support mechanisms. The South African Automotive Masterplan (SAAM) 2021-2035 will go beyond the APDP and will cover car and light commercial vehicle manufacturing, medium, heavy, extra-heavy truck and bus production (potentially including off-highway vehicles and yellow metals), motorcycles and the South African component supplier industry. Vehicle importers and distributors will also be covered. The Masterplan will create a framework to secure even higher levels of investments and production. Whilst the final policy provisions of the post-2020 through 2035 programme will only be announced during the course of 2017, it is anticipated that these will cover the following objectives:

• GrowSouthAfrican vehicle production to 1% of global production;

• IncreaselocalcontentinSouthAfricanmanufacturedvehiclesto60%;

• Doubleautomotiveemploymentinthesupplychain;

• Improveautomotiveindustrycompetitivenesslevelstothatofleadinginternationalcompetitors;

• TransformationoftheSouthAfricanautomotivevaluechain;and

• Deepenvalueaddition within South African automotive value chains.

It is anticipated that a number of “pillars” will support the objectives, including local market optimisation, regional market development, localisation, infrastructure development, industry transformation, and technology and associated skills development.

The original framework of the APDP is outlined next, followed by a summary of the key findings and proposals of the 2014 Review. An early review of the APDP commenced in 2014 and the recommendations on the outcome of the APDP Review was announced in November 2015. The most notable changes to the programme included that OEMs may qualify for incentives under the programme based on reduced volumes of 10 000 units per plant per annum, instead of the original 50 000 units per annum, as well as a freezing of catalytic converter incentives in 2017, instead of a continuing reduction up to 2020.

26

The APDP consists of four pillars that drive the programme:

1. Import Duty (tariff structure)

2. Vehicle Assembly Allowance (VAA) (rebate mechanism)

3. Production Incentive (PI) (rebate mechanism)

4. Automotive Investment Scheme (AIS) (cash grant)

The four key elements of the APDP may be described as follows:

Tariffs: Import duties on vehicles and automotive components will remain at 2012 levels (25% on light vehicles and 20% on original equipment components) through to 2020. A preferential agreement results in imported vehicles from the EU paying only 18% duty. These tariffs are meant to provide protection to justify continued domestic vehicle manufacturing. The purpose of the tariff structure under the APDP is to incentivise industry and not to generate revenue.

Vehicle Assembly Allowance (VAA): This support is in the form of component import allowances issued to vehicle manufacturers based on 20% (2013) of the ex-factory vehicle price, reducing to 19% in 2014 and to 18% in 2015 for all light motor vehicles produced domestically. The equivalent value of this to the OEMs is the allowance multiplied by the duty rate. This represented 4% of the ex-factory vehicle price in 2013, reduced to 3,6% in 2015. This support is effectively providing a lower duty rate for domestic vehicle manufacturers and is intended to provide enough encouragement for high volume vehicle production in line with the target of doubling domestic production.

Production Incentive (PI): In 2013 this support started at 55% of the designated local value addition, reducing progressively by 1% annually to 50%, in the form of a duty rebate certificate. The equivalent value is the incentive multiplied by the component/vehicle duty rate, so this represented 11% (on components) of value-added in 2013, and will reduce to 10% by 2018. There is an additional amount for “vulnerable products” which earned a PI of 80% in 2013 and 2014, reducing thereafter by 5% annually to 50% in 2020, with the exception of catalytic converters, which will remain at 65%. Value-added has been defined in simple terms as the manufacturer’s selling price less the value of non-qualifying material and imported components. For OEM supply, the incentive will flow through the supply chain to the OEM and, in the case of component exports or replacement parts, to the component manufacturer. The value-add support is planned to encourage increasing levels of local value addition along the automotive value chain with positive spin-offs for employment creation. A 25% standard value is regarded as local value-added on the following qualifying raw materials originating in the Southern African Customs Union (SACU) which have been beneficiated to suit automotive specifications:

• Aluminium

• Brass

• Leather

• PlatinumGroupMetals(PGMs)

• Stainlesssteel

• Steel

With regard to vulnerable products, these high material content products received additional support to avoid a sudden and significant loss of export business due to the transition from the export-oriented MIDP. In this regard, 40% of the standard material(s) listed above and applicable to the following list of products was initially regarded as local value-added:

27

• Alloy wheels • Aluminiumproducts(engineandtransmissioncomponents,heatexchangersandtubes,suspension components and heat shields)• Castironcomponents(engine/axle/brake/transmissionandrelatedtypesofcomponents)• Catalyticconverters• Flexiblecouplings• Leatherinteriors• Machinedbrasscomponents• Steel jacks

The 40% level was reduced by 5 percentage points per annum from 1 January 2015 to reach 25% from 1 January 2017 onwards.

Automotive Investment Scheme (AIS): The AIS marks the implementation of the first cash-based incentive for the South African automotive industry. The AIS represents the only industry support that is of physical cost to the fiscus in the form of a non-taxable cash grant. The total investment approved since inception of the AIS amounts to R41,1 billion, while the sum total of incentives approved since inception amounts to R11,5 billion. Since inception, 361 projects have been approved under the AIS, creating 15 133 additional jobs.

The AIS became effective from July 2009, immediately after the announcement of the APDP framework. The amended AIS guidelines, including the People-Carrier AIS, became effective from July 2014, and provided clarity on the non-taxability of the grant, as well as on the eligibility of automotive tooling companies to apply for the same benefits as those enjoyed by component manufacturers under the scheme. The AIS provides for a non-taxable cash grant of 20% of the value of qualifying investment in productive assets by light motor vehicle manufacturers, and increased support of 25% of the value of qualifying investment in productive assets by component manufacturers and tooling companies, as approved by the Dti. In addition, by achieving certain performance objectives, companies will be able to earn an additional 5% or 10%. This support is available to encourage investments by OEMs and component manufacturers in a manner that supports productive capacity upgrading. A competitiveness improvement grant of 20% of qualifying costs will also be available for automotive component manufacturers. The objective of this benefit is to enhance the competitiveness of component manufacturers through the improvement of processes, products, quality standards and related skills development through the use of business development services. The grant is a function of expenditure incurred by component suppliers to improve competitiveness and must be linked to a new or replacement model of a light vehicle manufacturer.

Since the original APDP framework was developed before the 2008/2009 global financial crisis, which resulted in dramatic changes in the global and domestic economy, concerns were raised that there could be limitations in the programme that may lead to failure to achieve the objectives set for the industry. In February 2014, the Dti commissioned an initial review of the APDP with a mandate to make recommendations to secure optimal outcomes to the sector and economy whilst retaining long-term policy certainty for investment. The review was aimed at considering the effectiveness of the current support measures for the industry, identifying shortcomings and recommending possible changes or enhancements to the programme. The final proposals were arrived at after several interactions with industry stakeholders at various levels, culminating in a consideration by Cabinet. The findings and key proposals may be summarised as follows:

Findings: The 2020 target of producing 1,2 million vehicles per year is unlikely to be achieved due to a variety of reasons, such as the fact that the global economy is still recovering from the effects of the 2008/2009 financial crisis. Secondly, it will also be extremely difficult to achieve significant expansion and deepening of the local supplier base under the prevailing conditions.

28

Key proposals: in an effort to sustain and grow the industry whilst steering it towards the APDP vision of high volume vehicle production, the following proposals will be implemented:

a) A post-APDP support framework will be developed during the course of 2016 in order to provide a certain policy environment for automotive manufacturing in South Africa after 2020.

b) The volume threshold for vehicle production will be reduced from 50 000 units to 10 000 units per annum in order to allow new entrants into the domestic industry.

c) The Volume Assembly Allowance (VAA) will be offered on a sliding scale based on volume, commencing at 10% for 10 000 units to 18% at 50 000 units from January 2016.

d) A suitable capital incentive (AIS) level will be provided for new entrants at the less than 50 000 per annum threshold.

e) The production incentive for catalytic converters will be frozen at the 2017 level of 65% rather than continue the phase-down.

f ) The qualification for component suppliers to earn APDP benefits will be tightened in order to avoid these being earned on non-core automotive products, and priority afforded to those products that add value in the value chain.

g) Lastly, Cabinet has mandated that National Treasury be approached for higher investment support to automotive tooling as a means of encouraging further component localisation. Overall national budget constraints are noted in this context.

Strategic direction: Government remains committed to the further development of the automotive industry in line with the National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP). Long-term development of the sector will be achieved through high vehicle production volumes and associated local value addition.

Other policy imperatives: A post-APDP automotive master plan will be developed and will also seek to promote meaningful transformation of the industry through the inclusion of previously excluded groups in the entire automotive value chain. The current situation is characterised by the extremely low participation of black persons in the automotive industry. This is prevalent through all parts of the sector’s value chain including distribution, retail and after sales/service. It is government’s view that the levels of support afforded to the industry in South Africa need to be reflected through an appropriately transformed sector.

Implementation plan: The necessary regulatory amendments and administration system for the programme will be set up and will be in line with the need for a strong monitoring and evaluation system, but will not be unduly burdensome to stakeholders.

29

It has been recognised that the APDP on its own will not be able to achieve the 2020 vision of the APDP without the support and co-ordination of a number of distinct factors, including alignment between all the various stakeholders. NAAMSA compiled a “Roadmap to automotive industry sustainability” which includes and outlines the following building blocks or key strategic interventions, that are, amongst others, needed to complement and deliver on the APDP objectives:

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. As part of the industry’s Roadmap to 2020, and in support of the APDP vision, industry initiatives and pro-active activities are taking place in many areas to address these challenges. Close collaboration and active participation by all role-players in the industry are of the utmost importance, particularly the Dti, which should champion a number of the building blocks.

The APDP applies to only light vehicles (passenger cars and light commercial vehicles), although components produced for heavy commercial vehicles also qualify for the Production Incentive (PI). In parallel with the launch of the APDP, other significant developments on other complementary fronts include the design of the Electric Vehicle Roadmap and the medium and heavy commercial vehicle (MCV/HCV) development strategy. The medium and heavy commercial vehicle sector and bus sector have also received increased attention. The rationale behind this is the fact that the MCV/HCV sector is labour intensive in terms of assembly, while a more active sector could also broaden South Africa’s component manufacturing industry. It is believed that this could be an opportunity for the component sector to grow its base and create additional employment. Recent progress includes the Automotive Investment Scheme (AIS) for this sector which was published in November 2014 and was backdated to April 2014. The intention is to use AIS support to drive the future growth and development of the MCV/HCV sector and to promote additional localisation and employment creation. A number of opportunities are also being exploited to revitalise and grow bus production in the country through the roll-out of the Bus Rapid Transport Systems in the metros and the implementation of the revised state preferential procurement framework.

The constructive way in which industry and government co-operate to maximise the contribution of the automotive sector to the economy is increasingly being used as a benchmark for other sectors. Government has recognised that the achievement of its economic objectives will largely depend on the ongoing successes of priority sectors, such as the domestic automotive sector.

SUCCESSFUL REALISATION OF 2020 APDP VISION:BUILDING BLOCKS / REQUIREMENTS

APDP VISION 2020: PRODUCTION OF 1 000 000 VEHICLES

Stability in officialautomotive policy

Stable industrialrelations

environment

Progressive, sustainedsupplier competitiveness

improvement

Effectivebeneficiation

strategy

Reductions ininfrastructure,logistics and

other input costs

Market growththrough reviewof vehicle taxes

Introduction ofEuro V fuel

qualityIncentives

for low / zeroemissionvehicles

Support forstrategic sectors Development

finance atpreferential

rates

Preferentialprocurement

30

METHODOLOGY – AUTOMOTIVE TRADE DATA

The methodology utilised and applied in the Automotive Export Manual – 2017 – South Africa publication remains unchanged from the previous publications in order to enable meaningful comparisons. All values are presented in nominal prices. The trade data in this publication is reflected for South Africa. A significant change in the South African trade statistics, as approved by the Minister of Finance on 14 November 2013, was that South African trade with member countries of the Southern African Customs Union (SACU), comprising Botswana, Lesotho, Namibia and Swaziland (BLNS), would now be included in South Africa’s trade data to provide a more accurate reflection of the country’s trade. BLNS country trade data had previously not been included in the country’s trade statistics because of the free interchange of goods between member countries from a customs point of view within SACU. The automotive industry’s trade performance has subsequently been revised with BLNS country data, with retrospective effect, where applicable, in the 2014, 2015, 2016, as well as in the 2017 publication.

The trade data in the Automotive Export Manual – 2017 – South Africa publication is based on the detailed Customs and Excise statistics for products eligible under the APDP, obtained from the South African Revenue Service (SARS). The Customs and Excise export values reflect free on board (FOB) values in nominal terms. The export values of the latest year (2016) are used to rank the countries in order of priority, from the most to the least important export country destination. The same principle is applied so as to prioritise the export data regarding regions, vehicles and component categories. There are 263 country export destinations listed by SARS. For purposes of relevance, one million rand (R1 million) is used in the Automotive Export Manual – 2017 – South Africa publication as a cut-off level (measure) to determine the top 154 South African export country destinations. For ease of reference and for comparison purposes, the data with respect to the component categories, where applicable, is placed in alphabetical order. Percentages are rounded off.

The main purpose of this publication is to discern and highlight trends in export and import data, to prioritise export country destinations, to prioritise countries of origin, to identify opportunities via potential growth country and region destinations, to measure the impact of the country’s trade arrangements on automotive trade patterns, as well as to identify growth in products exported to specific country destinations. The publication also serves as a guide to track the export and import performance of the South African automotive industry under the new APDP. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components, therefore certain categories may contain a small percentage of non-APDP components.

31EXPORTS

EXPORTS TO COUNTRIESRegardless of a sense of optimism in the global economy, international factors are expected to continue to play a significant role in the domestic economy. A concern is that a high degree of uncertainty surrounding the economic policies of the new administration in the US is expected to persist, creating a challenging and volatile environment for emerging markets, including South Africa. The prospect of rising protectionism and its implications for world trade add to structural concerns, while the impact of Brexit also poses potential risks to global economic stability. In a globalised world, economies, continents and individual countries are all interlinked. What happens in one, affects the rest. This makes it even more important for South Africa’s automotive industry to make sure that it is doing the right things domestically where it can exert ultimate control.

South Africa is an active member of the 164 membership World Trade Organisation (WTO) multilateral trading system and has strong bilateral ties with a substantial number of the world’s largest economies. The country’s track record as a reliable manufacturer and supplier of high-quality vehicles and automotive components to world markets is well established. The domestic automotive industry forms an important part of international supply chains by being fully integrated into the global automotive environment. The focus of the domestic automotive industry is to build on existing exports and to escalate the importance of exploring and exploiting new export opportunities. The reach in respect of the number of destinations of total automotive exports (vehicles and automotive components) from South Africa remains high. The following table reveals that the South African automotive industry is continuing to strengthen its global export footprint. The number of export destinations, for values in excess of R1 million, reached 154 in 2016, up substantially from the 140 in 2015, with 21 countries recording export values in excess of R1 billion, and 67 countries recording export values in excess of R100 million. First-world markets remain the main destinations for South African vehicles and automotive components. However, diversification into new emerging markets is a continuing trend and underlines the automotive industry’s competitiveness drive and a widening of the country’s traditional trading base. The latter is highlighted by new export destinations appearing in the industry’s export list of countries every year, as well as the specific destinations to which the export values more than doubled on a year-on-year basis. From 2015 to 2016, the total export values more than doubled in the case of 52 countries, which include: South Korea, Italy, Norway, Qatar, Austria, Switzerland, Denmark, Trinidad & Tobago, Finland, Panama, Dominican Republic, Egypt, Reunion, Morocco, Iceland, Cuba, Martinique, Seychelles, Bulgaria, Honduras, Cost Rica, Benin, Jamaica, Surinam, Guatemala, Peru, Georgia, Cyprus, Vietnam Republic, Netherlands Antilles, Somalia, Barbados, Venezuela, Croatia, Brunei, El Salvador, Bahamas, Dominica, Antigua, Gambia, Bosnia & Herzegovina, Bangladesh, Cape Verde Islands, Albania, French Polynesia, Myanmar, Papua New Guinea, Aruba, Cambodia, St Lucia, Falkland Islands and the Slovak Republic.

32EXPORTS

Total automotive export value and ranking by country – 2015 to 2016Country 2015

R million2015

Ranking2016

R million2016

Ranking

Germany 34 992,1 1 46 768,8 1

USA 20 946,9 2 22 602,4 2

Belgium 13 162,2 3 14 298,5 3

UK 7 436,0 6 8 988,7 4

Namibia 9 440,0 4 8 772,5 5

Japan 7 809,5 5 7 292,3 6

Spain 4 073,4 9 5 565,2 7

Botswana 4 815,7 8 5 309,1 8

Australia 5 257,1 7 4 919,5 9

France 2 696,2 10 3 814,7 10

Korea Republic South* 566,1 34 3 099,6 11

Zambia 2 485,3 12 2 836,6 12

Zimbabwe 2 208,0 14 2 395,7 13

Thailand 1 648,7 15 2 129,4 14

Mozambique 2 639,2 11 2 010,7 15

India 1 416,8 17 1 988,8 16

Canada 1 400,2 18 1 450,2 17

Swaziland 1 280,7 20 1 418,0 18

Argentina 990,8 25 1 275,2 19

Czech Republic 783,7 30 1 239,3 20

Lesotho 960,6 26 1 149,6 21

21 COUNTRIES ABOVE R1 BILLION

Ghana 871,1 27 931,6 22

Kenya 1 451,5 16 928,1 23

United Arab Emirates 1 203,6 21 920,6 24

Hungary 851,9 28 891,3 25

Democratic Republic of Congo 1 140,4 22 820,2 26

Tanzania 653,7 32 773,6 27

Singapore 829,7 29 711,3 28

Saudi Arabia 1 139,8 23 672,3 29

Taiwan 611,6 33 651,2 30

Netherlands 515,2 37 607,1 31

Malawi 530,3 36 584,6 32

Sweden 339,7 43 572,8 33

Turkey 534,1 35 546,2 34

Italy* 236,0 49 507,0 35

Poland 441,9 39 495,5 36

Norway* 128,6 62 491,3 37

Angola 700,5 31 474,5 38

Qatar* 218,7 51 455,1 39

Austria* 188,1 56 436,7 40

33EXPORTS

Brazil 2 430,3 13 428,5 41

Malaysia 302,5 45 421,1 42

Mauritius 303,7 44 404,6 43

New Zealand 293,0 46 365,8 44

Switzerland* 127,6 63 331,8 45

Hong Kong, China 506,4 38 330,7 46

Mexico 413,9 40 319,5 47

China 208,1 53 310,6 48

Romania 271,2 47 274,5 49

Ethiopia 389,4 41 268,5 50

Madagascar 136,7 59 261,6 51

Greece 154,5 58 261,1 52

Uganda 344,8 42 257,2 53

Portugal 209,0 52 251,3 54

Gibraltar 270,0 48 234,0 55

Nigeria 1 385,8 19 233,5 56

Estonia 179,9 57 201,2 57

Ivory Coast 99,0 65 194,4 58

Gabon 203,9 54 177,8 59

Denmark* 33,9 88 174,3 60

Trinidad & Tobago* 30,2 94 171,2 61

Finland* 52,1 75 156,0 62

Oman 72,9 69 131,4 63

Ireland 123,9 64 125,0 64

Panama* 32,6 91 124,1 65

Dominican Republic* 12,1 107 120,2 66

Senegal 87,1 67 119,6 67

67 COUNTRIES ABOVE R100 MILLION

Guadeloupe 51,1 76 92,3 68

Pakistan 60,4 72 91,9 69

Egypt* 38,5 84 90,4 70

Rwanda 79,1 68 90,1 71

Reunion* 31,2 93 88,7 72

Morocco* 4,7 118 85,9 73

Iceland* 37,3 85 82,0 74

Sudan 133,9 60 79,9 75

Cuba* 0,8 - 76,9 76

Martinique* 33,2 90 76,6 77

Kuwait 194,6 55 75,5 78

Seychelles* 33,9 87 68,2 79

Bulgaria* 26,5 96 64,7 80

Russia 230,6 50 64,1 81

Slovenia 71,0 70 59,8 82

Chile 59,6 73 59,1 83

34EXPORTS

Israel 46,7 78 57,2 84

Djibouti 132,0 61 56,3 85

French Guiana 31,9 92 53,3 86

Honduras* 1,3 136 53,3 87

Costa Rica* - - 53,3 88

Philippines 54,9 74 52,0 89

Cameroon 46,5 79 51,6 90

Benin* 12,5 105 46,7 91

Jamaica* 9,4 110 42,9 92

Bolivia 26,9 95 41,4 93

Bahrain 42,4 80 40,5 94

Surinam* 0,6 - 38,7 95

Guinea 18,8 101 37,0 96

Guatemala* 8,4 114 35,2 97

Sri Lanka 20,5 99 33,3 98

St Helena 21,5 98 32,3 99

Mali 40,6 82 31,4 100

Burkina Faso 33,7 89 31,0 101

Sierra Leone 24,0 97 29,2 102

Indonesia 39,2 83 28,2 103

Peru* 9,2 111 25,2 104

Togo 41,2 81 23,9 105

Georgia* 0,2 - 23,5 106

Cyprus* 9,7 109 23,0 107

Republic of Congo 50,2 77 20,0 108

Vietnam Republic* 8,8 112 19,8 109

Nicaragua 14,5 103 19,3 110

Netherlands Antilles* 1,8 131 18,1 111

Kazakhstan 13,5 104 17,2 112

Somalia* 2,8 123 16,9 113

Barbados* 5,2 117 15,4 114

Liberia 19,7 100 15,0 115

Venezuela* 0,4 - 14,2 116

Croatia* 0,3 - 13,3 117

Belize 7,8 115 13,1 118

Brunei* 4,5 119 12,6 119

Algeria 1 047,2 24 11,3 120

Eritrea 35,3 86 10,0 121

Mauritania 12,0 108 9,9 122

Ecuador 15,5 102 9,4 123

El Salvador* 0,4 - 9,1 124

Bahamas* 0,7 - 8,2 125

Tunisia 89,7 66 8,1 126

Dominica* - - 6,3 127

35EXPORTS

Colombia 12,2 106 6,3 128

Antigua* 0,2 - 6,1 129

Gambia* 1,9 129 5,7 130

Jordan 5,5 116 5,1 131

Comoros 2,6 125 5,0 132

Bosnia & Herzegovina* 2,2 128 5,0 133

Bangladesh* 2,3 127 5,0 134

Burundi 8,4 113 4,1 135

Cape Verde Islands* 1,4 135 3,7 136

New Caledonia 3,2 121 3,5 137

Albania* - - 3,1 138

French Polynesia* 0,1 - 2,9 139

Myanmar* 0,3 - 2,6 140

Papua New Guinea* 0,8 - 2,5 141

Aruba* 0,7 - 2,5 142

Cambodia* 0,7 - 2,4 143

Equatorial Guinea 2,8 124 2,4 144

Lebanon 68,8 71 2,0 145

St Lucia* 0,3 - 1,8 146

Iran 1,5 133 1,8 147

Falkland Islands* 0,8 - 1,7 148

East Timor 0,9 - 1,6 149

Chad 1,4 134 1,6 150

Slovak Republic* 0,8 - 1,6 151

Antarctica 0,8 - 1,4 152

Niger 1,0 140 1,4 153

Luxembourg 1,1 139 1,1 154

154 COUNTRIES ABOVE R1 MILLIONSource: AIEC, SARS*Countries with export values more than doubling year-on-year

South Africa’s admission into BRICS (Brazil, Russia, India, China and South Africa) on 24 December 2010 has enhanced the country’s international stature, and trade and economic relations. China, with 28,1 million units, was the top vehicle-producing country in 2016, with India in the 5th position, Brazil 10th and Russia in 16th position. China and India were among South Africa’s top 10 automotive trading partners in 2016. Apart from Russia, however, the automotive trade balance remains in favour of these countries. In 2016, the automotive import to export value ratio was 44,6 to 1 in favour of China, 10,9 to 1 in favour of Brazil and 4,8 to 1 in favour of India. Hence, the need for BRICS nations to identify complementarities, share experiences and promote capacity building in a number of trade- and investment-related issues. As a gateway into the continent, South Africa is expected to play a unique role in promoting BRICS-African co-operation. China is the largest developing country in the world and Africa is home to the biggest number of developing countries. China-Africa co-operation will assist Africa in fulfilling its ambitions of industrialisation and economic integration. South Africa’s participation in BRICS presents important opportunities for the country to build its domestic automotive manufacturing base and to expand trade and investment opportunities. South Africa, with its know-how and built-for-Africa vehicles, is ideally placed to benefit from the increased demand for vehicles and automotive components on the continent.

36EXPORTS

With regards to India, the Southern African Customs Union (SACU) and India began a formal process of trade negotiations on a preferential trade agreement (PTA) in 2008. A PTA is confined to products (or tariff lines) of special interest to the respective parties. Automotive products also feature in these lists of export interest and could potentially enhance trade and investment opportunities in the domestic automotive industry. SACU member states (Botswana, Lesotho, Namibia, South Africa and Swaziland) and India have exchanged their respective lists of products of export interest. Both parties are still engaged in formulating their respective responses and national positions in relation to the request lists. Many synergies between South Africa and India already exist that could be used to enhance two-way automotive trade between the two countries. India was South Africa’s 8th largest automotive trading partner in 2016, as well as the domestic industry’s main country of origin for vehicle imports in volume terms over recent years. Although the South African automotive industry is pursuing efforts to increase and diversify its automotive exports to India, it relies on government to focus on resolving barriers that are impeding the expansion of trade.

India was South Africa’s 8th largest automotive

trading partner in 2016, as well as the domestic

industry’s main country of origin for vehicle imports in volume

terms over recent years.

37EXPORTS

EXPORTS TO REGIONSAll South Africa’s trade negotiations have been conducted alongside the country’s partners in the Southern African Customs Union (SACU), comprising Botswana, Lesotho, Namibia and Swaziland, following the renewed SACU Agreement in 2004 that requires SACU to negotiate all trade agreements as a bloc. SACU, at present, enjoys free trade agreements (FTAs) with the 28-country European Union and the European Free Trade Association (EFTA) comprising Iceland, Lichtenstein, Norway and Switzerland. SACU is also part of the 15-country Southern African Development Community (SADC) free trade area, has a preferential trade agreement (PTA) with Mercosur, comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela, while South Africa enjoys a unilateral trade preference programme that provides duty-free and quota-free entry into the US market under the African Growth and Opportunity Act (AGOA).

South Africa’s established export markets in the Eurozone and NAFTA remain important as they are long-standing relationships that come with technology and knowledge transfers, and offer markets that are not without further possibilities. However, in recent years, Africa and Asia have become important destinations for South African automotive products, as these economies have grown and trade ties have strengthened. The wider geographical exposure also mitigates the impact of domestic or regional cyclical economic conditions by diversifying risk.

Regional integration remains an African priority and South Africa is well positioned to capitalise on opportunities on the continent, as Africa is the fastest-growing continent after Asia. The South African government has emphasised orienting exports towards the fast-growing economies of sub-Saharan Africa, where South Africa has the advantage of geography and trade agreements. Current regional trade negotiations include the tripartite free trade area (TFTA) negotiations consisting of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA).

The tables on the following pages reveal the South African automotive industry’s trade patterns with major trading blocs, including the European Union (EU), which remains the South African automotive industry’s main trading partner, the North American Free Trade Area (NAFTA), Africa, the Southern African Development Community (SADC) and the Common Market of South America (Mercosur).

Regional integration remains an African priority and South Africa is well positioned to capitalise on

opportunities on the continent, as Africa is the fastest-growing

continent after Asia.

38EXPORTS

European UnionEurope remains the South African automotive industry’s most important trading partner, accounting for R86,0 billion or 50,3% of total automotive exports of R171,1 billion, and R82,3 billion or 55,6% of total vehicle and automotive component imports of R147,9 billion in 2016. In view of the significance of the EU for the South African automotive industry, developments in the region have a direct and measurable impact on the domestic automotive industry’s overall performance.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production in the EU increased by 3,1% from 18,25 million units in 2015 to 18,81 million units in 2016, while new vehicle sales increased by 6,9% from the 16,0 million in 2015 to 17,1 million in 2016. Germany with 6,06 million units, followed by Spain with 2,89 million units, and France with 2,08 million units, led vehicle production in the region, while Germany with 3,54 million units, followed by the UK with 3,06 million units, and France with 2,34 million units, set the pace in respect of new vehicle sales volumes in 2016. The estimated vehicle parc (number of registered vehicles) in the EU was in the order of 299 million units, and the motorisation rate at 569 vehicles per 1 000 persons. The following table reveals the EU’s vehicle production and new vehicles sales for 2015 and 2016.

EU vehicle production and sales – 2015 to 20162015 2016

Vehicle production 18 254 326 18 809 265

New vehicle sales 16 024 419 17 135 463Source: OICA

The trade framework between South Africa and the EU is well entrenched and, up to 2016, had been governed by the Trade, Development and Co-operation Agreement (TDCA) which became effective on 1 January 2000. The automotive part of the TDCA was only concluded on 15 December 2006. As a result, the 3% import duty on original equipment components and the 4,5% duty on aftermarket parts were reduced to duty-free on 15 December 2006, while the 10% import duty on passenger cars was reduced to 3,5% on 15 December 2006, to 1,5% on 1 January 2007, and fell away completely in January 2008.

South Africa in turn granted the EU with a 7% preference on passenger cars and light commercial vehicles and an 8% preference on medium and heavy commercial vehicles and buses. Original equipment components received no preference, but a large number of aftermarket automotive parts qualified for lower import duties. In order to qualify for zero tariffs into the EU, South African vehicles and components must contain at least 60% local content in respect of the rules of origin. The definition of local content includes South African raw materials, labour, parts, transport, manufacturing costs and profit margins, as well as the value of components and sub-components originally sourced from Europe.

On 10 June 2016, the EU and six member states of SADC, namely Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland signed an Economic Partnership Agreement (EPA). The Agreement entered into force on 10 October 2016. The EPA between the EU and the SADC group replaced the trade provisions of the bilateral TDCA between South Africa and the EU and will harmonise the trading regime between SACU as a whole and the EU. The EU-SADC EPA is the first EPA signed between the EU and an African region. All of the six countries, barring Mozambique, are also members of SACU. Angola has not yet signed the agreement but was part of the negotiations and may join the group at any time in the future. The new deal preserves coherence within SACU, particularly with regard to maintaining the common external tariff. South Africa’s rationale for participation in the EPA was an effort to harmonise the region’s trade relations vis-à-vis the EU, with the aim to strengthen regional integration in SACU and SADC as well as further African integration,

39EXPORTS

given that there are also EPA discussions under way with regional blocs in West, East and Central Africa. The EPA is intended to be development-oriented and allow for deeper regional integration. The EPA allows for more flexibility on rules of origin, so that countries can source inputs from any other country in the respective EPA or other EPA region to benefit from duty- and quota-free access to the EU. Overall the EPA represents a commercial improvement over the TDCA, and will translate into better trade performance and aspiration towards greater integration and industrialisation.

In view of the free trade agreement (FTA) that SACU enjoys with the EU and also for the harmonisation of trade relations with Western Europe, SACU signed a free trade agreement with the European Free Trade Association (EFTA), which came into force on 1 May 2008. EFTA consists of Iceland, Liechtenstein, Norway and Switzerland. EFTA offered South Africa full duty- and quota-free access for industrial products. For its part, South Africa offered EFTA what it had already offered the EU on both processed agricultural products and industrial products, with some marginal adjustments. The free trade agreement brings about a number of benefits to South African exporters, which include duty-free market access for SACU products, including vehicles and automotive components, to EFTA markets. Automotive exports to Switzerland, Norway and Iceland have continued to grow and exports to EFTA, although still relatively small, increased substantially from R293,5 million in 2015 to R905,1 million in 2016.

The following table reveals that total automotive exports (vehicles and components) to the EU amounted to R86,0 billion in 2016, a substantial improvement of R18,9 billion or 28,2% compared to the R67,1 billion export value in 2015. Exports in Euro terms also increased by 11,3% year-on-year, reflecting the increase in real terms. Rising production and consumption demand by the EU’s top five markets, Germany, Spain, France, UK and the Czech Republic benefitted South African vehicle and automotive component exports to the region. Vehicle exports increased from 173 805 units in 2015 to 195 764 units in 2016, while automotive component exports increased by 8,3%, or R1,8 billion, from the R21,7 billion in 2015 to R23,5 billion in 2016. Exports to the 13 new member countries, forming part of the expanded EU, comprised R3,27 billion, or 3,8%, of the R86,0 billion export value in 2016 compared to the R2,64 billion export value in 2015.

Overall the EPA represents a commercial improvement

over the TDCA, and will translate into better trade

performance and aspiration towards greater integration

and industrialisation.

40EXPORTS

Exports to the EU by product category – 2012 to 2016Component 2012 2013 2014 2015 2016

Total (R million) 34 030,7 35 096,2 43 801,2 67 113,9 86 013,9

Total (average Euro million) 3 225,7 2 737,6 3 041,8 4 746,4 5 283,4

Air conditioners 22,1 22,1 31,2 38,9 4,2

Alarm systems 29,6 39,0 22,2 14,2 18,6

Automotive glass 210,6 324,9 380,4 307,2 383,8

Automotive tooling 160,6 161,5 202,3 229,1 286,0

Axles 92,5 186,6 146,0 195,2 281,5

Batteries 28,7 68,8 103,0 70,2 4,9

Body parts / panels 22,1 30,9 59,4 91,1 100,5

Brake parts 21,7 21,7 33,2 29,3 78,0

Car radios 36,1 0,5 1,1 1,1 1,3

Catalytic converters 12 389,9 13 288,6 14 124,0 13 904,5 14 951,1

Clutches / shaft couplings 140,1 169,8 196,9 221,5 271,5

Engines 16,3 7,5 9,2 75,2 78,0

Engine parts 834,0 1 019,3 1 366,8 1 109,5 980,3

Filters 131,7 157,0 164,3 171,3 262,8

Gaskets 34,2 42,7 41,7 41,3 37,6

Gauges / instruments / parts 42,9 44,7 94,9 62,3 67,0

Gear boxes 14,8 4,5 18,3 4,7 12,9

Ignition / starting equipment 15,4 21,7 35,6 19,5 43,2

Jacks 22,8 10,6 0,9 5,8 4,3

Lighting equipment / parts 131,4 154,7 145,0 136,8 144,5

Radiators / parts 577,3 672,6 690,3 685,4 797,3

Road wheels / parts 251,5 123,7 81,7 121,8 118,0

Seats 0,3 0,5 1,6 3,7 2,3

Seat belts 0,7 0,4 1,3 0,6 0,6

Stitched leather seats / parts 1 693,4 1 499,3 1 244,1 916,6 693,0

Shock absorbers / suspension parts 366,5 386,6 388,6 324,6 421,5

Silencers / exhausts 1 326,8 839,7 214,3 236,8 306,6

Springs 7,8 7,3 6,3 3,3 8,1

Steering wheels / columns / boxes 123,9 131,8 13,1 11,1 10,3

Transmission shafts 247,0 217,1 286,0 194,1 137,3

Tyres 392,5 274,4 443,6 425,5 549,0

Wiring harnesses 63,9 75,9 94,5 92,0 60,4

Other parts 1 250,0 1 240,7 1 472,5 1 983,1 2 414,3

Light vehicles 13 327,2 13 841,6 21 653,5 45 376,1 62 454,5

Medium / Heavy vehicles 4,4 7,5 33,4 10,5 28,7 Source: AIEC, SARS

41EXPORTS

Top export destinations in the EU with export value – 2016

42EXPORTS

NAFTA (North American Free Trade Area)

The North American Free Trade Area consists of the USA, Canada and Mexico and represented South Africa’s second largest trading region in 2016. The US, Mexico and Canada manage trade within NAFTA which entered into force in 1994. South African automotive exports to NAFTA amounted to R24,37 billion, or 14,2%, of total automotive exports of R171,1 billion in 2016.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production and new vehicle sales in NAFTA peaked at their highest levels in 2016, with production increasing by 1,2%, from the 17,95 million units in 2015, to 18,17 million units in 2016, while new vehicle sales increased from the 21,17 million units in 2015, to 21,50 million units in 2016. Vehicle production and new vehicle sales in NAFTA were dominated by the US with production of 12,2 million units and sales of 17,87 million units in 2016. The estimated vehicle parc (number of registered vehicles) in NAFTA was in the order of 317 million units and the motorisation rate at 661 vehicles per 1 000 persons. The following table reveals the US’s vehicle production and new vehicle sales for 2015 and 2016.

NAFTA vehicle production and sales – 2015 to 20162015 2016



The US is the world’s largest national economy in nominal terms. The US’s decisions are not just felt within the country’s borders but actually impact on the rest of the world and particularly on emerging markets in view of the inter-connectedness of emerging markets and the US. South Africa is a beneficiary of the USA’s Generalised System of Preference (GSP), which was instituted on 1 January 1976 and grants duty-free status to some goods. Since 2001, trade with the US has significantly increased due to the African Growth and Opportunity Act (AGOA), which is an extension of the GSP and allows duty-free access of additional products into the US. The cornerstone of AGOA is the expansion of development and trade with Africa, providing diverse opportunities to grow and integrate the continent into the global economy. South Africa, together with 37 of the 49 sub-Saharan African countries, has been designated as an eligible country in terms of the Act. Under AGOA, 98% of South African exports to the US enter the country without tariffs or quotas. A major portion of the country’s exports to the US consists of manufactured goods, such as vehicles, which have assisted in enhancing manufacturing in South Africa. Duty rates into the US range from 2,5% on passenger cars to 25% in respect of commercial vehicles. The rule of origin requirement is that 35% of the value added on the output should come from the production activities in the country claiming AGOA preference. The 35% value added can be met by including the production of materials from other AGOA beneficiaries.

The effective commencement date of the duty-free access provisions in terms of AGOA was 1 January 2001 to last until 30 September 2008, which was subsequently extended until 30 September 2015. In 2015, President Barack Obama signed into law the Trade Preferences Extension Act of 2015 that contained the AGOA Extension and Enhancement Act which extended the programme for a further 10 years to 2025. Its renewal for a 10-year period represented the longest-ever extension in the programme’s history. To date, member African countries have struggled to fully leverage the benefits under the Act, with a current

43EXPORTS

utilisation rate under 20% across the continent. South Africa has been one of a few countries able to diversify its product range outside of petroleum, leveraging AGOA through, most notably, the automotive and agricultural sectors to grow its exports.

There are considerable mutual benefits to be derived from the two-way trade in vehicles and components, for both the US and South Africa. The US was the South African automotive industry’s second largest trading partner, second largest destination for total automotive exports, second largest vehicle export destination and fifth largest country of origin for total automotive imports in 2016. Moreover, growing two-way trade contributes positively to sustaining employment in the US supplier and vehicle manufacturing industries, as well as that in South Africa and sub-Saharan African countries. The domestic automotive industry is increasingly involved in regional integration and in building capacity in other African countries. Both the US and countries involved under AGOA have the potential of generating significant economic benefits from trade, as AGOA countries continue to develop, modernise and industrialise.

The US is exploring negotiated alternatives to unilateral preferences to formalise the relationship with African countries when the current 10-year extension of AGOA lapses in 2025, including the possibility of full free trade agreements. South Africa is considered the doorway to the rest of the continent and in view of the critical and vital space that South Africa fills in the region’s economy, a permanent agreement would provide both countries with certainty and would open opportunities for goods and services to flow into the African market.

The following table reveals that in 2016, exports to NAFTA, at R24,37 billion, increased by 7,1% compared to the R22,76 billion exported in 2015. Due to the substantial weakening of the rand against the US dollar in 2016, exports to NAFTA in US dollar terms, however, declined by 7,2%. Vehicle exports to the US in 2016, at 47 627 units, down from the 48 999 units in 2015, comprised mainly the left-hand drive BMW 3-series, the new generation Mercedes-Benz C-Class as well as the Ford Ranger.

Moreover, growing two-way trade contributes positively

to sustaining employment in the US supplier and vehicle manufacturing industries,

as well as that in South Africa and sub-Saharan African

countries.

44EXPORTS

Exports to NAFTA by product category – 2012 to 2016Component 2012 2013 2014 2015 2016

Total (R million) 20 900,7 19 138,2 18 691,1 22 756,9 24 371,1

Total (average US$ million) 2 545,8 1 983,2 1 724,3 1 784,9 1 656,8

Air conditioners 0,1 0,1 3,1 6,5 11,6

Alarm systems 2,8 2,9 1,5 3,3 1,3



Axles 80,9 40,6 125,0 80,9 2,8

Batteries 0,3 0,1 0,6 0,1 2,6


Brake parts 3,7 2,6 2,0 2,6 4,3

Car radios - - - - 0,1

Catalytic converters 2 416,1 2 399,7 3 241,0 4 355,2 4 638,9


Engines 13,4 6,5 3,5 15,4 19,5

Engine parts 791,9 675,1 814,7 924,0 747,3

Filters 39,5 25,0 3,5 1,9 3,5

Gaskets 1,9 2,9 6,6 9,8 8,5


Gear boxes 41,4 33,7 49,4 59,6 26,9


Jacks 34,0 17,3 1,4 1,5 2,7


Radiators / parts 163,4 194,4 248,4 300,3 306,4


Seats 4,8 0,1 0,5 0,8 1,6

Seat belts - - - - 0,2

Stitched leather seats / parts 16,7 16,1 11,2 8,9 6,3

Shock absorbers / suspension parts 22,5 3,6 43,7 57,6 52,4

Silencers / exhausts 257,8 262,2 165,0 179,3 177,3

Springs 0,8 0,4 0,3 0,5 0,4

Steering wheels / columns / boxes 31,7 47,5 14,2 2,9 2,9


Tyres 128,9 58,5 48,4 136,5 147,2


Other parts 736,9 258,9 260,5 598,0 523,5

Light vehicles 15 928,8 14 951,1 13 471,2 15 684,9 17 403,9

Medium / Heavy vehicles 3,4 - 0,7 3,7 29,5Source: AIEC, SARS

45EXPORTS

Top export destinations in NAFTA with export value – 2016

46EXPORTS

AfricaAfrica remains a priority focus for the South African automotive industry, and the continent accounted for R31,28 billion, or 18,3%, of South Africa’s total automotive exports of R171,1 billion in 2016. Automotive exports to Africa declined by R2,81 billion, or 8,3%, from the R34,09 billion exported in 2015. In 2016, the GDP growth in sub-Saharan Africa has been the weakest since the 2008/2009 global financial crisis. This was largely because of the weak performance in its two largest economies, South Africa and Nigeria. However, growth on the continent is far from homogeneous, with non-resource intensive economies generally remaining robust. Growth prospects remain diversified by region, with East Africa retaining its position as the fastest growing region on the continent.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production in Africa grew by 6,5% from 960 305 units in 2015 to 1 022 348 units in 2016. The continent’s market share comprised 1,1% of global vehicle production in 2016. South Africa, with 599 004 units accounted for 58,6% of Africa’s total vehicle production, while Morocco, with 345 106 units, Algeria with 42 008 units, and Egypt, with 36 230 units, accounted for the balance. Total new vehicle sales in Africa declined by 15,2% from the 1,55 million units recorded in 2015 to 1,31 million units in 2016. The estimated vehicle parc (number of registered vehicles) in Africa was in the order of 43 million units and the motorisation rate at 44 vehicles per 1 000 persons. The following table reveals Africa’s vehicle production and new vehicle sales for 2015 and 2016.

Africa vehicle production and sales – 2015 to 20162015 2016

Vehicle production 960 305 1 022 348


Vehicle demand needs on the continent are being met for the most part through the import of CBUs. New vehicle sales in Africa peaked at 1,72 million units in 2014, but subsequently declined to 1,55 million units in 2015, and 1,31 million units in 2016. The economic downturn in Africa, fuelled by a steep decline in the demand for commodities, has directly affected the continent’s appetite for new vehicles. In 2016, new passenger car sales totalled 981 214 units and commercial vehicle sales 333 249 units. South Africa and northern African countries constituted the main markets. Used car imports are not allowed in South Africa and in northern African countries, but comprise the bulk of sales in the rest of the countries on the continent and continue to dampen demand for new vehicles. Although Africa has witnessed erratic and subdued growth in the last two years, the continental demand still presents some of the best opportunities for exporters from South Africa. The following table reveals the top 10 new vehicle markets in Africa for 2015 and 2016.

Africa remains a priority focus for the South African automotive industry, and the continent

accounted for R31,28 billion, or 18,3%, of South Africa’s total automotive exports of

R171,1 billion in 2016.

47EXPORTS

Top 10 new vehicle markets in Africa – 2015 to 2016 Countries and 2016 ranking Total new vehicle sales

2015Total new vehicle sales

2016Passenger cars

2016Commercial vehicles

2016

1. South Africa 617 648 547 406 361 289 186 117

2. Egypt 332 100 264 100 214 800 49 300

3. Morocco 131 910 163 110 152 324 10 786

4. Algeria 215 400 96 600 85 300 11 300

5. Tunisia 48 500 50 800 36 400 14 400

6. Libya 54 100 46 400 31 600 14 800

7. Reunion 27 697 29 547 23 701 5 846

8. Nigeria 20 000 23 000 19 200 3 800

9. Mauritius 10 000 11 000 8 700 2 300

10. Kenya 14 100 10 600 2 400 8 200

Total new vehicle sales 1 549 556 1 314 463 981 214 333 249Source: NAAMSA/Lightstone Auto, OICA

The average level of vehicle ownership in Africa remains the lowest globally by region. Although the continent’s automotive market remains relatively underdeveloped in comparison to those in Europe, Asia and North America, the continent is trying hard to place itself on the automotive roadmap. Demand for vehicles is highly income elastic and the continent therefore represents huge opportunities in terms of consumption, as the buying power of the African consumer is on the rise and the continent’s middle class is increasing exponentially. A growing middle class in Africa will lead to greater development of the automotive sector as countries’ demand spurs economies of scale in both domestic and regional supply. Automotive manufacturers are therefore moving closer to African markets to produce vehicles – a practice adopted primarily due to local content promotion policies instituted by countries such as Nigeria and Kenya – which have resulted in restrictions of imports on second-hand vehicles as well as higher tariffs on new vehicles. The push to local content promotion by these governments has also led to the establishment of assembly plants in the two countries. As the African continent becomes increasingly important within the global economy, it is crucial that South Africa leverages its well-established regional network, grows other markets and strengthens relationships, especially with countries where automotive manufacturers have a presence.

It is likely that an Africa automotive industry-wide initiative could emerge in the near future. Due to the strategic vision and guidance of the independent African Association of Automotive Manufacturers (AAAM), the development and promotion of a cohesive automotive strategy for the African continent has been gaining new impetus. Countries on the continent need to leverage one another’s expertise and achievement factors, with regional collaboration emerging as a key trend expected to influence the automotive industry. South Africa is the only country in sub-Saharan Africa where vehicle manufacturing has reached the scale to drive a cumulative process of linkage building. The country, with its know-how and built-for-Africa vehicles is ideally placed to benefit from the increased demand for vehicles, assembly kits and automotive components on the continent. South Africa’s proximity, compared to other emerging markets, and its understanding of business conditions and practices in other African countries, places it in the favourable position of being the ideal partner for assistance in establishing a vehicle assembly operation, in return for some kind of preferential treatment, while the component sector is being developed there. The wealth of management experience in the country and understanding of the issues that an African production site entails could ensure the optimisation of operations and costs in both countries.

To unlock this market potential will require greater government and private sector partnerships to develop a formal legislative environment that is conducive to longer-term growth. The incentive for South Africa to assist other countries lies in the economies of scale and increased foreign investment that can be realised in

48EXPORTS

the long term from specialising in certain vehicle models and parts in different countries. The development of automotive industries outside of South Africa gives South African component manufacturers the opportunity to export to infant assembly operations in the region. Aftermarket production also represents a potential starting point for countries in the region which do not yet have significant demand for new vehicles or the capacity to engage in competitive full-scale vehicle production. Generally, the production of vehicles and components could have important spillovers for other industries as well.

The following table reveals South African automotive exports to the African continent. Annual comparisons should take account of the following – the 2013, 2014, 2015 and 2016 total automotive export data to Africa provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to Africa, excluding BLNS country data, declined by a significant 16,9% from the R17,60 billion in 2015 to R14,63 billion in 2016, while total automotive exports, including BLNS country data, declined by 8,3% from the R34,09 billion in 2015 to R31,28 billion in 2016. Vehicle exports to the domestic industry’s top destinations in Africa, namely to Algeria and Nigeria, reflected a substantial decline due to new vehicle import regulatory changes that have been implemented since 2014. Vehicle exports to 38 African countries declined from 42 234 units in 2015 to 21 564 units in 2016. Automotive component exports into the continent also declined year-on-year in 2016, which is in line with the lowest economic growth experienced in sub-Saharan Africa in two decades, thus impacting on demand.

The development of automotive industries outside of

South Africa gives South African component

manufacturers the opportunity to export

to infant assembly operations in the region.

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Exports to Africa by product category – 2013 to 2016Component 2013* 2014* 2015* 2016* 2013** 2014** 2015** 2016**

Total (R million)Including BLNS country data 30 194,5** 31 621,2** 34 090,2** 31 277,3**

Total (R million) Excluding BLNS country data 17 887,9* 16 562,5* 17 598,8* 14 628,2*

Air conditioners 18,1 36,4 23,5 33,1 30,1 45,6 42,3 46,3

Alarm systems 21,6 51,8 45,2 45,2 36,6 85,3 77,7 89,3

Automotive glass 15,7 17,9 17,2 18,0 54,6 64,1 73,4 89,5

Automotive tooling 291,1 283,7 540,3 222,4 396,8 442,1 688,6 333,3

Axles 61,4 57,9 51,3 45,3 87,3 87,0 128,3 61,5

Batteries 166,6 203,7 190,2 205,5 209,8 278,3 285,2 328,1

Body parts / panels 77,6 22,8 38,2 24,1 144,9 122,5 126,7 134,8

Brake parts 70,6 75,4 79,2 84,7 145,7 165,9 182,1 198,2

Car radios 8,2 9,7 7,5 7,7 24,2 20,4 22,1 18,6

Catalytic converters 86,1 88,3 99,5 84,8 107,0 104,3 118,3 110,3

Clutches / shaft couplings 29,6 39,4 36,7 40,9 72,5 85,9 95,6 105,2

Engines 187,3 238,8 333,2 382,9 238,8 319,9 443,0 493,4

Engine parts 334,1 469,1 475,7 466,9 585,0 732,4 791,5 815,7

Filters 154,7 202,5 179,3 187,7 207,7 294,5 273,6 308,9

Gaskets 79,1 83,4 90,4 95,0 106,7 114,8 133,7 131,1

Gauges / instruments / parts 244,7 311,2 358,9 304,3 312,8 403,8 480,0 441,0

Gear boxes 41,2 25,8 35,8 33,5 74,3 82,6 79,0 93,9

Ignition / starting equipment 64,5 105,3 96,6 87,0 136,2 192,2 207,1 204,9

Jacks 24,0 31,7 23,1 20,3 26,9 36,3 28,0 27,0

Lighting equipment / parts 42,6 44,4 47,8 50,1 53,8 71,6 89,6 108,1

Radiators / parts 29,5 26,7 28,8 37,2 58,4 59,8 73,5 88,2

Road wheels / parts 68,3 30,4 36,8 25,5 110,3 68,9 82,4 80,7

Seats 4,3 8,9 8,4 6,9 9,7 16,1 18,1 16,8

Seat belts 1,7 2,5 2,8 2,4 4,2 4,9 5,9 6,0

Stitched leather seats / parts 4,7 7,2 4,3 5,9 11,0 17,0 54,1 41,3

Shock absorbers / suspension parts 33,8 37,3 45,8 34,7 58,5 63,9 79,3 82,5

Silencers / exhausts 5,7 8,3 5,4 4,8 15,5 16,6 14,5 15,3

Springs 10,2 6,8 7,8 13,7 16,9 13,4 13,6 20,9

Steering wheels / columns / boxes 12,1 10,8 11,0 9,7 20,1 22,9 23,8 26,2

Transmission shafts 322,9 426,8 389,6 406,1 448,6 573,8 542,7 562,9

Tyres 725,3 941,8 762,6 850,3 1 352,6 1 616,3 1 455,0 1 619,2

Wiring harnesses 12,2 17,4 21,5 20,3 33,2 159,2 139,4 229,0

Other parts 2 846,8 3 385,8 3 204,5 2 848,9 5 325,8 6 384,6 6 273,4 5 798,2

Light vehicles 10 598,9 7 555,5 8 487,9 5 750,8 16 958,1 15 176,8 17 091,8 14 566,8

Medium / Heavy vehicles 1 192,7 1 697,1 1 812,0 2 171,6 2 719,9 3 677,5 3 856,9 3 984,2Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

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Top export destinations in Africa with export value – 2016

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Southern African Development Community (SADC)

South Africa’s automotive exports to the Southern African Development Community (SADC) comprised 87,2%, or R27,28 billion, of its total R31,28 billion automotive exports to the African continent. Exports of automotive goods to six countries within SADC exceeded the R1 billion level in 2016. Contributing factors to the significant trade with the country’s neighbours include the geographical proximity of these markets, which are relatively easily accessible by road or by rail, as well as the formation of a free trade area within SADC, which positions South Africa as the ideal location to access the region.

South Africa’s participation in SADC, comprising 15 sub-Saharan African countries, allows access to a market of approximately 300 million people and an estimated regional GDP of US$600 billion. SADC operates as a free trade area. The 15 SADC countries include: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. South Africa joined the SADC in August 1994. The SADC Protocol on Trade was signed on 24 August 1996 and came into force on 25 January 2000. Currently, Angola and the Democratic Republic of Congo remain outside the agreement. The SADC FTA was launched in 2008 when 85% of tariff lines became duty-free. By 2012, about 98% of SADC merchandise trade was subject to zero tariffs. The phase-down offers are country-specific on the principle of reciprocity, for example, tariff preferences will be extended only to member states that have submitted their instruments of implementation. To date, all signatories, except for Zimbabwe, have translated their commitments into domestic enabling legislation. The intention is that the agreement encourages economies of scale, creating competitive SADC-wide industries and thereby increasing intra-regional trade and enhancing foreign investment into the region. At present, much of the SADC market is served by imported second-hand cars. The used car market partly fills the demand for vehicles in the region, impeding the creation of new industries. South Africa was able to ban imports because of its successful indigenous industry to serve its growing market. A challenge for the region is the lack of accurate data on vehicle sales in many countries, which fail to provide foreign and domestic investors with necessary information on available market opportunities.

For South African-based OEMs to attain higher production volumes, exports to regional markets should be an attractive proposition. Trade agreements need to be in place to facilitate bilateral trade so that regional trade blocs can develop. The challenge for South Africa is to offer regional markets an alternative proposition to the importation of pre-owned vehicles. In SADC, the focus currently is on consolidating the achievements of the free trade area, and working to extend African integration through the pursuit of the tripartite free trade area (TFTA) including SADC, the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). The TFTA was officially launched in Egypt on 10 June 2015. The TFTA consists of 26 countries with a population of 632 million and a combined GDP of US$1,3 trillion, and it aims to bring about a unified and liberalised single market. The two important elements that were discussed in consultation between South Africa’s social partners at the National Economic Development and Labour Council (Nedlac) are the rules of origin and offers for the elimination of import tariffs between countries, to create preferential market access. SACU, of which South Africa is the dominant member, is negotiating as a group in the TFTA. SACU has already exchanged offers with the EAC and Egypt, with Ethiopia to follow.

The current membership of the three Regional Economic Communities (RECs) is summarised in the following table. Some overlapping occurs with the same countries being part of more than one REC. The countries in blue font are the ones to which South Africa does not yet have preferential access.

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Membership of the three Regional Economic Communities (RECs)SADC EAC COMESA

Angola Burundi Burundi

Botswana Kenya Comoros

Democratic Republic of Congo Rwanda Democratic Republic of Congo

Lesotho Tanzania Djibouti

Madagascar Uganda Egypt

Malawi Eritrea

Mauritius Ethiopia

Mozambique Kenya

Namibia Libya

Seychelles Madagascar

South Africa Malawi

Swaziland Mauritius

Tanzania Rwanda

Zambia Seychelles

Zimbabwe Sudan

Swaziland

Uganda

Zambia

Zimbabwe

Vehicle and automotive component exports to the three separate Regional Economic Communities in 2016 amounted to R27,28 billion in respect of SADC (R27,32 billion in 2015); R2,1 billion in respect of the EAC (R2,5 billion in 2015); and R10,6 billion in respect of COMESA (R10,7 billion in 2015). Establishing regional value chains via the harmonisation of trade regimes, increased market liberalisation and various other areas of co-operation could present the South African automotive industry with increased export opportunities.

The launch of the TFTA was followed by the initiation of negotiations around the establishment of a Continental free trade area (CFTA) at the African Union on 15 June 2015. The CFTA, which is planned to be in place by December 2017, will bring together 54 African countries with a combined population of 1,2 billion people and a combined GDP of more than US$3,4 trillion. With the CFTA, African leaders aim to, amongst other things, create a single continental market for goods and services, enable free movement of business persons, increase investments, and expand intra-African trade. Huge potential exists to bolster economic development through greater co-operation in the areas of combining resources, production, logistics infrastructure and services. In addition, trade barriers across the continent have curtailed its growth prospects by driving up the cost of doing business, and eliminating charges like export and import fees could promote new markets and enhance profits.

In addition to regional integration, the establishment of a potential free trade zone between Kenya, Egypt, Nigeria and South Africa (KENSA) – the four largest economies on the continent – will also drive intra-regional trade and exports. The idea of a KENSA free trade zone arose from the need for greater intra-Africa trading, which is currently among the lowest in the world compared to other regions. Faced with the threat of new disruptions to existing trade patterns and supply chain integration relating to Brexit and the new US administration, it is even more important that African economies start trading among themselves.

The following table reveals South Africa’s automotive exports to SADC. Annual comparisons should take account of the following – the 2013, 2014, 2015 and 2016 total automotive export data to SADC provides two comparisons: one comparison includes exports to Botswana, Lesotho, Namibia and Swaziland (BLNS

53EXPORTS

countries) in line with the new publishing format of South African trade data provided by SARS, and the other comparison excludes exports to BLNS countries in order to facilitate historical comparisons. Total automotive exports to SADC, excluding BLNS country data, declined by 1,8% from R10,83 billion in 2015 to R10,63 billion in 2016. Total automotive exports, including BLNS country data, declined by 0,1% from R27,32 billion in 2015 to R27,28 billion in 2016. Several SADC countries have consistently remained amongst the South African automotive industry’s top export destinations over the past two decades.

Several SADC countries have consistently

remained amongst the South African

automotive industry’s top export destinations

over the past two decades.

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Exports to SADC by product category – 2013 to 2016Component 2013* 2014* 2015* 2016* 2013** 2014** 2015** 2016**

Total (R million)Including BLNS country data 21 865,2** 25 860,3** 27 318,0** 27 279,5**

Total (R million) Excluding BLNS country data 9 558,6* 10 801,4* 10 826,6* 10 630,4*

Air conditioners 12,0 32,8 19,5 32,3 24,0 42,0 38,3 45,5

Alarm systems 14,5 31,6 32,4 27,6 29,5 65,0 64,9 71,7

Automotive glass 11,9 14,3 13,6 14,0 50,8 60,6 69,8 85,5

Automotive tooling 157,1 201,5 193,7 131,7 262,8 359,8 342,0 242,6

Axles 59,5 37,0 48,8 41,2 85,4 66,1 125,8 57,4

Batteries 164,2 200,8 185,6 203,7 207,4 275,4 280,6 326,3

Body parts / panels 72,7 18,9 34,2 18,7 140,0 118,6 122,7 129,4

Brake parts 56,1 62,3 65,6 66,9 131,2 152,9 168,5 180,4

Car radios 7,6 7,9 6,5 6,6 23,6 18,7 21,1 17,5

Catalytic converters 64,9 72,2 76,1 54,6 85,8 88,2 94,9 80,1

Clutches / shaft couplings 24,0 33,2 32,0 33,7 66,9 79,7 90,9 98,0

Engines 178,2 225,6 325,8 357,7 229,7 306,8 435,6 468,2

Engine parts 277,9 394,5 410,7 372,5 528,8 657,8 726,5 721,3

Filters 137,0 168,4 155,7 157,8 190,0 260,3 250,0 279,0

Gaskets 70,2 73,8 79,2 84,0 97,8 105,2 122,5 120,1

Gauges / instruments / parts 181,9 228,1 279,7 244,7 250,0 320,6 400,8 381,4

Gear boxes 38,0 24,3 31,7 26,4 71,1 81,1 74,9 86,8

Ignition / starting equipment 56,5 93,8 82,2 74,9 128,2 180,8 192,7 192,8

Jacks 19,5 26,3 18,7 17,4 22,4 30,9 23,6 24,1

Lighting equipment / parts 35,6 35,9 40,3 40,6 46,8 63,2 82,1 98,6

Radiators / parts 25,8 22,9 24,9 32,0 54,7 56,1 69,6 83,0

Road wheels / parts 65,8 28,8 32,0 21,7 107,8 67,2 77,6 76,9

Seats 3,6 8,2 6,2 5,7 9,0 15,4 15,9 15,6

Seat belts 1,4 2,1 2,4 1,6 3,9 4,6 5,5 5,2

Stitched leather seats / parts 4,2 5,7 4,1 5,7 10,5 15,4 53,9 41,1

Shock absorbers / suspension parts 31,5 36,0 43,9 32,5 56,2 62,7 77,4 80,3

Silencers / exhausts 5,3 6,0 4,6 4,0 15,1 14,2 13,7 14,5

Springs 8,9 6,0 7,2 11,8 15,6 12,6 13,0 19,0

Steering wheels / columns / boxes 7,8 9,3 9,0 8,1 15,8 21,4 21,8 24,6

Transmission shafts 243,1 360,7 342,4 328,4 368,8 507,7 495,5 485,2

Tyres 555,0 750,4 603,6 680,0 1 182,3 1 424,9 1 296,0 1 448,9

Wiring harnesses 11,6 16,0 20,7 16,9 32,6 157,8 138,6 225,6

Other parts 2 386,8 2 808,2 2 705,6 2 372,9 4 865,8 5 807,0 5 774,5 5 322,2

Light vehicles 3 440,0 3 129,0 3 354,6 3 137,8 9 799,2 10 750,3 11 958,5 11 953,8

Medium / Heavy vehicles 1 128,5 1 628,9 1 533,4 1 964,3 2 655,7 3 609,3 3 578,3 3 776,9Source: AIEC, SARS* Comparison excluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports** Comparison including BLNS (Botswana, Lesotho, Namibia and Swaziland) country exports

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Top export destinations in SADC with export value – 2016

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Mercosur (Mercado Común del Sur - Common Market of South America)

Mercosur is an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela, with Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname as associate members. The associate members receive tariff reductions but do not enjoy full voting rights or complete access to the markets of Mercosur’s full members. Trade with Mercosur remains relatively small in the context of South Africa’s overall automotive trade regime. Total automotive exports to Mercosur amounted to R1,76 billion, or 1,0%, of total South African automotive exports of R171,1 billion in 2016. The substantial decline in automotive exports to Mercosur from R3,48 billion in 2015 to R1,76 billion in 2016 could be attributed to the recessionary economic climate in Brazil. Consequently, South African vehicle exports to the region declined from 6 554 units in 2015 to 4 750 units in 2016.

According to the International Organisation of Motor Vehicle Manufacturers (OICA), vehicle production in Mercosur declined by 11,1%, from 2,96 million units in 2015 to 2,63 million units in 2016. Brazil dominated production in the region and in 2016 the country was ranked 10th in terms of global vehicle production. Brazil dropped one place in the global rankings as production volumes decreased by 11,2%, from 2,43 million units in 2015 to 2,16 million units in 2016, while vehicle production in Argentina also declined by 10,2% year-on-year in 2016. New vehicle sales in the region declined by 14,1%, from 3,29 million units in 2015 to 2,83 million units in 2016. The estimated vehicle parc (number of registered vehicles) in Mercosur was in the order of 57 million units and the motorisation rate at 235 vehicles per 1 000 persons. The following table reveals Mercosur’s vehicle production and new vehicle sales for 2015 and 2016.

Mercosur vehicle production and sales – 2015 to 20162015 2016



The Preferential Trade Agreement (PTA) between Mercosur and SACU came into force on 1 April 2016 and covers about 1 000 tariff lines. The PTA was concluded in 2004, while it was updated and signed in 2008. The PTA was the first trade agreement concluded by SACU as a single entity. This agreement is also the first with another developing region, giving meaning to the objectives of the South-South co-operation. The PTA creates a basis for further integration and co-operation, including possible further exchanges of tariff preferences, and co-operation in other possible areas. The aim of the agreement was to strengthen existing relations, promote the expansion of trade, and establish the conditions for the creation of a free trade agreement between Mercosur and SACU. Automotive products are excluded from the arrangement on the side of both parties. However, future negotiations may involve the granting and winning of tariff concessions in respect of automotive products.

In October 2012, the Brazilian government approved by decree a new programme, Inovar-Auto, to encourage vehicle technology innovation. Inovar-Auto was designed to support the automotive industry’s technology development, innovation, safety, environmental protection, energy efficiency and quality improvement. Inovar-Auto is both a carrot and a stick, with the twin goals of pushing OEMs to manufacture vehicles in Brazil and encouraging consumers to buy more fuel-efficient vehicles. The programme has introduced large increases in the taxation on all cars, especially imports, although manufacturers conforming to a

57EXPORTS

lengthy set of regulations can ensure that their products avoid the charges. Inovar-Auto added a 30% tax to industrial products, except those built in Mexico or the Mercosur countries. Moreover, the increase was in addition to a 35% import duty applicable to vehicles. The 30% tax increase can be negated if OEMs invest in R&D in Brazil and achieve the production of more economical, lower priced and safer vehicles. The main opportunity opened by Inovar-Auto is the motivation for the automotive industry to internalise international technology and decrease the wide gap in respect of technological developments that exists between Brazil and developed countries. Inovar-Auto has been running since the start of 2013 and is valid until 2017. The tax increase will mostly be felt by those automotive component manufacturers and OEMs without plants in Brazil, or those that only assemble vehicles in the country with a high level of imported components. Inovar-Auto has succeeded in its objective of reducing imports of vehicles into Brazil. At present, the government is discussing a new automotive policy programme, which will replace Inovar-Auto, which expires on 31 December 2017. It is not yet known what the policy will entail, but the Ministry of Development, Industry and Commerce is already meeting with representatives of the sector and also with Mercosur members in this regard.

In March 2016, the Brazilian authorities published a list of automotive components that were not being manufactured in Brazil, and which would now attract an import tariff of 2%, compared to the 14%, 16% and 18% tariffs that had been previously charged. The list included 61 automotive parts, some of which are still subject to import quotas. The tax reduction was requested by industry associations, aimed at increasing the competitiveness of the domestic OEMs. The products listed include gasoline and diesel engines, volumetric pumps and gear boxes, amongst others, which could potentially present opportunities for exporters from South Africa.

The following table reveals that total automotive exports (vehicles and components) to Mercosur consisted of a limited range of products. The substantial decline in automotive exports to the region, from R3,48 billion in 2015 to R1,76 billion in 2016, could mainly be attributed to the decline in vehicle exports and the subsequent decline in the export value of vehicles from R2,43 billion in 2015 to R617,5 million in 2016. For the first time, the bulk of exports to the region was destined for Argentina, accounting for R1,28 billion, with Brazil only accounting for R428,5 million of exports.

For the first time, the bulk of exports to the region was

destined for Argentina, accounting for R1,28 billion, with Brazil only accounting

for R428,5 million of exports.

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Exports to Mercosur by product category – 2012 to 2016Component 2012 2013 2014 2015 2016

Total (R million) 1 503,2 2 047,0 2 270,8 3 481,7 1 764,7

Air conditioners 0,1 0,1 0,1 - 1,0

Alarm systems 3,8 2,1 0,5 0,1 0,5



Axles 0,2 0,2 1,5 14,7 11,3

Batteries - - 0,2 0,6 -


Brake parts 1,0 0,5 0,1 0,4 0,8

Car radios - - 0,9 - -

Catalytic converters 129,7 228,1 243,4 174,6 196,9


Engines 248,9 2,7 0,5 - -

Engine parts 216,8 279,6 215,2 232,8 319,4

Filters 2,7 3,8 2,2 1,7 4,4

Gaskets 0,3 1,0 0,5 0,9 1,3


Gear boxes 0,1 0,6 0,1 - -


Jacks 0,1 - - - -


Radiators / parts 52,7 0,7 0,1 17,4 20,6


Stitched leather seats / parts 0,9 0,1 2,1 3,4 1,8

Seat belts 0,2 - - 0,1 -

Seats - - 0,2 0,2 0,2

Shock absorbers / suspension parts 0,1 - 0,2 - 0,4

Silencers / exhausts 12,7 20,4 27,1 14,8 19,0

Steering wheels / columns / boxes 0,8 8,7 0,1 - 1,0

Springs 3,9 - 0,2 - -


Tyres 114,8 90,2 14,0 0,6 2,1


Other parts 475,1 1 012,0 540,3 399 2 429,6

Light vehicles 47,1 54,5 939,3 2 427,7 617,5

Medium / Heavy vehicles - 0,9 0,9 7,2 2,3Source: AIEC, SARS

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Top export destinations in Mercosur with export value – 2016

60EXPORTS

EXPORTS OF VEHICLESThe automotive industry is scale intensive. Exports therefore remain key to the sustainability and viability of the vehicle manufacturing industry in South Africa, as part of the industry’s strategy going forward under the APDP, with its vision to double vehicle production in the country to around one million vehicles per annum by 2020. In 2016, a record number of 344 859 left- and right-hand drive South African manufactured vehicles were exported to 85 countries, up from the previous record of 333 847 units exported in 2015. Five OEMs have export contracts beyond Africa, with two OEMs producing mainly for the South African and sub-Saharan African market.

The majority of vehicles manufactured in South Africa are exported. In 2016, passenger car exports accounted for 70,8% of the total passenger car production, which is the highest export level registered on record, while 44,6% of the total light commercial vehicle production was exported. Of the 344 859 units exported in 2016, passenger car exports comprised 238 536 units, or 69,2%, light commercial vehicles comprised 105 219 units, or 30,5%, and medium and heavy commercial vehicles and buses comprised 1 104 units, or 0,3%.

Significant rationalisation of the production of light vehicle models in South Africa has taken place under the automotive policy regimes, resulting in a reduction from 42 platforms, 20 years ago, to 13 platforms at present. During 2016, five models achieved production volumes in excess of 40 000 units, of which one model achieved a production volume in excess of 100 000 units. A key challenge that remains in the industry is to raise localisation which would result in various benefits such as improved supplier efficiencies, the avoidance of currency volatility, logistics cost savings, domestic job creation, skills development, and technology transfers. Importantly, the domestically-based OEMs perceive an increase in local sourcing and local value addition levels in South African manufactured vehicles as a prerequisite for establishing a more sustainable vehicle production base.

The industry’s overall export performance remains a function of the direction of the global economy and global markets. The following table reveals that the top export destinations for passenger cars and LCVs in terms of number of units in 2016 were the UK, the US, Japan and Australia. Mercedes-Benz, with its C-Class model, was the pace-setter in terms of exported vehicles in 2016. For the first time over the past two decades, no African country featured under South Africa’s top 10 vehicle export destinations in 2016. Regulation changes stripped support for new imported vehicle purchases in a number of countries on the continent. In particular developments in Algeria and Nigeria, two of the domestic industry’s top export destinations in recent years, exacerbated the situation.

In 2016, a record number of 344 859 left- and right-hand drive South African manufactured vehicles were exported to 85 countries, up from the previous

record of 333 847 units in 2015.

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Top 10 destinations for light vehicles (passenger cars and light commercial vehicles) exported – 2012 to 2016

Country 2012 2013 2014 2015 2016

Total (R billion) 48,7 57,7 66,3 98,0 114,0

Ranking of exportersNumber 1 to Number 5

ToyotaVW

MBSABMWFord

ToyotaBMW

VWMBSAFord

ToyotaBMW

VWFord

MBSA

MBSAVW

BMWFord

Toyota

MBSAVW

BMWFord

Toyota

UK 41 111 40 763 61 073 104 098 110 356

USA 66 219 63 457 42 319 48 899 47 627

Japan 17 226 24 869 25 097 15 828 33 296

Australia 14 325 14 975 13 100 21 197 21 446

France 11 558 11 461 13 558 16 130 19 204

Germany 7 060 5 121 9 337 9 915 12 297

Saudi Arabia 293 960 3 092 9 913 8 200

Belgium 2 404 1 793 4 788 8 772 8 116

Italy 992 1 090 1 403 2 892 6 238

Russia 6 082 5 158 6 587 9 301 6 091

Other 109 646 105 551 95 168 85 775 70 882

Total (units) 276 916 275 198 275 522 332 720 343 753Source: NAAMSA/Lightstone Auto, SARS

A strong domestic and regional base is imperative for exports to other regions. The following table reveals that vehicle exports into Europe and Asia reflected strong growth in 2016, while the EU, on the whole, dominated as a region. Exports into African markets have faltered on the back of a more difficult economic environment, which has directly affected the continent’s appetite for new vehicles. However, the African market’s medium- to long-term potential remains positive as the continent has a low level of motorisation, as well as a growing middle class – ingredients which spell a growing demand for new vehicles.

Changing composition of South African vehicle exports by major regions: 2012 – 2016

Region 2012 2013 2014 2015 2016 % change2016 / 2015

Africa 80 293 78 807 61 839 42 234 21 564 -48,9%

Europe 87 621 79 820 116 077 173 805 195 764 +12,6%

North America 68 292 65 379 48 408 54 000 52 430 -2,9%

Asia 26 443 36 482 33 520 34 306 47 616 +38,8%

Australasia 15 323 15 831 14 610 22 948 22 735 -0,9%

South America 20 85 2 482 6 554 4 750 -27,5%Source: NAAMSA/Lightstone Auto

Exports of medium and heavy commercial vehicles and buses comprised only 0,3% of total vehicle exports in 2016 and, in relation to passenger cars and light commercial vehicles, have been relatively insignificant in terms of volumes. The thousand unit export level, however, has been exceeded for the fifth year in a row. In 2016, a total of 1 104 trucks and buses were exported which consisted of 725 extra-heavy commercial vehicles, 198 medium commercial vehicles, 127 heavy commercial vehicles and 54 buses. The overall top

62EXPORTS

destination for all truck and bus exports in 2016 was Zimbabwe. For extra-heavy commercial vehicles the top destination was Tanzania, while Zimbabwe was the top destination for medium commercial vehicles as well as heavy commercial vehicles, and Zambia was the top destination for bus exports in 2016. The following table reveals that the main export destinations for trucks and buses have consistently been South Africa’s neighbouring countries in the SADC region.

Top destinations and regions for medium, heavy commercial vehicles and buses exported – 2012 to 2016

Country 2012 2013 2014 2015 2016

Total (R billion) 1,3 2,8 3,7 3,9 4,1

Ranking of exportersNumber 1 to Number 5

UD TrucksScania

MANIveco

VW

MANScania

UD TrucksIveco

GM/Isuzu Trucks

MANScaniaIveco

UD TrucksGM/Isuzu Trucks

MANVolvo Group

ScaniaGMSA/Isuzu Trucks

Iveco

Volvo GroupScania

GM/Isuzu TrucksIvecoFAW

Zimbabwe 246 262 315 282 349

Tanzania 109 214 159 143 202

Mozambique 145 168 153 213 199

Zambia 303 174 392 126 165

Malawi 105 107 42 64 64

Kenya 127 175 191 219 55

Uganda - - 8 42 43

Mauritius 2 1 7 7 15

Brazil - - - - 5

Angola 25 94 130 20 2

Other 14 11 7 8 5

Africa 1 063 1 198 1 404 1 116 1 095

Total (units) 1 076 1 206 1 414 1 124 1 104Source: NAAMSA/Lightstone Auto, SARS

In a declining domestic market, exports into Africa remain a priority focus for commercial vehicle manufacturers. The continent has a uniquely developing economy, which drives the demand for competitively priced and efficient transport services. Trucking in itself is a diversified business activity playing an important role in many economic sectors, from agriculture, mining, quarrying, manufacturing, construction, distribution and forestry, to household removals, container cartage, bulk fuel transport and rural bread delivery. Within Africa, in particular, trucks are required to travel long distances, often on poorly maintained roads, to transport and deliver goods. Investing in the development of their dealer networks along the major trade corridors within the region offers potential opportunities for businesses that are willing to understand the market nuances and cultures of the different countries, each with its own culture and set of business ethics. The result is increased support and accredited technical assistance for fleet owners who operate across the borders in southern Africa. The growing business ties between South Africa and the rest of the continent could assist South Africa’s continued expansion into Africa.

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AUTOMOTIVE COMPONENTS – EXPORTS BY COUNTRY

South African OEMs are strategically located, along with other subsidiaries, to manufacture certain vehicle models for the global market, which means that a locally manufactured vehicle is identical to vehicles manufactured elsewhere. This implies that domestic automotive component suppliers must be able to deliver technology and quality levels that are on par with those found anywhere else in the world, at comparable cost.

The automotive component sector in South Africa consists of a diverse group of various tier-level automotive suppliers. There are in the order of 110 first-tier suppliers and approximately 400 lower-tier suppliers operating in South Africa. Although the role of the OEMs, as value chain drivers, is undisputed, the component sector is globally recognised for its ability to generate significant levels of added value, employment, skills development and other cross-cutting economic benefits. In the order of 75% of the first-tier automotive component suppliers in South Africa are foreign multinational companies.

South African-owned companies are more represented within the second-tier and third-tier supplier base that supply the sub-parts built into completed components. Increased localisation will especially benefit these suppliers, and contribute to enhancing employment numbers in the industry. Various automotive industry initiatives are underway to identify and develop black-owned businesses which would benefit from a government funding programme for black industrialists and which would contribute towards further value addition and diversification. Employment creation and high-level skills development are vital in South Africa, and since the majority of the automotive industry employment is generated in the component sector, higher localisation remains an essential focus. The deepening of the local component supplier base under the APDP is important as it will reduce the risks associated with exchange rate fluctuations and logistics costs.

Contributing factors that supported automotive component exports in 2016 included a weakening rand exchange rate, year-on-year vehicle production gains in the industry’s top export destinations, the domestic component suppliers’ production flexibility advantages as well as South Africa’s trade arrangements with the EU, SADC and the US. Multiple areas of collaboration exist between South African component manufacturers and outside partners for market access, technology transfer, process know-how, joint production or strategic alliance, amongst others. The following table reveals that the main destinations for automotive component exports remain first-world markets, although emerging markets are starting to feature as important export destinations, indicating progress in the South African component manufacturers’ ability to compete globally. In this regard, significant increases in component exports to Thailand, India and the Czech Republic are a case in point.

The deepening of the local component supplier base under the APDP is important

as it will reduce the risks associated with exchange rate fluctuations and logistics costs.

64EXPORTS

Automotive component export value and ranking by country – 2015 to 2016Country 2015

R million2015

Ranking2016

R million2016

Ranking

Germany 13 681,9 1 14 889,0 1

USA 6 518,9 2 6 248,9 2

Namibia 2 790,7 3 2 799,4 3

Spain 2 226,7 5 2 392,1 4

UK 2 624,1 4 2 202,7 5

Thailand 1 638,3 7 2 129,2 6

Botswana 2 017,9 6 2 081,1 7

India 1 413,5 8 1 988,7 8

Zambia 1 373,3 10 1 574,2 9

Japan 813,9 14 1 501,3 10

Czech Republic 782,4 15 1 239,3 11

Mozambique 1 402,5 9 1 113,9 12

Zimbabwe 1 084,7 11 1 035,8 13

Argentina 902,8 13 984,4 14

Democratic Republic of Congo 1 018,0 12 757,5 15

Belgium 518,6 18 709,2 16

Swaziland 552,0 17 603,0 17

Korea Republic South 565,5 16 590,8 18

Turkey 488,2 19 537,3 19

Lesotho 487,5 20 537,0 20

Netherlands 483,3 21 524,9 21

Canada 326,7 25 437,8 22

United Arab Emirates 249,8 30 424,3 23

Hungary 480,8 22 387,3 24

Poland 319,5 26 361,6 25

China 204,6 32 301,5 26

Angola 450,6 23 287,7 27

Australia 312,0 27 266,2 28

Mexico 226,9 31 252,1 29

France 285,5 28 246,1 30

Tanzania 263,7 29 236,1 31

Ghana 443,0 24 213,7 32

Malawi 195,8 34 207,6 33

Kenya 198,7 33 176,3 34

Brazil 127,9 38 140,2 35

Nigeria 174,0 36 123,9 36

Italy 91,5 - 122,3 37

Austria 42,5 - 107,4 38

Malaysia 82,6 - 100,9 39Source: AIEC, SARS

65EXPORTS

The following tables reveal the automotive component export details for the 39 export destinations recording an export value above R100 million, or 0,2%, of the total automotive component export value of R53,04 billion in 2016.

(1)Country Germany R14 889,0 million

1Catalytic converters

R9 810,5

2Engine parts

R839,3

3Radiators / parts

R478,2

4Stitched leather seats /

partsR450,1

5Shock absorbers / suspension parts

R418,1

6Tyres

R333,4

7Axles

R273,0

8Clutches / shaft couplings

R256,4

9FiltersR189,1

10Silencers / exhausts

R118,3

(2)Country USA R6 248,9 million


R4 291,9

2Engine parts

R744,3

3Radiators / parts

R199,3


R173,9

5Tyres

R145,6

6Automotive tooling

R80,4


R52,4

8Transmission shafts /

cranksR36,0


R32,3

10Gauges / instruments /

partsR28,9

(3)Country Namibia R2 799,4 million

1Tyres

R335,2

2Engine parts

R187,9

3Batteries

R77,7


partsR73,0

5Automotive tooling

R69,3


cranksR60,1

7FiltersR58,4

8Engines

R48,3

9Body parts / panels

R47,4

10Ignition / starting

equipmentR46,0

(4)Country Spain R2 392,1 million


R1 958,7

2Radiators / parts

R157,8


R48,7

4Automotive glass

R40,3

5TyresR32,7

6Road wheels / parts

R21,6

7Engine parts

R6,7

8Lighting equipment /

partsR3,9

9Gear boxes

R3,0

10FiltersR2,8

66EXPORTS

(5)Country United Kingdom (UK) R2 202,7 million


R1 471,5

2Automotive glass

R119,9

3Engine parts

R47,3


partsR37,2

5TyresR35,9

6FiltersR24,1


R17,9

8Automotive tooling

R17,7


partsR16,9

10Engines

R16,8

(6)Country Thailand R2 129,2 million

1Engine parts

R912,0


R640,2


cranksR109,4


partsR4,6


R4,2

6TyresR3,2

7JacksR2,5

8Brake parts

R1,4

9Automotive tooling

R1,1

10Gaskets

R0,8

(7)Country Botswana R2 081,1 million

1Tyres

R260,7

2Wiring harnesses

R203,3

3Engine parts

R111,9


cranksR72,3

5Engines

R51,9


equipmentR50,7


partsR49,8

8FiltersR46,0


R44,3

10Gear boxes

R44,2

(8)Country India R1 988,7 million

1EnginesR1 411,2


R222,8


R170,3


R66,8

5Radiators / parts

R21,1

6Automotive tooling

R11,2


cranksR9,3


R5,8

9TyresR2,8

10Engine parts

R1,3

(9)Country Zambia R1 574,2 million

1EnginesR178,3

2Tyres

R153,5

3Engine parts

R109,5


cranksR81,5


partsR67,5

6Batteries

R67,0

7FiltersR38,2

8Automotive tooling

R28,8

9GasketsR19,5


equipmentR19,0

67EXPORTS

(10) Country Japan R1 501,3 million


R99,4

2Brake parts

R5,8

3Springs

R5,0

4Engine parts

R4,8


R4,6

6TyresR4,0


partsR3,0

8Automotive tooling

R2,8


R2,6


cranksR1,5

(11) Country Czech Republic R1 239,3 million


R1 079,8


R65,5


R30,5

4Automotive tooling

R24,0

5Radiators / parts

R8,6


R1,5

7Car radios

R0,4

8Brake parts

R0,3

9FiltersR0,2

10SeatsR0,2

(12) Country Mozambique R1 113,9 million

1EnginesR103,2


cranksR97,5

3TyresR93,4

4Batteries

R82,2

5Engine parts

R57,1

6Automotive tooling

R35,1


partsR24,5

8FiltersR23,1

9Brake parts

R13,6

10GasketsR12,4

(13) Country Zimbabwe R1 035,8 million

1Tyres

R192,9

2FiltersR70,5

3Engine parts

R53,9


cranksR49,1


equipmentR27,4


partsR25,6

7Automotive tooling

R25,1

8Batteries

R24,8

9Brake parts

R19,4


R18,2

(14) Country Argentina R984,4 million

1Engine parts

R318,7


R184,6


R46,1


cranksR36,0


R6,1

6Wiring harnesses

R3,4

7FiltersR1,8

8Automotive tooling

R1,4


partsR0,6


R0,2

68EXPORTS

(15) Country Democratic Republic of Congo (DRC) R757,5 million


cranksR68,6


partsR67,8

3Engine parts

R51,8

4Engines

R37,8

5GasketsR23,6

6AxlesR17,3

7TyresR17,2


R13,8

9Automotive tooling

R13,5


equipmentR7,5

(16) Country Belgium R709,2 million

1Radiators / parts

R117,0

2Automotive glass

R104,8


cranksR67,3

4Engine parts

R67,1

5Brake parts

R64,3

6TyresR33,7

7Automotive tooling

R33,7

8FiltersR28,3


R17,1


R13,7

(17) Country Swaziland R603,0 million

1Tyres

R108,7

2Engine parts

R33,5

3Brake parts

R24,5


equipmentR16,5


cranksR15,4


R15,0


R13,9

8FiltersR12,7

9Automotive tooling

R10,2


partsR8,6

(18) Country Korea Republic South R590,8 million


R512,7


R41,5

3Radiators / parts

R16,9

4Automotive tooling

R1,9

5Engine parts

R1,5


partsR0,2

7TyresR0,2

8Gear boxes

R0,1- -

(19) Country Turkey R537,3 million


R459,6

2Radiators / parts

R32,4


R21,7


cranksR2,3

5Springs

R1,9

6Automotive tooling

R1,7


R1,3

8Engine parts

R0,7

9Alarm systems

R0,2

10Gaskets

R0,1

69EXPORTS

(20) Country Lesotho R537,0 million

1TyresR64,4


partsR24,1

3Engine parts

R15,5

4Automotive tooling

R10,2

5Brake parts

R9,2


cranksR9,1

7Alarm systems

R5,8


parts R5,2


equipmentR4,7


R4,2

(21) Country Netherlands R524,9 million


R261,0

2TyresR97,9

3Radiators / parts

R29,8

4Automotive tooling

R23,4


cranksR20,8


equipmentR16,6


parts R7,3

8Engine parts

R5,5

9Air conditioners

R2,7

10Engines

R2,1

(22) Country Canada R437,8 million


R274,3

2Wiring harnesses

R15,4

3Air conditioners

R7,0


cranksR4,0

5Engine parts

R2,9

6Brake parts

R2,8

7Steering wheels / columns / boxes

R2,5


R2,4

9SeatsR1,4

10FiltersR1,3

(23) Country United Arab Emirates (UAE) R424,3 million

1Wiring harnesses

R94,1

2TyresR85,2


R59,4


partsR16,3


equipmentR15,9

6Automotive tooling

R15,3

7Engine parts

R9,8


R4,6

9FiltersR4,0


cranksR2,4

(24) Country Hungary R387,3 million


R323,6


partsR10,1

3AxlesR0,9


partsR0,1


R0,1

70EXPORTS

(25) Country Poland R361,6 million


partsR169,4


R23,1


R15,8

4Automotive glass

R9,5

5FiltersR7,1

6Wiring harnesses

R5,5

7Automotive tooling

R4,5


partsR0,8

9Radiators / parts

R0,2

10Engine parts

R0,1

(26) Country China R301,5 million

1Radiators / parts

R84,7

2Engine parts

R45,1


R26,2

4Automotive tooling

R23,3


R23,3

6TyresR6,6


partsR6,0


cranksR3,6


R2,3


R0,9

(27) Country Angola R287,7 million

1Tyres

R119,2

2Engine parts

R59,0


partsR23,6

4Engines

R12,5

5FiltersR10,7


cranksR9,5

7Air conditioners

R8,6

8Batteries

R8,6

9Automotive tooling

R8,3

10Brake parts

R3,5

(28) Country Australia R266,2 million


R24,4

2Automotive tooling

R17,5


partsR14,8


cranksR13,3

5Springs

R6,1

6FiltersR5,8


partsR5,4

8Brake parts

R4,2


R4,2

10TyresR4,0

(29) Country Mexico R252,1 million

1Radiators / parts

R107,1


R72,7


R12,6

4Automotive tooling

R10,7

5Engines

R10,6


R3,1

7TyresR1,4


cranksR1,3


partsR0,8


R0,4

71EXPORTS

(30) Country France R246,1 million

1Automotive glass

R41,4

2Automotive tooling

R37,7


R15,4

4FiltersR11,0


R9,2


partsR8,6


partsR6,0

8Engine parts

R5,6


equipmentR5,2

10Alarm systems

R4,5

(31) Country Tanzania R236,1 million

1TyresR38,3


partsR17,2

3Engine parts

R16,1


cranksR12,7

5Automotive tooling

R10,5

6Engines

R7,0

7FiltersR3,9


R2,9

9Batteries

R2,0

10Gaskets

R1,9

(32) Country Ghana R213,7 million

1TyresR25,6


R19,2


partsR14,3


cranksR12,9

5FiltersR10,5

6Automotive tooling

R8,1

7Engine parts

R8,0

8Engines

R4,3

9Alarm systems

R3,1


equipmentR2,6

(33) Country Malawi R207,6 million

1TyresR48,2

2Batteries

R12,4

3Engine parts

R11,3


cranksR5,6

5FiltersR5,4


partsR4,5

7Brake parts

R4,4

8Engines

R3,7

9Alarm systems

R3,5


equipmentR2,8

(34) Country Kenya R176,3 million

1TyresR38,4

2Engine parts

R13,6

3Automotive tooling

R11,2

4FiltersR5,3


partsR4,7


cranksR3,6

7Alarm systems

R3,4

8Brake parts

R3,2

9Engines

R2,7


R2,6

72EXPORTS

(35) Country Brazil R140,2 million

1Automotive tooling

R21,0

2Radiators / parts

R20,5


R12,9


R12,2

5AxlesR11,2


partsR7,7


R3,3

8FiltersR2,2

9TyresR2,1


equipmentR1,4

(36) Country Nigeria R123,9 million

1Automotive tooling

R22,0

2Engine parts

R12,5


partsR5,4

4TyresR5,3

5Alarm systems

R4,3

6FiltersR2,8

7Engines

R2,5


cranksR1,6

9Gaskets

R1,0

10Automotive glass

R0,9

(37) Country Italy R122,3 million

1Automotive glass

R25,9


R17,3

3Gaskets

R9,1

4TyresR8,3


R8,2

6Automotive tooling

R6,7

7Engine parts

R4,7


partsR1,7

9Brake parts

R1,4


R0,6

(38) Country Austria R107,4 million

1Alarm systems

R5,6

2Automotive tooling

R0,5


partsR0,5

4Wiring harnesses

R0,3

5Engine parts

R0,2


partsR0,1

7Gear boxes

R0,1- - -

(39) Country Malaysia R100,9 million

1Engines

R44,3

2TyresR10,0

3Engine parts

R6,7

4Automotive tooling

R6,2


partsR2,8


R1,3

7Gear boxes

R1,3


cranksR1,2

9AxlesR0,4

10Steering wheels / columns / boxes

R0,2

73EXPORTS

AUTOMOTIVE COMPONENTS – EXPORTS BY PRODUCT

A diverse range of original equipment components and aftermarket parts are manufactured in South Africa. The bulk of the domestically manufactured automotive components is sold as original equipment components to the OEMs or as replacement parts, but automotive component manufacturers are also active in the export market, selling their products into international OEM supply chains. The South African market is generally not large enough to generate sufficient economies of scale, consequently exporting needs to be viewed as a necessary step towards international competitiveness.

In the context of weak domestic new vehicle sales in South Africa, an increase in the range and volumes of domestically manufactured components is essential for the sustainability and growth of component manufacturing companies in South Africa. The present may be a good time for small businesses to expand their offerings to foreign markets, in order to grow, while diversifying and minimising the risks of a weakening domestic economy. Challenges facing South African component suppliers include low economies of scale, low levels of local content in South African manufactured vehicles, and export readiness, which must be underpinned by the supply chain’s efforts at continuous improvement and maintaining international certified standards.

Many domestic component manufacturing suppliers are already of world class. However, the automotive component sector in South Africa consists of multiple sub-sectors, each with different cost drivers, supply chain challenges and key market requirements. The challenge remains for suppliers to keep up with rapidly progressing global best practices, which are essential for localisation contracts. Strong global linkages, along with supplier development and competitiveness improvements, remain critically important to support the sustainable future development of the South African automotive industry. The only way to address these issues is through the extension of world-class manufacturing standards and improved competitiveness among all suppliers in South Africa.

In this regard, the Automotive Supply Chain Competitiveness Initiative (ASCCI), established in December 2013, has as its ultimate objective to assist in building a successful and sustainable domestic automotive industry by actively developing supply chain competitiveness at the national level. The creation of ASCCI was initiated jointly by the Dti, OEMs (represented by NAAMSA), suppliers (represented by NAACAM), and organised labour (represented by NUMSA) in the industry. ASCCI is an important programme that complements the APDP in supporting this strategic manufacturing sector. Where the APDP is intended to incentivise production and investment in the domestic automotive industry, the purpose of ASCCI is to support the development of a sustainable domestic value chain by upgrading competitiveness and building greater levels of domestic value addition. One main objective is to implement the national strategic imperative of sustained and progressive competitiveness improvement, while other key focus areas of the initiative include improving component supplier operational capabilities, increasing levels of localisation, and achieving increased levels of manufacturing value addition in the country. Transformation has been identified as being of cross-cutting relevance to all focus areas. The initiative is in support of the APDP’s vision to manufacture around one million vehicles per annum by 2020 and should have a positive impact on employment creation, enabling supplier capabilities and an increase in value addition, thus ensuring the long-term sustainability of the South African automotive industry. ASCCI highlights not only the need for focused interventions, but also the value of co-operation between stakeholders in the industry in making these initiatives a success.

74EXPORTS

The following table reveals the automotive component export ranking by product category from 2012 through to 2016. In 2016, automotive component exports, including sales to the BLNS (Botswana, Lesotho, Namibia and Swaziland) countries, increased by 6,8% to R53,04 billion, from R49,64 billion in 2015. South Africa remains a strategic supplier of catalytic converters to the world and by value this component category maintained its dominant export position under the APDP in 2016, as the focus of exporters tend to be on high-value domestically beneficiated, logistics-friendly automotive components. The significant increase in the exports of engines relates to the EA111 engine for the VW Polo and Polo Vivo and the Duratorq TDCi engine for the Ford Ranger, both linked to export programmes, which are manufactured in South Africa, illustrating the country’s manufacturing capabilities.

South Africa remains a strategic supplier of catalytic converters to the world and

by value this component category maintained its

dominant export position under the APDP in 2016,

as the focus of exporters tend to be on high-value domestically

beneficiated, logistics-friendly automotive components.

75EXPORTS

Automotive component export ranking by product category – 2012 to 2016

Component category 2012 2013 2014 2015 2016% of total

export value

Ranking

Total (R million)Including BLNS country data

39 883 42 176 45 682 49 641 53 041

Catalytic converters 16 347 17 641 19 493 20 326 21 892 41,3% 1

Engine parts 2 875 3 189 3 732 3 941 3 901 7,4% 2

Tyres 1 522 1 842 2 206 2 193 2 527 4,8% 3

Engines 559 263 364 1 448 2 110 4,0% 4

Radiators / parts 945 1 117 1 172 1 190 1 378 2,6% 5

Transmission shafts / cranks 771 926 1 102 1 060 982 1,9% 6

Automotive tooling 782 777 936 1 459 861 1,6% 7

Stitched leather seats / parts 1 719 1 530 1 286 993 768 1,4% 8

Gauges / instruments / parts 401 435 640 685 627 1,2% 9

Silencers / exhausts 1 730 1 225 504 535 618 1,2% 10

Filters 353 407 475 460 600 1,1% 11

Shock absorbers / suspension parts 440 474 518 480 560 1,0% 12

Clutches / shaft couplings 225 310 383 430 538 1,0% 13

Automotive glass 230 386 451 389 480 0,9% 14

Road wheels / parts 466 455 367 471 427 0,8% 15

Wiring harnesses 94 118 264 260 415 0,8% 16

Axles 252 335 377 421 362 0,7% 17

Batteries 180 280 383 358 337 0,6% 18

Body parts / panels 146 263 269 301 325 0,6% 19

Brake parts 97 192 225 230 297 0,6% 20

Ignition / starting equipment 109 185 255 257 280 0,5% 21

Lighting equipment / parts 198 248 239 237 263 0,5% 22

Gaskets 100 160 176 192 184 0,3% 23

Gear boxes 100 122 153 145 137 0,3% 24

Alarm systems 62 87 125 102 116 0,2% 25

Air conditioners 42 55 94 102 66 0,1% 26

Springs 33 31 35 28 45 0,1% 27

Steering wheels / columns / boxes 182 210 51 39 43 0,1% 28

Jacks 103 57 39 36 38 0,1% 29

Seats 11 13 21 26 28 - 30

Car radios 47 26 25 24 21 - 31

Seat belts 24 8 7 7 7 - 32

Other parts 5 722 8 809 9 315 10 816 11 808 22,3%Source: AIEC, SARS

The following tables reveal the top five destinations for the automotive product category exports from South Africa from 2012 through to 2016.

76EXPORTS

Catalytic converters (1)Country 2012 2013 2014 2015 2016

Total (R million) 16 347,0 17 640,9 19 492,7 20 325,7 21 891,5

Germany 40% 41% 42% 44% 45%

USA 11% 12% 15% 20% 20%

Spain 6% 7% 6% 9% 9%

UK 8% 9% 9% 9% 7%

Czech Republic 5% 5% 4% 3% 5%

Engine parts (2)Country 2012 2013 2014 2015 2016

Total (R million) 2 875,1 3 188,7 3 732,4 3 941,4 3 901,4

Thailand 13% 15% 13% 21% 23%

Germany 21% 24% 20% 25% 22%

USA 28% 21% 22% 23% 19%

Argentina 4% 6% 5% 6% 8%

Namibia 3% 4% 3% 4% 5%

Tyres (3)Country 2012 2013 2014 2015 2016

Total (R million) 1 521,5 1 842,1 2 205,8 2 193,0 2 526,6

Namibia 10% 11% 10% 12% 13%

Germany 12% 10% 12% 12% 13%

Botswana 10% 11% 11% 12% 10%

Zimbabwe 11% 8% 8% 7% 8%

Zambia 10% 8% 8% 7% 6%

Engines (4)Country 2012 2013 2014 2015 2016

Total (R million) 558,9 262,8 363,7 1 447,9 2 109,8

India - 1% - 60% 67%

Zambia 16% 36% 29% 9% 8%

Mozambique 3% 11% 15% 7% 5%

Germany - 1% - 3% 3%

Botswana 7% 11% 15% 4% 2%

Radiators and parts (5)Country 2012 2013 2014 2015 2016

Total (R million) 945,2 1 116,7 1 172,1 1 190,2 1 377,5

Germany 47% 24% 12% 36% 35%

USA 19% 15% 17% 19% 14%

Spain 12% 11% 10% 11% 11%

Belgium - 6% 9% 8% 8%

Mexico 2% 3% 4% 6% 8%

77EXPORTS

Transmission shafts and cranks (6)Country 2012 2013 2014 2015 2016

Total (R million) 770,7 925,6 1 102,1 1 060,0 981,6

Thailand 9% 10% 8% 12% 11%

Mozambique 4% 5% 8% 7% 10%

Zambia 7% 7% 10% 6% 8%

Botswana 9% 8% 7% 7% 7%

Democratic Republic of Congo 6% 8% 8% 11% 7%

Automotive tooling (7)Country 2012 2013 2014 2015 2016

Total (R million) 782,0 776,8 935,8 1 458,7 861,1

Germany 3% 2% 4% 3% 10%

USA 3% 5% 3% 8% 9%

Namibia 7% 9% 14% 7% 8%

Portugal - - - - 6%

France 1% 1% 1% 1% 4%

Stitched leather seats and parts (8)Country 2012 2013 2014 2015 2016

Total (R million) 1 718,7 1 530,4 1 285,9 992,7 767,5

Germany 74% 68% 59% 59% 59%

Poland 1% 5% 12% 14% 22%

Romania - - 2% 6% 7%

Lesotho - - - 4% 3%

Croatia - - - - 2%

Gauges, instruments and parts (9)Country 2012 2013 2014 2015 2016

Total (R million) 401,4 435,1 640,3 685,3 626,6

Namibia 5% 8% 7% 12% 12%


Zambia 9% 9% 7% 8% 11%

Botswana 5% 6% 5% 4% 8%

UK 7% 6% 9% 5% 6%

Silencers and exhausts (10)Country 2012 2013 2014 2015 2016

Total (R million) 1 729,6 1 225,4 503,8 535,3 617,7

USA 14% 15% 32% 33% 28%

Germany 28% 36% 18% 18% 19%


Spain 1% 1% 2% 4% 8%

Korea Republic South 1% 2% 7% 8% 7%

78EXPORTS

Filters (11)Country 2012 2013 2014 2015 2016

Total (R million) 353,0 407,4 474,8 460,1 599,8

Germany 27% 29% 25% 28% 32%

Zimbabwe 18% 15% 16% 15% 12%

Namibia 2% 6% 8% 8% 10%

Botswana 4% 5% 8% 9% 8%

Zambia 8% 7% 8% 9% 6%

Shock absorbers and suspension parts (12)Country 2012 2013 2014 2015 2016

Total (R million) 439,6 474,1 517,7 480,3 560,2

Germany 83% 81% 75% 67% 75%

USA 5% 1% 8% 12% 9%

Namibia 2% 3% 2% 4% 5%

Zimbabwe 3% 4% 5% 5% 3%

Botswana 4% 5% 4% 3% 3%

Clutches and shaft couplings (13)Country 2012 2013 2014 2015 2016

Total (R million) 224,8 309,5 382,8 429,8 537,5

Germany 56% 49% 46% 47% 48%

United Arab Emirates 3% 4% 6% 3% 11%

USA 6% 6% 7% 5% 6%

Namibia 5% 5% 5% 6% 5%

China 2% 3% 4% 5% 5%

Automotive glass (14)Country 2012 2013 2014 2015 2016

Total (R million) 230,4 386,4 450,6 389,0 479,5

UK 29% 27% 24% 23% 25%

Belgium 27% 28% 19% 20% 22%

France 13% 14% 14% 9% 9%

Namibia 6% 5% 6% 8% 8%

Spain 5% 4% 5% 8% 8%

Road wheels and parts (15)Country 2012 2013 2014 2015 2016

Total (R million) 466,0 454,8 367,1 471,1 427,4

India 1% - 7% 23% 40%

Argentina 7% 16% 22% 17% 11%

Germany 29% 13% 14% 13% 10%

Czech Republic - - - - 7%

Namibia 3% 3% 4% 4% 7%

79EXPORTS

Wiring harnesses (16)Country 2012 2013 2014 2015 2016

Total (R million) 94,0 118,2 264,4 260,2 415,3

Botswana 10% 14% 52% 43% 49%

United Arab Emirates - 1% - 2% 23%

Germany 14% 11% 9% 28% 11%

Canada 3% 1% - 1% 4%

USA 5% 1% 2% 3% 2%

Axles (17)Country 2012 2013 2014 2015 2016

Total (R million) 251,7 334,8 377,3 421,0 361,5

Germany 35% 53% 36% 45% 76%


Zambia 10% 5% 2% 1% 4%

Brazil - - - 3% 3%

Botswana 4% 6% 5% 15% 2%

Batteries (18)Country 2012 2013 2014 2015 2016

Total (R million) 180,0 280,0 383,4 357,9 337,0

Mozambique 38% 30% 25% 23% 24%

Namibia 2% 1% 8% 15% 23%

Zambia 21% 15% 13% 13% 20%

Botswana 6% 11% 9% 9% 13%

Zimbabwe 12% 9% 6% 9% 7%

Body parts and panels (19)Country 2012 2013 2014 2015 2016

Total (R million) 145,8 263,1 269,4 301,3 325,1

Germany 8% 6% 14% 24% 24%

India 20% 30% 25% 24% 21%

Namibia 10% 10% 16% 13% 15%

Botswana 12% 7% 12% 10% 14%

Belgium 3% 5% 4% 4% 5%

Brake parts (20)Country 2012 2013 2014 2015 2016

Total (R million) 97,3 192,0 225,2 229,7 297,1

Belgium 18% 10% 10% 10% 22%

Namibia 9% 11% 12% 13% 14%

Botswana 22% 17% 14% 17% 13%

Swaziland 10% 9% 10% 10% 8%

Zimbabwe 16% 7% 8% 9% 7%

80EXPORTS

Ignition and starting equipment (21)Country 2012 2013 2014 2015 2016

Total (R million) 108,8 184,9 255,2 256,6 279,5

Botswana 9% 16% 16% 19% 18%

Namibia 13% 15% 12% 17% 16%

Zimbabwe 17% 9% 8% 9% 10%

Zambia 13% 5% 11% 7% 7%

Netherlands 9% 5% 3% 3% 6%

Lighting, signalling and wiping equipment (22)Country 2012 2013 2014 2015 2016

Total (R million) 198,4 248,1 239,0 236,9 262,7

Germany 53% 50% 45% 35% 39%

Namibia 2% 1% 6% 11% 13%

Botswana 2% 2% 4% 5% 7%

UK 10% 6% 5% 5% 6%

Zimbabwe 3% 3% 4% 5% 5%

Gaskets (23)Country 2012 2013 2014 2015 2016

Total (R million) 100,2 160,2 176,1 192,0 184,2


Zambia 13% 10% 8% 5% 11%

Namibia 8% 7% 7% 11% 9%

Madagascar - - - 2% 7%

Mozambique 6% 8% 7% 11% 7%

Gear boxes (24)Country 2012 2013 2014 2015 2016

Total (R million) 99,9 121,9 153,4 144,8 136,7

Botswana 19% 13% 21% 12% 32%

USA 41% 25% 32% 41% 20%

Namibia 11% 10% 13% 14% 9%

Mozambique 6% 3% 3% 6% 7%

UK - - 1% 1% 4%

Alarm systems (25)Country 2012 2013 2014 2015 2016

Total (R million) 61,5 86,9 124,5 102,3 116,4

Botswana 9% 9% 13% 11% 16%

Namibia 8% 6% 11% 15% 14%

Mozambique 3% 4% 7% 8% 6%

UK 8% 8% 3% 1% 5%

Lesotho 7% 2% 1% 4% 5%

81EXPORTS

Air conditioners (26)Country 2012 2013 2014 2015 2016

Total (R million) 42,2 55,4 94,2 102,2 65,6

Mozambique 5% 2% 10% 5% 14%

Angola 4% 1% 6% 3% 13%

Canada - - 3% 4% 11%

Zimbabwe 6% 2% 4% 5% 9%

Zambia 9% 7% 4% 5% 9%

Springs (27)Country 2012 2013 2014 2015 2016

Total (R million) 32,9 31,1 35,2 27,6 44,8

Zimbabwe 5% 8% 6% 6% 14%

Australia 3% - 3% 16% 14%

Japan 8% 14% 13% 16% 11%

Botswana 4% 7% 7% 8% 8%

Namibia 8% 13% 8% 8% 6%

Steering wheels, columns and boxes (28)Country 2012 2013 2014 2015 2016

Total (R million) 181,8 210,1 50,5 38,9 42,8

Namibia - 1% 10% 14% 23%

Belgium 4% 12% 12% 17% 16%

Botswana - 1% 6% 10% 7%

Canada 1% - 1% 7% 6%

Zambia 1% 1% 3% 5% 5%

Jacks (29)Country 2012 2013 2014 2015 2016

Total (R million) 103,3 57,2 39,1 35,5 38,0

Mozambique 1% 4% 5% 12% 14%

Zimbabwe 4% 10% 18% 19% 13%

Zambia 4% 9% 22% 12% 9%

Namibia 1% 2% 4% 4% 8%

Germany 5% 5% 1% 6% 8%

Seats (30)Country 2012 2013 2014 2015 2016

Total (R million) 11,4 13,2 21,3 25,6 28,2

Singapore 10% 11% 9% 9% 18%

Botswana 24% 25% 20% 17% 16%

Namibia 12% 12% 9% 13% 15%

Zambia 10% 11% 10% 7% 9%

Sweden - - 1% 4% 6%

82EXPORTS

Car radios (31)Country 2012 2013 2014 2015 2016

Total (R million) 46,7 25,9 25,4 23,5 21,0

Botswana 8% 19% 13% 23% 21%

Zambia 3% 5% 16% 12% 21%

Namibia 13% 29% 21% 28% 20%

Swaziland 3% 6% 6% 5% 8%

Zimbabwe 1% 1% 6% 1% 3%

Seat belts (32)Country 2012 2013 2014 2015 2016

Total (R million) 24,1 7,7 6,8 6,8 7,3

Namibia 3% 13% 14% 28% 27%

Botswana 4% 15% 15% 10% 14%

Uganda - - - 3% 7%

Zambia 2% 4% 8% 7% 7%

Swaziland 2% 3% 6% 6% 7%

83IMPORTS

IMPORTS BY COUNTRY OF ORIGINThe countries of origin for vehicles and automotive components imported into South Africa generally reflect the global linkages with the head offices of parent companies. The notable exception amongst the top 10 countries of origin in 2016 was China, where most of the imports were for aftermarket parts. Growing import competition in the domestic market and that of low-cost products sourced from a global pool remain the order of the day.

Imports of automotive products into South Africa remain a function of the success of the APDP, domestic market demand, and currency movements. Imports of vehicles and original equipment components, to accommodate vehicle production, as well as replacement parts for the growing vehicle parc (also defined as the number of registered vehicles) of 11,96 million vehicles, remain high. Exchange rate weakness in 2016 continued to result in increases in new vehicle prices growing above the CPI index. The rand exchange rate, however, has reacted differently to different countries and this is particularly important with regard to the exchange rates of the source countries for South African imports.

84IMPORTS

The following table reveals the import values and rankings for the 54 countries of origin for vehicles and automotive component imports into South Africa, above the R20 million threshold, for 2015 and 2016.

Import value and ranking by country of origin – 2015 to 2016

Country 2015R million

2015Ranking

2016R million

2016Ranking

Germany 65 210,4 1 69 684,5 1

Japan 22 052,6 2 20 101,0 2

Thailand 13 793,7 3 18 572,7 3

China 12 585,9 4 13 868,2 4

USA 11 835,5 5 11 472,2 5

India 10 790,3 6 9 603,7 6

UK 8 001,4 7 6 567,3 7

Korea Republic South 7 133,8 8 5 742,6 8

Spain 6 010,8 9 5 676,6 9

Brazil 4 725,2 10 4 689,9 10

Italy 3 214,0 11 3 511,8 11

Czech Republic 2 384,3 13 3 260,5 12

Sweden 2 685,7 12 2 474,9 13

France 2 254,0 14 2 466,2 14

Poland 1 898,4 15 2 421,4 15

Romania 1 689,7 16 2 325,9 16

Hungary 1 396,3 21 1 681,2 17

Slovak Republic 1 522,2 18 1 521,4 18

Turkey 1 609,6 17 1 394,6 19

Taiwan 1 414,8 20 1 293,1 20

Netherlands 1 068,7 24 1 213,7 21

Indonesia 1 307,9 23 1 208,6 22

Austria 838,0 27 1 157,3 23

Portugal 838,1 26 1 092,3 24

Mexico 1 503,9 19 1 081,8 25

Philippines 575,4 28 1 019,6 26

26 COUNTRIES ABOVE R1 BILLION

Belgium 915,6 25 991,1 27

Argentina 1 320,7 22 986,3 28

Malaysia 553,6 30 608,6 29

Switzerland 559,1 29 480,1 30

Canada 391,4 31 433,5 31

85IMPORTS

Australia 291,2 32 320,2 32

Luxembourg 177,9 34 227,2 33

Denmark 189,9 33 215,1 34

Hong Kong, China 72,4 42 182,4 35

Slovenia 134,0 37 166,0 36

Finland 169,2 35 159,6 37

Israel 148,2 36 152,7 38

United Arab Emirates 117,2 39 124,2 39

Vietnam Republic 65,9 44 103,6 40

Singapore 74,9 41 87,1 41

Tunisia 70,3 43 73,5 42

Latvia 28,0 49 54,3 43

Bulgaria 18,2 - 51,3 44

Morocco 127,7 38 45,6 45

Ireland 43,4 46 43,0 46

Zambia 44,8 45 40,5 47

Russia 28,4 48 39,5 48

Norway 41,5 47 39,2 49

Angola 7,8 - 26,8 50

New Zealand 17,9 - 23,9 51

Bosnia & Herzegovina 21,2 52 23,0 52

Lithuania 4,7 - 21,7 53

Malta 13,8 - 20,4 54

54 COUNTRIES ABOVE R20 MILLIONSource: AIEC, SARS

86IMPORTS

IMPORTS OF VEHICLESA process of homologation is required before any motor vehicle model can be introduced into the South African market. The National Regulator for Compulsory Specifications (NRCS) homologation is a procedure intended to ensure that all new vehicle models comply with the relevant South African legislation, standards and specifications, as well as codes of practice, before use by the public on public roads. This eliminates the risk of having to withdraw a sub-standard motor vehicle model from the market and it reduces the possibility of resultant legal action against the supplier.

In 2016, total new vehicle imports into South Africa originated from 28 different countries around the world. Imports of light vehicles (passenger cars and light commercial vehicles) continued its downward trend and declined by a further 12,6%, from the 335 413 units in 2015 to 293 261 units in 2016, in line with a third successive year of decline in the domestic new vehicle market. Light vehicle imports comprised 56,4% of the total light vehicle sales in 2016, down from 57,1% in 2015. India was the top country of origin in volume terms for passenger cars and LCVs imported into South Africa in 2016, with 74 145 units, accounting for 25,3 % of the total light vehicles imported. India has traditionally focussed on producing small vehicles, which dominate its large domestic market, and global OEMs have therefore recognised India’s capabilities in this product range by allocating their global production of small vehicles to the country. Most of the vehicles imported from India were therefore entry-level or small vehicles. Volkswagen’s Polo Vivo and General Motor’s Chevrolet Spark, which are manufactured in South Africa, are the only two such vehicles manufactured in the country.

An important aspect of the South African automotive industry is the relationship between imports and domestic production as governed by the automotive policy regime in South Africa. The previous MIDP and current APDP encourage domestic OEMs to manufacture high volumes of selected models linked to export contracts to obtain economies of scale, coupled with low volume models imported to complement domestic market mixes. Every brand has a benchmark product in just about every segment of the market. The domestic model mix is thus arranged to provide the most effective marketing combination of domestically manufactured and imported models to satisfy a consumer-driven market. South African consumers benefit from access to new models, the widest variety of choice in the world and a highly competitive pricing environment.

Although the volume leader in respect of imports was India, the value of Indian imports was less than half of those imported from Germany, which included the premium brands such as Audi, BMW, Mercedes-Benz and Porsche. The following table reveals that in value terms, Germany, followed by India, Japan and South Korea were the top countries of origin for vehicles imported into South Africa in 2016.

South African consumers benefit from access to new models, the widest variety of choice in the

world and a highly competitive pricing environment.

87IMPORTS

Top 10 countries of origin for light vehicles (passenger cars and light commercial vehicles) imported – 2012 to 2016

2012 2013 2014 2015 2016

Total value (R billion) R47,4 R60,6 R53,7 R59,6 R53,6

Country of origin

Germany 24% 26% 30% 27% 30%

India 11% 14% 15% 15% 14%

Japan 12% 10% 10% 11% 12%

Korea Republic South 15% 11% 10% 9% 8%

USA 9% 7% 9% 8% 7%

UK 10% 9% 7% 8% 6%

Spain 2% 5% 4% 6% 5%

Thailand 3% 5% 3% 3% 3%

Romania - - 1% 1% 2%

France 3% 2% 1% 1% 2%

Other 11% 11% 10% 11% 11%

Number of light vehicle imports 360 723 377 885 353 047 335 413 293 261Source: NAAMSA/Lightstone Auto, SARS

Used vehicle imports are not allowed into South Africa. Strict control measures ensure that only a limited number of legal import permits are issued to allow used vehicles into South Africa. In terms of current legislation, used vehicles qualifying for an import permit include those for immigrants, returning South African residents and nationals, specifically adapted vehicles for persons with physical disabilities, vehicles inherited by South African citizens/nationals, vintage and collectors’ passenger vehicles and racing cars. Without a legal import permit, imported used vehicles cannot be registered on the National Transport Information System (NaTIS). The system also combats stolen and non-complying vehicle registrations. All vehicle manufacturing plants in South Africa have been linked to the on-line system to facilitate the collation of data of vehicles produced. Left-hand drive vehicles are also not allowed into the country. More information in respect of used vehicle imports and relevant application forms can be accessed at www.itac.gov.za.

Used vehicle imports are not allowed into South Africa.

88IMPORTS

AUTOMOTIVE PARTS AND COMPONENTS – IMPORTS

Original equipment component imports by the OEMs amounted to R88,0 billion in 2016, up by 10,6% from the R79,6 billion in 2015. The increase is in line with the year-on-year weakening average exchange rate of the rand against all major currencies in 2016. A significant portion of the value of automotive imports comprises original equipment components, which are subsequently exported as part of completely built-up vehicles after local value-adding processes. Capital-intensive complex components such as engines, gearboxes and interior electronic components are mainly imported by the OEMs and much of the remainder is sourced in the domestic market. The development and deepening of the domestic component supplier base under the APDP is an important focal point as it will reduce the risks associated with exchange rate fluctuations and logistics costs. Higher volumes relating to the doubling of vehicle production in the country under the APDP by 2020, and various supplier competitiveness initiatives could improve the viability of further foreign direct investment, export contracts and localisation efforts in future.

The following table reveals that imports of original equipment components in 2016 originated mainly from Germany, Japan and Thailand.

Top 10 countries of origin for original equipment components imported (Chapter 98) – 2012 to 2016

Country of origin 2012 2013 2014 2015 2016

Total (R billion) 51,4 59,0 70,2 79,6 88,0

Germany 35% 35% 38% 47% 46%

Thailand 12% 14% 12% 12% 16%

Japan 25% 22% 20% 15% 11%

Brazil 6% 5% 5% 5% 4%

China 2% 3% 3% 4% 4%

USA 3% 3% 3% 2% 2%

Spain 2% 2% 2% 2% 2%

UK 2% 2% 3% 2% 2%

Sweden 3% 3% 3% 2% 2%


Other 8% 9% 10% 8% 10%Source: AIEC, SARS

The growing variety of models and ever more complex technologies have led to a larger number of players and an increasing number of aftermarket parts in the market. The growth of cheaper products, imported mainly from China, has exacerbated this trend. In 2016, the import of replacement parts increased by a further R4,4 billion, or 7,9%, to R59,75 billion, from the R55,38 billion in 2015. With the exception of automotive tooling, which is used in the production processes of vehicles and automotive components, the replacement parts imports are not linked to value addition under the APDP. There has been an increasing trend in the import of aftermarket replacement parts. The intended doubling of vehicle production in the country by 2020 and projects such as the Automotive Supply Chain Competitiveness Initiative (ASCCI) could change the situation by improving the viability of FDIs and export contracts. The following table

89IMPORTS

reveals the increasing trend in the import of aftermarket parts to complement the parts not manufactured in the domestic market, and more particularly, to service the increasing imported share of the vehicle parc of 11,96 million vehicles in 2016, for which most parts have to be imported.

Top 10 replacement parts imported (R million) – 2012 to 2016Parts category 2012 2013 2014 2015 2016

Tyres 3 610 3 990 4 856 4 771 6 067

Engine parts 3 074 3 546 3 879 4 231 4 412

Automotive tooling 2 798 4 090 4 095 5 084 3 748

Stitched leather seats / parts 1 206 1 543 1 592 1 985 2 461

Engines 1 243 1 361 1 707 2 811 2 297

Wiring harnesses 670 799 1 011 1 870 2 254

Gauges / instruments / parts 1 303 1 607 1 622 1 895 2 106

Transmission shafts / cranks 1 414 1 774 1 913 2 065 1 942

Brake parts 887 1 116 1 212 1 277 1 229

Catalytic converters 628 892 858 1 031 1 212

Other 18 307 22 429 25 302 28 361 32 019

Total 35 140 43 147 48 047 55 381 59 747

Source: AIEC, SARS

The following table reveals that the countries of origin for the aftermarket parts imported, with the exception of China, were aligned with the main countries of origin for new passenger cars and commercial vehicles. Imports from the traditional markets such as Japan, the US and the UK have declined over recent years, while imports from China have increased, indicating the cost competitiveness of this increasingly dominant automotive force.

Top 10 countries of origin for replacement parts imported – 2012 to 2016Country of origin 2012 2013 2014 2015 2016

Germany 20,4% 19,9% 19,3% 18,8% 20,0%

China 15,9% 16,0% 16,1% 16,8% 16,8%

USA 10,2% 9,4% 9,6% 9,4% 9,5%

Japan 7,9% 7,1% 6,6% 7,3% 5,9%

Thailand 4,6% 5,0% 4,5% 4,7% 4,8%

Italy 3,9% 4,0% 3,8% 3,2% 3,2%

UK 4,6% 5,3% 4,1% 3,6% 3,1%

Czech Republic 1,8% 1,9% 2,2% 2,4% 2,6%

India 2,2% 2,2% 2,0% 2,3% 2,2%

Spain 2,3% 2,0% 2,5% 2,0% 2,2%

Other 26,2% 27,2% 29,3% 29,5% 29,7%

Source: AIEC, SARS

90

AUTOMOTIVE INDUSTRY TRADE BALANCE

As the leading manufacturing sector in South Africa’s economy, the automotive industry’s export value under the APDP in 2016 amounted to R171,1 billion, which comprised a significant 15,6% (14,6% in 2015) of the total South African exports of R1 099,9 billion, while the industry’s imports of R147,9 billion under the APDP comprised 13,5 % (13,4% in 2015) of the total South African imports of R1 098,9 billion.

Automotive exports surged to a new record of R171,1 billion, or an improvement of 12,9%, compared to the R151,5 billion total export value in 2015. Record vehicle exports of 344 859 units in 2016, which exceeded the previous record of 333 804 units set in 2015, contributed to the industry’s export performance. The more subdued year-on-year rise of 1,2% in imports, amounting to R147,9 billion, could be attributed to a decline in domestic new vehicle sales in 2016 for the third successive year.

Following a sharp depreciation, the rand exchange rate started to strengthen against major currencies towards the middle of 2016. However, the annual averages of the rand versus those of the major trading partners were still significantly down on a year-on-year basis in 2016. At a sectoral level and at an individual company level, depending on the particular firm’s exposure to imports and exports and the firm’s balance of trade, the impact of exchange rate fluctuations may vary.

The South African vehicle manufacturing industry accounted for only 0,63% of global vehicle production in 2016, and therefore the industry remains reliant on global design, technologically sophisticated plant and machinery, and imported high-value components. This has contributed to the outflow of foreign exchange over the past two decades. To address this issue, one of the APDP’s cornerstones is to encourage increased local content in South African-built vehicles, and to reduce the reliance on imported components. The following table reveals that the trade surplus under the APDP measurement expanded to R23,2 in 2016 compared to the R5,3 billion in 2015. In particular, record vehicle exports and a declining domestic market have contributed to a reverse in the trade deficit trend. Vehicle and automotive component exports to the EU, by far the domestic automotive industry’s main export region, increased from R67,1 billion in 2015 to R86,0 billion in 2016. Africa provided by far the biggest trade surplus, more than any other global region with which South Africa conducts automotive business, followed by NAFTA and the EU. Elsewhere the country’s automotive trade was in deficit in 2016.

Africa provided by far the biggest trade surplus, more than any other

global region with which South Africa conducts automotive business,

followed by NAFTA and the EU.

91

APDP-related trade balance for the automotive industry – 2013 to 2016Year Imports into SA

(R billion)Exports from SA

(R billion)Trade surplus/(deficit)

(R billion)

2013 126,7 102,7 (24,0)

2014 131,5 115,7 (15,8)

2015 146,2 151,5 5,3

2016 147,9 171,1 23,2

EU 82,3 86,0 3,7

NAFTA 6,6 24,4 17,8

Africa (incl. SADC) 2,6 31,3 28,7

Mercosur 4,9 1,8 (3,1)

Other regions 51,5 27,6 (23,9)

2016 147,9 171,1 23,2

Vehicles 56,2 118,1 61,9

Automotive components(excluding aftermarket parts)

91,7 53,0 (38,7)

Source: AIEC,SARSIncluding BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

Under the APDP, as was the case under the MIDP, the level of imports remains a function of the success of the programme, as the benefits can only be used to rebate the import duties on vehicles and eligible automotive components that are imported. A key strategy of the OEMs operating in South Africa is to expand market share through a combination of domestic production of one or two relatively high-volume models for the domestic and export markets, and to import models not manufactured in the country to complement their domestic model mixes.

It should be noted that under the APDP, the basis for calculating the duty-free import credits is based on value-added through the supply chain in the automotive manufacturing industry. There are certain eligibility requirements under the programme, to ensure that the beneficiaries are companies producing substantial quantities of components for vehicle manufacturing, and to exclude accessories. Component manufacturers have to supply at least 25% of their total turnover, or R10 million annually, as part of an OEM supply chain domestically and/or internationally to comply under the APDP. In this regard, with the exception of automotive tooling, which is used in the production processes of vehicles and automotive components, the imported replacement parts are not linked to value addition in the country under the APDP, and they are therefore not included in the automotive trade balance which is used to monitor the progress of the APDP. When all automotive products, including vehicles, OE components and aftermarket parts are included, the industry as a whole still reflects a trade deficit. At R32,9 billion in 2016, however, this figure was the lowest deficit since 2012 (refer to the memo item and following table).

Memo item:For the purposes of comparison of the 2013, 2014, 2015 and 2016 trade balance data under the APDP, based on a holistic view of total automotive exports and imports (including vehicles, OE components and aftermarket parts), total automotive imports were R204,0 billion in 2016, up R7,3 billion, or 3,7%, compared to R196,7 billion in 2015. The imported replacement parts, not linked to value addition in the country under the APDP, with the exception of automotive tooling, amounted to R59,7 billion in 2016, reflecting an increase of 7,8% compared to the R55,4 billion imported in 2015. The trade deficit narrowed substantially from its peak in 2013, and in 2016 amounted to R32,9 billion, compared to the R45,2 billion in 2015, a significant reduction in real terms over recent years.

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Automotive industry trade balance, including all automotive products – 2012 to 2016

Year Imports into SA(R billion)

Exports from SA(R billion)

Trade surplus/(deficit)(R billion)

2012* 137,2 94,9 (42,3)

2013 166,5 102,7 (63,8)

2014 177,9 115,7 (62,2)

2015 196,7 151,5 (45,2)

2016 204,0 171,1 (32,9)

Vehicles 56,2 118,1 61,9

Automotive components(including aftermarket parts)

147,8 53,0 (94,8)

Source: AIEC, SARS*MIDP calculationRevised retrospective from 2012 to include BLNS (Botswana, Lesotho, Namibia and Swaziland) country trade data

New vehicle and automotive component export growth in 2017 will remain a function of the direction and performance of global markets, domestic OEMs’ export programmes, and movements in the rand exchange rate.

New vehicle and automotive component export growth in 2017 will remain a function

of the direction and performance of global markets, domestic OEMs’ export programmes,

and movements in the rand exchange rate.

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MAIN AUTOMOTIVE TRADING PARTNERSThe South African automotive industry’s biggest single trading partner in 2016 was Germany – home to BMW, Volkswagen and Mercedes-Benz. The total automotive trade between the two countries notched an impressive R116,5 billion, but, of that amount, R69,7 billion, almost two thirds of the total, accounted for imports. With the exception of the US, the UK and Belgium, South Africa’s relationship with other automotive trading partners in the top 10 was equally imbalanced.

South Africa’s main automotive trading partners (exports and imports combined) for 2016 reflected the country’s global linkages with the OEMs’ parent companies in Germany, the US and Japan. The following tables reveal details and rankings of the South African automotive industry’s top 10 automotive trading partners in 2016, and also reflect the top 10 products exported and imported, where applicable. Germany remained the domestic automotive industry’s main trading partner over the past two decades, while Belgium replaced Brazil in the industry’s top 10 trading partners during 2016.

1. Germany (Total trade R116 453,3 million) – 2016

Main products Exports from SAR46 768,8 million Main products Imports into SA

R69 684,5 million

Light vehicles 31 860,3 Original equipment components 40 706,8

Catalytic converters 9 810,5 Light vehicles 16 007,4

Engine parts 839,3 MCV / HCV vehicles 1 040,0

Radiators / parts 478,2 Automotive tooling 779,4

Stitched leather seats / parts 450,1 Engine parts 725,8

Shock absorbers / suspension parts 418,1 Engines 634,6

Tyres 333,4 Catalytic converters 623,3

Axles 273,0 Tyres 608,9

Clutches / shaft couplings 256,4 Steering wheels / columns / boxes 599,3

Filters 189,1 Transmission shafts / cranks 401,5

Other 1 860,4 Other 7 557,5

2. United States of America (USA) (Total trade R34 074,6 million) – 2016


R11 472,2 million

Light vehicles 16 324,1 Light vehicles 3 915,4

Catalytic converters 4 291,9 Original equipment components 1 848,6

Engine parts 744,3 Engine parts 679,1

Radiators / parts 199,3 Engines 542,3

Silencers / exhausts 173,9 Axles 346,9

Tyres 145,6 Tyres 345,4

Automotive tooling 80,4 Transmission shafts / cranks 336,0

Shock absorbers / suspension parts 52,4 Gauges / instruments / parts 296,0

Transmission shafts / cranks 36,0 Automotive tooling 237,9

Clutches / shaft couplings 32,3 Catalytic converters 85,6

Other 522,2 Other 2 839,0

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3. Japan (Total trade R27 393,3 million) – 2016


R20 101,0 million

Light vehicles 5 791,0 Original equipment components 9 847,7

Catalytic converters 99,4 Light vehicles 6 615,6

Brake parts 5,8 Tyres 564,4

Springs 5,0 Engine parts 312,4

Engine parts 4,8 Automotive tooling 206,5

Silencers / exhausts 4,6 Ignition / starting equipment 179,2

Tyres 4,0 Transmission shafts / cranks 136,0

Stitched leather seats / parts 3,0 Axles 122,2

Automotive tooling 2,8 Brake parts 120,4

Clutches / shaft couplings 2,6 MCV / HCV vehicles 118,6

Other 1 369,3 Other 1 878,0

4. Thailand (Total trade R20 702,1 million) – 2016


R18 572,7 million

Engine parts 912,0 Original equipment components 14 347,8

Catalytic converters 640,2 Light vehicles 1 354,1

Transmission shafts / cranks 109,4 Tyres 417,3

Gauges / instruments / parts 4,6 Stitched leather seats / parts 310,9

Silencers / exhausts 4,2 Wiring harnesses 260,4

Tyres 3,2 Filters 149,2

Jacks 2,5 Engine parts 105,8

Brake parts 1,4 Car radios 93,5

Automotive tooling 1,1 Axles 71,9

Gaskets 0,8 Radiators / parts 67,0


5. United Kingdom (UK) (Total trade R15 556,0 million) – 2016


R6 567,3 million



Automotive glass 119,9 Engines 277,3

Engine parts 47,3 Engine parts 185,2

Gauges / instruments / parts 37,2 Gauges / instruments / parts 171,9

Tyres 35,9 Catalytic converters 123,7

Filters 24,1 Alarm systems 93,2

Road wheels / parts 17,9 Automotive tooling 89,2

Automotive tooling 17,7 Transmission shafts / cranks 72,4

Lighting equipment / parts 16,9 Tyres 42,4

Other 420,7 Other 820,2

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6. Belgium (Total trade R15 289,6 million) – 2016


R991,1 million

Light vehicles 13 589,3 Light vehicles 480,5

Radiators / parts 117,0 MCV / HCV vehicles 120,8

Automotive glass 104,8 Automotive tooling 43,6

Transmission shafts / cranks 67,3 Engine parts 18,6

Engine parts 67,1 Transmission shafts / cranks 15,0

Brake parts 64,3 Original equipment components 14,5

Tyres 33,7 Gauges / instruments / parts 13,6

Automotive tooling 33,7 Lighting equipment / parts 12,6

Filters 28,3 Automotive glass 7,5

Body parts / panels 17,1 Radiators / parts 4,5


7. China (Total trade R14 178,8 million) – 2016

Main products Exports from SAR310,6 million Main products Imports into SA

R13 868,2 million

Radiators / parts 84,7 Original equipment components 3 791,2

Engine parts 45,1 Tyres 1 926,5

Clutches / shaft couplings 26,2 Automotive tooling 761,7

Automotive tooling 23,3 Engine parts 714,3

Silencers / exhausts 23,3 Stitched leather seats / parts 443,6

Light vehicles 9,1 Road wheels / parts 291,4


Gauges / instruments / parts 6,0 Brake parts 253,6

Transmission shafts / cranks 3,6 Radiators / parts 244,3

Catalytic converters 2,3 Ignition / starting equipment 209,7


8. India (Total trade R11 592,5 million) – 2016


R9 603,7 million

Engines 1 411,2 Light vehicles 7 272,5

Catalytic converters 222,8 Original equipment components 775,5

Road wheels / parts 170,3 MCV / HCV vehicles 227,0

Body parts / panels 66,8 Gauges / instruments / parts 141,0

Radiators / parts 21,1 Engine parts 107,0

Automotive tooling 11,2 Automotive tooling 88,7

Transmission shafts / cranks 9,3 Engines 82,8

Clutches / shaft couplings 5,8 Tyres 79,9


Engine parts 1,3 Ignition / starting equipment 40,2


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9. Spain (Total trade R11 241,8 million) – 2016


R5 676,6 million



Radiators / parts 157,8 Tyres 288,8

Silencers / exhausts 48,7 MCV / HCV vehicles 181,1

Automotive glass 40,3 Automotive tooling 125,4

Tyres 32,7 Axles 56,0

Road wheels / parts 21,6 Engine parts 51,9

Engine parts 6,7 Lighting equipment / parts 50,9

Lighting equipment / parts 3,9 Brake parts 48,4

Gear boxes 3,0 Transmission shafts / cranks 28,5


10. Korea Republic South (Total trade R8 842,2 million) – 2016


R5 742,6 million


Catalytic converters 512,7 Original equipment components 361,2

Silencers / exhausts 41,5 Tyres 160,0

Radiators / parts 16,9 Automotive tooling 83,1

Automotive tooling 1,9 Batteries 80,0

Engine parts 1,5 Filters 72,2

Tyres 0,2 Clutches / shaft couplings 53,0

Gauges / instruments / parts 0,2 Engine parts 43,2

Gear boxes 0,1 Brake parts 38,1

Other 15,8 Engines 36,2

Other 683,4

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IMPERATIVES TO SUSTAIN AND GROW THE SOUTH AFRICAN AUTOMOTIVE

INDUSTRY The automotive industry as a whole is operating within an ever-changing, highly competitive and challenging environment and has to adapt and grow accordingly. For the South African automotive industry to flourish until 2020 and beyond, it is vital that all the players move with the times in terms of innovation, new thinking, finding creative solutions and different ways of doing things. South Africa is not a large new vehicle market or located close to a large market. It is therefore important for the long-term sustainable viability of the industry to increase production volumes via exports and to create depth in the upstream component supplier sector.

The automotive policy regimes in South Africa have been the foundation for the industry’s growth and development over the past two decades. In sectors, such as the automotive sector, where industrial policy was well designed and the subject of sustained engagement with key stakeholders in the private sector, significant progress and positive economic outcomes have been achieved. Policy certainty and stability have contributed to a number of noteworthy achievements by the vehicle manufacturing and associated industries, including higher levels of vehicle production, increased vehicle exports, substantial investments by multi-national automotive companies in manufacturing facilities in South Africa, significant model rationalisation and employment stability.

For countries wanting to establish manufacturing plants or expand their existing plants, South Africa, as the most sophisticated industrial manufacturing base on the African continent, remains an attractive destination of choice. The country’s attractiveness as a sub-contracting hub for automotive manufacturing includes:

• Long-termpolicycertaintyandpredictability;• Internationallycompetitiveincentivesandsupportmeasures;• FavourabletradearrangementswiththeEU,EFTA,theUSandSADC;• World-classlogisticssuitableforimportandexportoperations;• Abundantandcost-competitivelabourpool;• First-worldbusinesssector;• High-qualityofficeandbusinessparkfacilities;• Qualityprivateschools,sophisticatedcosmopolitancitiesandacknowledgedqualityoflife;• Europeantimezone;• Ranked number 1 in the cost-of-living index by the International Institute for Management

Development (IMD) World Competitiveness Center 2016 competitiveness ranking and number 2 in effective personal income-tax rate. South Africa improved its overall global ranking to 52nd in 2016 and was the only country in Africa rated against all other developing and developed countries. The key factors the business community perceived as attractive in South Africa were the effective legal environment, quality of corporate governance, cost competitiveness, reliable infrastructure and access to financing.

South Africa’s automotive industry is a success story in an embattled domestic manufacturing sector. The manufacturing sector, with the highest growth and employment multipliers of all the economic sectors,

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has strong positive spill-over effects on the primary and services sectors and is critical to sustainable growth in the country. As a key partner in the development and growth of the domestic automotive industry, as the country’s largest manufacturing sector, government’s commitment to and confidence in the future of the industry is again illustrated in its assurance that policy support will continue beyond 2020 in providing further certainty via its South African Automotive Masterplan 2021-2035. Policy stability is essential to attract new investments and is a motivating factor for OEMs to remain in the country and make long-term investment decisions. By building on its strengths and minimising the threats to the industry, the South African automotive industry can improve its international competitiveness and, as a result, create more employment. However, it is vital that South Africa continues to follow a collaborative approach with OEMs, suppliers, unions and government in order to achieve real efficiency improvements in the industry.

However, it is vital that South Africa continues to

follow a collaborative approach with OEMs, suppliers, unions and government in order to

achieve real efficiency improvements in the industry.

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KEY MOTOR INDUSTRY CONTACT DETAILS

Automotive Industry Export Council (AIEC)P O Box 40611Arcadia0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.aiec.co.za

Department of Trade & Industry (the dti)Private Bag X84Pretoria0001Telephone: +27 12 394 9500 (International)Telephone: 0861 843 384 (Customer Care Centre)Website: www.thedti.gov.za

National Association of Automotive Component & Allied Manufacturers (NAACAM)P O Box 9558Edenglen1613Telephone: +27 11 392 4060Telefax: +27 86 659 0494Website: www.naacam.co.za

National Association of Automobile Manufacturers of South Africa (NAAMSA)P O Box 40611Arcadia0007Telephone: +27 12 807 0086/0152Telefax: +27 12 807 0481Website: www.naamsa.co.za

National Union of Metalworkers of South Africa (NUMSA)P O Box 260483Excom2023Telephone: +27 11 689 1700/1/2/3Telefax: +27 11 833 6330/6408

Retail Motor Industry Organisation (RMI)P O Box 2940Randburg2125Telephone: +27 11 789-2542/886-6300Telefax: +27 11 789-4525Website: www.rmi.org.za

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Standard disclaimer

The trade data is based on eligible APDP products. The AIEC cannot vouch for the accuracy of the information obtained from the source. Due to certain limitations, Customs and Excise statistics cannot always distinguish between automotive components eligible in terms of the APDP and non-APDP components. The main purpose of this trade data is to discern trends in exports and export destinations, as well as imports and countries of origin.

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