JSE-listed automotive components and energy storage manufacturer Metair Investments anticipates that its current turnover will be boosted 140% to 160% by significant contracts it has secured from the Ford Motor Company of South Africa for planned new vehicle models.
The contracts will generate an estimated R25 billion to R28 billion of turnover for Metair over the model life of the vehicle from mid-2022, create about 3 300 new jobs, and lead to capital investments of R900 million by Metair – the group’s largest to date for a single customer and which includes major investments in greenfield facilities.
Metair CEO Theo Loock said on Monday the actual impact of the new contracts on the company’s turnover will depend on the final volumes it will be required to supply to Ford and the launch date of the new vehicle by Ford.
Loock said the benefits to Metair of securing the contract from Ford will start to flow through during the company’s 2022 financial year but for the full year from its 2023 financial year.
Metair has secured multiple contracts to support Ford ahead of new vehicle launches aimed at the local and exports markets. The launches form part of Ford’s investment and production expansion programme to meet the demands of a growing export-driven business in South Africa.
Shares in Metair rose 4.9% on Monday to close at R18.
Loock said the new contracts will elevate Metair’s relationship with Ford to a similar level to its long-standing supplier relationship with Toyota South Africa Motors.
He said Metair was previously a supplier of lighting, suspension and batteries to Ford, but the new contract includes the full range of Metair’s portfolio of products – including wire harnesses, plastics and heat exchange products.
“This is the importance of it because we get a second customer of similar strength and stature as our 40-year relationship with Toyota. It’s some good news in a difficult environment.”
Loock said Metair started working on securing business from Ford for its full suite of products about 15 years ago.
“That is how long it takes to get these things,” he said.
Loock said there was no hesitancy from Ford in finalising the contract, considering the possible impact of the Covid-19 pandemic on new vehicle demand, because it is such an important model for the multinational carmaker.
Move to greener technologies and lighter vehicles
He added that the contracts also address possible market shifts to greener technologies and lighter vehicles, and that 95% of the business secured from Ford is incremental – and business Metair never had before.
The capital investment Metair will be making to service the Ford contracts includes about R230 million in a new property and a 30 000m2 wiring harness factory in Stanger, KwaZulu-Natal.
Metair will also be investing:
- About R120 million in Lumotech, its lighting business in Uitenhage near Volkswagen South Africa’s manufacturing plant;
- More than R100 million in a new plastics plant at the Tshwane Automotive Special Economic Zone (SEZ) adjacent to Ford’s plant in Silverton in Pretoria;
- More than R100 million in Metair’s wire drawing business that produces wire for its wire harnesses; and
- A small investment in mostly handling equipment in a just-in-time Hesto Harnesses logistics and supply warehouse, which will also be located in the Tshwane Automotive SEZ.
Loock said the bulk of the new jobs created will be at its wiring harness factory in Stanger and that all investments are expected to deliver returns in line with Metair’s targets over the life of the contracts.
He added that Metair will continuously review its financial commitments in line with the operating environment to ensure adequate capital management and liquidity throughout the project.
Loock said construction of the new facilities will take a year to complete, and it will take another year to install all the equipment and commission the new factories.
He said Metair’s automotive components vertical is entering an important investment phase to support the original equipment manufacturers (OEMs) that will drive the group’s future growth and support South Africa.
The ‘shift towards localisation’
“We believe that the investments we are making now will strengthen Metair’s position, as the shift towards localisation accelerates in light of the inevitable structural global trade disruptions resulting from Covid-19,” he said.
Renai Moothilal, executive director at the National Association of Automotive Component & Allied Manufacturers (Naacam), said the outlook for the South African automotive industry remains positive, with OEMs and component manufacturers investing significant capital to expand their facilities for model changes and additional models.
“This major commitment by both Ford and Metair towards the South African automotive manufacturing sector is a welcome development which is totally aligned with SA Automotive Masterplan 2035, and its emphasis on increased localisation and market growth while participating in this global industry,” he said.
In March this year shortly after the Covid-19 lockdown had been implemented, Moothilal expressed concern that the pandemic would negatively impact one of the major aims of the new automotive masterplan, which is to deepen and broaden the automotive components sector.
The Automotive Masterplan is effective from 2021.
Minister of Trade, Industry and Competition Ebrahim Patel welcomed the commitments made by Ford and Metair at an important time given the impact of Covid-19 on the South African economy.
“This material commitment by both Ford and Metair is reflective of the long-term confidence in South Africa as a key destination in the global automotive value chain,” he said.
“Metair is a great example of a local company that has made huge strides in the international automotive sector and we will continue to support industries that drive technology and skills transfer but also create employment opportunities over the long term.”