The National Association of Automobile Manufacturers of South Africa (Naamsa) is anticipating another very good year of capital investment commitments by automotive original equipment manufacturers (OEMs) in South Africa in 2021.
Naamsa CEO Mikel Mabasa said on Tuesday it is anticipating that a number of automotive OEMs will definitely be considering some capital investment projects in South Africa this year, including a Chinese heavy commercial vehicle manufacturer.
“I don’t want to steal their thunder but there is a major Chinese company, which is going to produce and manufacture heavy commercial vehicles in the country this year.
“We are hoping that those announcements will be finalised and when they are ready, we can allow them to make those announcements,” he said.
Mabasa’s comments follow Naamsa this week releasing its quarterly review of business conditions in the new vehicle manufacturing industry, which revealed that total capital expenditure by the major vehicle manufacturers reached its highest level on record at R9.2 billion in 2020.
“The continued high levels of capital expenditure are due to investment projects by manufacturers in terms of the Automotive Production and Development Programme [APDP], which are normally spread over multiple years and linked to higher levels of production for export markets,” he said.
Mabasa said it is difficult to speculate how 2021 will pan out in terms of capital investments by automotive OEMs and how the total investment by the industry this year will compare with the record investment year in 2020.
However, he said the industry had started 2021 “very powerfully” from an investment perspective, particularly in view of the very difficult economic conditions and climate South Africa finds itself in.
This is a reference to the announcement earlier this month that R20.13 billion is to be invested in South Africa by the Ford Motor Company and its suppliers for the production of the new Ranger and a bakkie for Volkswagen at Ford’s assembly plant in Silverton in Pretoria and the adjacent Tshwane Automotive Special Economic Zone (SEZ) and Toyota South Africa Motors (TSAM) announcing the investment of almost R3 billion in South Africa for the production of the new Corolla Cross sport utility vehicle (SUV) at its manufacturing plant in Prospecton in Durban.
Of the R20.13 billion to be invested by Ford and its suppliers:
- $686 million or R10.3 billion provides for extensive upgrades to the assembly plant in Silverton, including increases in the plant’s installed capacity from about 168 000 to 200 000 vehicles a year and to drive significant improvements in production efficiency and vehicle quality.
- A further $365 million or R5.5 billion investment by Ford in tooling at its major supply factories.
- Investments of R4.33 billion by 12 automotive component suppliers, including existing and new suppliers in the country dedicated to producing components for the new Ranger and Volkswagen Amarok product, in facilities and to set up their businesses adjacent to the Silverton plant.
The TSAM investment is a significant milestone for the company because it will be the first time its plant manufactures a hybrid drivetrain vehicle.
Other investment activity
It was also reported that Minister of International Relations and Cooperation Dr Naledi Pandor said during the State of the Nation Address debate in Parliament last week that Isuzu, Tata Motors, Mahindra Motherson Sumi and Toyota have expanded their investments in South Africa.
Mabasa said on Tuesday there are more OEMs, other than those mentioned in Parliament, that are definitely considering some capital investment projects this year.
“South Africa is still in recession currently and the fact that all these automakers compellingly presented to South Africa very serious investments, is confirmation that this year will see a renewed investment climate from the automotive industry,” he said.
Naamsa’s quarterly business review said annual capital investment by independent vehicle importers at their head offices and dedicated dealerships increased to R52.4 million in 2020 from R11.8 million in 2019.
The review said the number of people employed in the vehicle manufacturing industry increased by 218 jobs to 30 162 jobs in the last week of December 2020 from the 29 944 industry headcount at the end of September 2020.
Total employment by independent vehicle importers increased by 163 jobs to 5 579 jobs at end-December 2020 from a headcount of 5 416 at end-September 2020.
Turning to the Naamsa CEO’s Confidence Index, the review said despite a much improved performance during the fourth quarter of 2020, the CEOs generally regarded the prevailing domestic automotive industry business conditions during the fourth quarter as still unsatisfactory compared to the corresponding quarter of 2019.
The new vehicle market in South Africa recorded its lowest aggregate sales total in 18 years in 2020 because of the impact of the Covid-19 lockdown.
However, the review said the sentiment expressed by the Naamsa CEOs related to automotive business conditions over the next six months “is one of cautious optimism”.
“A rebound in the domestic as well as global GDP growth rates is generally anticipated for 2021, which bodes well for improved domestic new vehicle sales and production, from a very low-based Covid-19-affected 2020.
“In general, the CEOs across all vehicle manufacturing segments, as well as the CEOs of the independent vehicle importers, are fairly positive that domestic new vehicle market performance indicators and market conditions are likely to improve over the next six months,” it said.