South Africa car manufacturing sector in 2017 rises

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A strengthened rand, recovering somewhat against both the dollar and the euro in 2016, has helped in some way to contain new vehicle prices.

This has seen South African car sales experiencing a 3.7% year-on-year increase in January.

In addition to these economic contributors, 2016 saw the local automotive sector attract major investments from Ford and Chinese state-owned car manufacturer, Beijing Automotive International Corp (BAIC).

Dave Everett, Safmarine Global Key Account Owner, a member of Maersk Group says that all of these factors bode well for South Africa’s automotive industry the country’s largest manufacturing sector in 2017.

“Some car manufacturers in South Africa export up to 70% of their vehicles and components, mainly to Europe and other parts of Africa, which helps to maintain production growth. Based on January’s figures and current economic conditions, exports, particularly to Europe, can be expected to remain strong, and will likely take up any excess volume there may be from production in SA.”

The impact that the car manufacturing sector has on import container trade is fairly direct, explains Everett.

“Original Equipment Manufacturer (OEM) volumes, made up of car parts and components, provide regular and largely predictable container flows based on required weekly volumes from suppliers to OEM assembly plants.”

Everett goes on to say that the 11 billion-rand BAIC plant planned for Coega, Eastern Cape, will further boost South Africa’s container trade activity.

“This is the biggest investment in a vehicle-production facility that the country has seen in some time, and is essentially a commitment from yet another OEM to build vehicles in South Africa. While the majority of supply and shipments will most likely be controlled from China, BAIC will benefit from government’s Automotive Production and Development Programme (APDP) for manufacturers in South Africa.”

“Container volumes will be driven by OEM’s competitiveness to build vehicles in South Africa. Every manufacturer is driven to build vehicles at a competitive cost relative to their other plants around the world. If benefits of assembly in South Africa, such as quality, continue outweigh cost and supply chain constraints, then OEM volumes are likely to grow. Each OEM will continue to balance these factors for the models and volumes they produce here,” explains Everett.

Everett concludes that the outlook for South Africa’s car manufacturing sector in 2017 is definitely positive, but the long-term future of the industry is not as certain.

“For the short to medium term, we perceive the current OEMs are committed to South Africa and continue to invest to greater or lesser degree in assembly here.”

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