Forecast for vehicles sales revised down

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They have also reiterated their support for government automotive policy, insisting it is the best bet for local market development and attracting foreign investment.

They were responding to comments demanding a change of direction for the Department of Trade and Industry's 2013-20 automotive production and development programme.

In its latest quarterly review, published on Friday, the National Association of Automobile Manufacturers (Naamsa) downgraded its new-vehicle market forecast for this year to 659,000 from 671,000. This is still more than the 644,504 vehicles sold last year. It lowered its prediction for next year, from 717,000 to 705,000.

Sales dropped 0.8% in the first four months of this year compared to last year. However, the Naamsa review suggested the market could rebound slightly in the case of several "ifs": if economic growth accelerated, interest rates and credit ratings remained stable, and consumer price inflation moderated. But it said that uncertainty about electricity supply could have an undermining effect.

Export projections, however, were unchanged, with last year's 276,873 expected to increase to 320,500 this year and 351,700 next year. This was the main reason for a year-on-year increase of 1.8% in vehicle assembly employment at the end of March, and a rise in the use of available production capacity. Aggregate industry employment levels increased by 542 jobs to reach 31,008 positions at the end of March, Naamsa said. This followed strong gains recorded during the last quarter of last year.

In a separate statement, Naamsa president Johan van Zyl described criticism of the automotive production and development programme as lacking perspective. The Department of Trade and Industry is due soon to announce the results of an initial review of the programme, and to suggest policy direction beyond 2020.

Most people expect the department to recommend only minor changes but Business Day reported recently that Ken Lello, chief operating officer of the Metair Investments components group, said the programme needed major revision. It was in danger of missing all its major aims.

Production growth was well behind target, most cars sold in SA were imported and the industry's international trade deficit was still stubbornly high, he said.

Lello, who represents the National Association of Automotive Components and Allied Manufacturers (Naacam) on the government's automotive production and development programme advisory committee, said motor companies had reduced manufacturing complexity by reducing the number of vehicle platforms built in SA, only to lift it again by building more variants. The programme had failed to overcome the local industry's structural lack of competitiveness. However, Dr van Zyl, who is also president of Toyota SA, said it offered a clear, "albeit ambitious" vision for the industry. It had attracted investment by multinational vehicle and components companies, model rationalisation had taken place, employment had "held up well" and the trade deficit had started to decline. He said the programme was the result of extensive discussion with industry stakeholders such as Naacam, "with their full buy-in".

The only way to address the industry's challenges, he said, was "through achievement of worldclass manufacturing standards and improved supplier competitiveness and not through additional protection as propagated by Naacam".

The programme aims to have the South African motor industry building 1.2-million vehicles a year by 2020. Though that target is not written into the programme, it was set by former trade and industry minister Mandisi Mpahlwa.

However, earlier this year, 14 months into the government's 2013-20 leg of the programme, industry officials said production was already 30% off the pace. The programme offers duty rebates to vehicle manufacturers building 50,000 vehicles annually, and also returns up to 30% of investments by vehicle and components firms.

Source: Business Day via I-Net Bridge