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A weak rand brings mixed blessings to the motor sector.
While car makers across the country are making the most of government’s export-focused automotive production development programme to raise last year’s exports of 277 000 vehicles to an expected 325 000 this year, little of that growth comes immediately from the falling currency that makes cars cheaper in foreign showrooms.
The current export success results from contracts and targets agreed to years in advance, although relatively cheaper prices can build goodwill for the future.
Nico Vermeulen, director of the National Association of Automobile Manufacturers of SA, said Mercedes-Benz’s export of its C-Class model to foreign destinations is followed by BMW, which sells in the US, and VW, which goes to European outlets.
Ford’s Ranger, Toyota’s Hilux and General Motors aim to open up African markets and are also pushing up the export numbers.
This year, exports have become more important as local demand has shrunk by about 6%.
Since as much as one-third of the components and materials in locally manufactured vehicles are imported, the weaker currency means they become more expensive, negating the relative cheapness of local parts. But local producers of automotive parts can expect a fillip in export sales if the rand stays in the low teens or declines. Buyers of imported vehicles can expect prices to rise later in the year.
Arno van der Merwe, chief executive and executive director of manufacturing for Mercedes-Benz SA, said they expected the local demand decline to continue for some time, in line with other emerging markets.
“We’ve posted record export numbers and look forward to the trend continuing. The wider geographical exposure through this flexible production network also mitigates the impact of local or regional cyclical economic conditions on our overall business. On balance, the current exchange rate realities also support the export business,” he said.
