'Only rand can rescue car firms'

Port Elizabeth - Vehicle manufacturers and dealers may feel relieved at the signs of improvement in new motor-vehicle sales, but in the parts supply chain the hard times are far from over.

Last year 11 companies in the sector closed their doors. There are now 20 000 fewer workers than a year ago and more losses are expected, says Stewart Jennings, president of the National Association of Automotive Component & Allied Manufacturers.

These manufacturers were the worst hit of the whole South African manufacturing sector, he says.

Not a single company in the sector is currently making money.

Higher material costs have long been cited as the biggest challenge for South Africa's component manufacturers, because these comprise - depending on the exchange rate - between 75% and 85% of the total cost of the vehicle.

India and China are 20% to 40% more competitive in terms of price when it comes to materials. For Europe this is 10% to 20%, contingent upon the exchange rate, says Bill Stephens, general manager of communications for Volkswagen South Africa.

Evan Dold, vice-president of global sales and the supply chain at General Motors South Africa, says that when prices of material sourced locally are compared with the lowest prices at which it can be obtained elsewhere in the world, South African suppliers have a 30% to 40% competitive disadvantage on a particular basket of spares.

According to Jennings, the short-term solution lies in a competitive exchange rate.

- Sake24.com

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