Johannesburg - The country's vehicle assembly plants, already operating at almost half of capacity, may lose further production allocations should parent companies decide to save foreign factories at South Africa's expense.
According to the KPMG Global Executive Survey for 2010, released on Wednesday, automotive executives are concerned about overcapacity levels in production plants worldwide. The research note summarised the views of 200 senior motoring executives from 24 countries,
"They are saying that while they've come a long way in the past year, they still have further to go in rightsizing," said Gavin Maile, industry leader for African automotives at KPMG.
KPMG reports that the biggest overcapacity problems are in the United States, Western Europe and Japan.
Overcapacity in South Africa is an issue as well. Last year, local plants operated at 56% of full capacity, according to the National Association of Automobile Manufacturers of South Africa (Naamsa). This compares to 68% in both 2007 and 2008.
Maile said that overcapacity issues in Organisation for Economic Cooperation and Development (OECD) countries could hit South Africa further. Overseas parent companies could choose to give production allocation to a European plant operating at an even lower percentage of optimal capacity than the South African equivalent.
In another finding, the report stated Chinese and Indian vehicle manufacturers are expected to significantly increase their global market share over the next five years.
"The emerging economies of the East is where the growth will happen," said Maile. "If there's any new plants, they will be built there."
China and India's increasing importance in the global automotive market could also mean higher import levels from these regions into South Africa.
Strong rand endangers exports
The industry leaders identified by the KPMG survey were Kia/Hyundai, Toyota, Honda and various emerging new Chinese and Indian car brands.
South Africans bought 258 000 vehicles in 2009 and 62% of these were imported models, according to Naamsa. The industry body has projected this percentage rising to 64% during 2010.
"If the amount of imported cars continues to increase, we have to increase our exports rapidly. Otherwise, there is no point in continuing to make cars in South Africa," said Maile.
South African exports stood at 47% of the total number of units manufactured in 2009, only marginally down from 2008 when exports were at half the total number of vehicles produced.
A major factor which may inhibit exports this year is the strength of the rand, which makes South African goods comparatively more expensive on world markets
The National Association of Automotive Component and Allied Manufacturers (Naacam) has repeatedly called for macroeconomic policy to weaken the local unit. It says the move would be crucial to boosting manufacturing and creating jobs.
Another hurdle to growing exports is the fact that new car demand in South Africa's main export markets - the US, Japan and Europe - has been driven by government incentives over the past year.
Additional findings in the KPMG survey include the continued drive to create greener, fuel-efficient vehicles.
The survey found that hybrid fuel systems are rated the most important alternative technology over the next five years. Battery electric power and fuel cell power are rated second and third in order of importance.
- Fin24.com