State plan raises car part hopes

Johannesburg - South Africa's vehicle parts makers have said the Industrial Policy Action Plan (Ipap) announced by Trade and Industry Minister Rob Davies last week will breathe new life into the ailing sector.

"We are pleased that the minister addressed the financing of manufacturing projects and the need for preferential procurement for South African-manufactured products," said Stewart Jennings, president of the National Association of Automotive Component and Allied Manufacturers (Naacam).

Ipap aims to boost manufacturing capacity and create 2.7 million jobs in the next decade.

Apart from recent lows in vehicle sales, Jennings said the sector's troubles are exacerbated by the large number of imported entry-level cars gaining market share from locally-produced alternatives.

Almost two-thirds of new cars sold in South Africa in 2009 were imported models. The country's total commercial car market was 258 129 units in 2009, according to a statement by the National Association of Automobile Manufacturers of South Africa (Naamsa). Domestically-produced cars made up 94 379 of the total, and the remainder were imported vehicles.

Naamsa projects this trend to continue in 2010 and 2011, with imports averaging about 63% of the total market.

"The strong rand makes imported models more competitive," said Jennings. "Hopefully we can make up some of the loss in market share by boosting exports, but it will be hard with the currency the way it is."

Jennings added that the competitive imports come from countries where the automotive sector enjoys government protection and support. This is not the case for local players.

"We are just asking for a competitive environment," said Jennings. "Business will do the rest."

Jennings said that state stimulation and a plan to address the strong rand would pave the way to a competitive environment.

- Fin24.com