By Luke Morawitz, senior ratings analyst, Coface South Africa
The local motor industry has made steady gains in recovering from the turmoil caused by the economic disruptions of 2008-2009. Going back two years, the improvement in figures released during 2010 confirmed that there was a turnaround, a fact that has been reinforced by further improved results in 2011.
Vehicle sales saw strong growth over 2011 spurred by an improvement in global economic conditions. Total volumes for new vehicle sales in South Africa saw an improvement of 15,9 per cent for 2011. This was assisted by a low interest rate environment and higher levels of disposable income.
Units sold for the month of December 2011 were down from the previous month to 43 790. This was substantially lower than sales in November which were reported at 49 498. However this is to be expected because of the festive season and shifting spending patterns. Exports for the 2011 exceeded 2010. Sales for January 2012 were up to about 42 000, an increase of 7 per cent over January 2011.
Total vehicle exports were up 11,9 per cent year-on-year but were lower month-on-month in December. It is expected that exports to Europe will continue to decline with the prediction of a return to recession in many of the markets South Africa does business in. The developing world still provides a healthy market and it is likely that more focus will be placed on these countries by the world’s vehicle manufacturers to sustain sales.
In addition to finished vehicles, a substantial volume of components are exported on an annual basis. Again, the bulk of these are sent to Europe. There has however been substantial demand from the United States, Australia and the Far East for locally manufactured parts which should help maintain growth in this sector. Year-on-year growth in 2011 should show substantial improvement and level out over 2012.
South Africa’s healthy motor industry is helped in part by the Motor Vehicle Program instituted by government to stimulate investment in the vehicle manufacturing industry. Improved efficiencies and a continuing focus of skills improvement have also enabled the sector to continue its rapid expansion.
A concern is the inability of smaller firms to make use of the developed logistics chains currently in place. Government has made it a priority to target this high growth sector to position the country as an African automotive hub. Foreign companies will continue to invest in order to take advantage of the growing African market, a market which has recently been receiving much interest.
The motor vehicle manufacturing sector in South Africa will be one of the main drivers of the economy in the future and significant growth can be expected from this sector.