ACKNOWLEDGEMENTS - AIEC

1 1 ACKNOWLEDGEMENTSThe information and analysis in this report were produced and compiled by Dr Norman Lamprecht on behalf of the Automotive Industry Export Council. The contributions and assistance by NAAMSA, NAACAM and the Department of Trade and Industry are hereby gratefully acknowledged. The data processing and editing by Dr Alet Tolmay, and design and outlay of the publication by Dr Selma Schiller are also acknowledged with O Box 40611 Arcadia0007 Tel: +27 12 807 0086 Fax: +27 12 807 0481 Website: Export Manual 2017 South Africa ..4 South Africa and its automotive industry ..5 The Automotive Industry Export Council ..9 Representative South African automotive industry new vehicle market features ..12 South African new vehicle market features ..16 Automotive clusters ..20 Automotive policy regime ..25 Methodology Automotive trade data ..30 Exports to countries ..31 Exports to regions ..37 Exports of vehicles.

2 60 Automotive components exports by country ..63 Automotive components exports by product ..73 Imports by country of origin ..83 Imports of vehicles ..86 Automotive parts and components imports ..88 Automotive industry trade balance ..90 Main automotive trading partners ..93 Imperatives to sustain and grow the South African automotive industry ..97 Key motor industry contact African Growth and Opportunity ActAIEC Automotive Industry Export CouncilAIS Automotive Investment SchemeAPDP Automotive Production Development ProgrammeBLNS Botswana, Lesotho, Namibia and SwazilandBRICS Brazil, Russia, India, China and South AfricaCBU Completely Built-upCKD Completely Knocked DownCOMESA Common Market for Eastern and Southern AfricaCPI Consumer Price IndexDTI The Department of Trade and IndustryEAC East African CommunityEU European UnionFDI Foreign Direct InvestmentFOB Free on BoardFTA Free Trade AgreementGDP Gross Domestic ProductIDZ Industrial Development ZoneMERCOSUR Mercado Com n del Sur Common Market of South AmericaMIDP Motor Industry Development ProgrammeNAACAM National Association of Automotive Component and Allied ManufacturersNAAMSA National Association of Automobile Manufacturers of South AfricaNAFTA North American Free Trade AreaOEM Original Equipment Manufacturer (Vehicle Manufacturer)

3 OICA International Organisation of Motor Vehicle Manufacturers SA South AfricaSACU Southern African Customs UnionSADC Southern African Development CommunitySARS South African Revenue ServiceWTO World Trade Organisation4 AUTOMOTIVE EXPORT MANUAL 2017 SOUTH AFRICA PUBLICATIONR esearch is a critical enabler within the South African economy, intending to produce the best economic intelligence. The value and insight which data has to offer and the role that data plays are key and integral in formulating policy and defining business strategies. Market intelligence provides companies with a competitive edge in identifying market gaps and opportunities. Accurate and timeous data provides insight into current trading conditions, acts as an indicator as to where the market is headed and assists companies to develop sound and appropriate strategies. The Automotive Export Manual 2017 South Africa publication is an annual publication produced and compiled by the Automotive Industry Export Council (AIEC) the recognised source of South African automotive trade data.

4 The 2017 publication, as well as the previous 10 publications since 2007, provides a comprehensive guide on the export and import performance of the South African automotive industry, both under the previous Motor Industry Development Programme (MIDP) and the current Automotive Production Development Programme (APDP). The aim of the manual is to identify and report on the major automotive export destinations, the major countries of origin, the main automotive export trade blocs, the most important automotive products being exported and imported, the top growth markets and products, as well as the impact of the trade arrangements enjoyed by South Africa on automotive trade patterns. 5 SOUTH AFRICA AND ITS AUTOMOTIVE INDUSTRYS outh Africa, as Africa s largest economy and its most integrated in terms of capital and trade flows, represents the blue chip jurisdiction in the region. Although South Africa offers investors the benefits of a country with first-world standards in business infrastructure, it also offers emerging market vibrancy and opportunity, the ideal formula for growth and profitability.

5 The country, with its sound fundamentals, remains one of the most accessible, dynamic and well-regulated entry points to Africa s 1,2 billion consumers. 6 South Africa has developed an established, diversified manufacturing base that has shown resilience and potential to compete in the global economy. The country s economy, however, has experienced relatively slow growth in recent years and its gross domestic product (GDP) has not risen by the rates seen prior to the global financial crisis of 2008/2009. South Africa s GDP growth rates remain marginal, and this, in turn, negatively impacts on the domestic demand for manufactured products. Export-led growth could counter this trend, as domestic manufacturers export to a strengthening global industrial sector. In this regard, the automotive manufacturing sector has been identified as one of the industries with the highest potential for accelerated export automotive industry spans the primary, secondary and tertiary sectors of the South African economy, from agriculture and mining, to the manufacturing and service industries.

6 While other industries have been struggling due to the weak macro-economic climate in the country in recent years, automotive firms have proven resilient, primarily due to the segment s strong degree of integration, a solid policy framework and export diversification. The automotive industry remains fundamentally important to South Africa s socio-economic prosperity, growth and development and central to the South African government s efforts to industrialise and re-industrialise the country s economy. The manufacturing sector, as the engine of the economy, provides a locus for stimulating the growth of other activities, such as services, and achieving specific outcomes, such as employment creation and economic empowerment. Manufacturing, therefore, presents an opportunity in South Africa to significantly accelerate the country s growth and development. As the largest manufacturing sector in the country s economy, vehicle and component production accounted for 33% of South Africa s manufacturing output in 2016, while the broader automotive industry s contribution to the GDP was 7,4% (4,7% manufacturing and 2,7% retail).

7 Exports of automotive products in 2016 accounted for R171,1 billion, a further record, representing 15,6% of total South African exports. Exports of automotive products in 2016 accounted for R171,1 billion, a further record, representing 15,6% of total South African following table highlights the significant social and economic contribution made by the domestic automotive industry in the context of the South African economy for the years 2015 and 2016. Key performance indicators 2015 to 2016 IndicatorPerformance20152016 Consumer Price Index (CPI)4,6%6,3%South Africa s Gross Domestic Product (GDP) (current prices)R4 049,8 billionR4 337,0 billionBroader automotive industry contribution to GDP 7,5%7,4%Vehicle and component production as % of South Africa s manufacturing output 33,5%33,0%Average monthly employment by vehicle manufacturers31 26030 953 Automotive component sector employment82 10082 000 Capital expenditure vehicle manufacturersR6,6 billionR6,4 billionCapital expenditure component sectorR2,8 billionR2,6 billionTotal South African new vehicle sales617 648 units547 406 unitsTotal South African vehicle production 616 082 units599 004 unitsSouth Africa s vehicle production as % of Africa s vehicle production64%58,5%South Africa s global vehicle production ranking22nd22ndSouth Africa s global vehicle production market share0,68%0,63%Vehicle ownership ratio per 1 000 persons180180 Total automotive export earningsR151,5 billionR171,1 billionAutomotive export value as % of total South African export value14,6%15.

8 6%Number of export destinations140154 Number of export destinations with export values more than doubling year-on-year 3052 Top automotive country export destination in rand value termsGermanyGermanyTotal South African vehicle exports333 847 units344 859 unitsValue of vehicle exportsR101,9 billionR118,1 billionTop vehicle export destination in volume termsUKUKV alue of automotive component exportsR49,6 billionR53,0 billionTop automotive export component category in rand value termsCatalytic convertersCatalytic convertersTop automotive trading partner in rand value termsGermanyGermanyTop automotive trading region in rand value termsEUEUTop country of origin for total automotive imports in rand value termsGermanyGermanyTop country of origin for vehicle importsIndiaIndiaSource: AIEC, Econometrix, NAAMSA/Lightstone Auto, NAACAM, OICA, SARS8 For currency comparison purposes, the following table reveals the movement of the rand against the currencies of the South African automotive industry s main trading partners, namely, the EU, the UK, the US and Japan, from 2012 through to 2016.

9 Currency indices for the rand versus major trading partners (foreign currency: rand annual averages) Currency20122013201420152016 Euro10,5512,8214,4014,1416,28 Index 2012100122136134154UK Pound13,0115,1117,8619,4920,00 Index 2012100116137150154US$8,219,6510,8412,75 14,71 Index 2012100118132155179 Japan (100 Yen)10,299,8710,2610,5313,54 Index 201210096100102132 Source: South African Reserve BankThe South African Reserve Bank is responsible for formulating and implementing monetary policy. Its primary objectives are keeping inflation within a targeted range of 3% to 6% and maintaining a stable, competitive currency. Following significant depreciation against major currencies since the end of 2015, South Africa s share price, the rand exchange rate, has strengthened since mid-2016. An improvement in South Africa s growth prospects in 2017 is premised on the easing of the drought conditions, the improvement in commodity prices and a decline in inflationary pressures on the back of a stronger rand.

10 Unforeseen political events and instability could, however, impact on economic growth. Low inflation and a stable exchange rate remain vital to the automotive industry s cost structure. The global economic outlook, which remains positive, should also continue to lend support to South Africa s improved vehicle export performance. Low inflation and a stable exchange rate remain vital to the automotive industry s cost AUTOMOTIVE INDUSTRY EXPORT COUNCIL The Automotive Industry Export Council (AIEC) is administered by the NAAMSA offices in Pretoria, and the activities and administration are coordinated by the AIEC Board. The AIEC Board of Directors consists of Mr Renai Moothilal (Executive Director NAACAM Chairperson), Mr Nico Vermeulen (Director NAAMSA), Dr Norman Lamprecht (Executive Manager NAAMSA) as well as two ex-officio members from the Department of Trade and Industry, Mr Mzwakhe Mbatha and Mr Adriaan AIEC serves as the umbrella body for the export promotion and development activities of the South African automotive industry and represents an important link between the industry and the Department of Trade and Industry (Dti).