The automotive industry plays an instrumental role in South Africa’s economy. The country has capitalised on the wealth of experience brought about by the presence of all the major European, American and Japanese motor vehicle manufacturers. South Africa’s attractiveness as an investment destination of choice, and production base for products to be exported to global markets, has been well established. With its advanced infrastructure, diverse economy, sophisticated capital markets and developed manufacturing capacity, South Africa is the ideal location for any company aspiring to reach the continental market more effectively, both from a cost and logistical point of view.
The automotive industry is strategically placed across three manufacturing hubs of Gauteng – the country’s economic hub; the Eastern Cape – renowned for the largest Industrial Development Zone in the country; and KwaZulu-Natal – home to the largest port on the African continent. The automotive multinational corporations support the improvement of the country’s biggest socio-economic challenge – unemployment – and make a vital contribution to the social upliftment of the communities in the regional clusters where the industry is concentrated.
The automotive industry is strategically placed in Gauteng – the country’s economic hub; the Eastern Cape – renowned for the largest Industrial Development Zone in the country; and KwaZulu-Natal – home to the largest port on the African continent. The automotive multinational corporations support the improvement of the country’s biggest socio-economic challenge – unemployment – and make a vital contribution to the social upliftment of the communities in the regional clusters where the industry is concentrated.
Automotive Industry’s Contribution To GDP
Source naamsa, 2022
The automotive sector continues to remain one of the most visible sectors receiving foreign investments, with the seven OEMs investing R8,8 billion in 2021, the second highest annual figure on record, while the component sector also invested a record R5,7 billion in 2021. In 2021, the broader automotive industry’s contribution to the gross domestic product (GDP) comprised 4,3% (2,4% manufacturing and 1,9% retail). Classified as the anchor of the national industrial base and largest manufacturing sector in the country’s economy, a substantial 17,3% of value addition within the domestic manufacturing output was derived from vehicle and automotive component manufacturing.
2022 Half Yearly Developments
Vehicle exports were 2,9% down for the first half of 2022 compared to the first half 2021. Passenger car exports performed well during the first half of 2022, but LCV (bakkie) exports lagged due to the knock-on effects of the KZN floods and the temporary closure of the Toyota plant as well as the ongoing shortage of semi-conductors impacting on vehicle production of bakkies. South African vehicle exports remain a function of the direction and performance of global markets, in particular Europe where nearly four out of every five vehicles are destined. The ongoing war in Ukraine, supply chain disruptions and the risk of stagflation are hampering global growth and is weighing in on the domestic industry’s export performance. However, the industry remains optimistic in view of several new model launches by major exporting OEMs in the country in 2022, including the Ford Ranger and VWSA Amarok bakkies.
During the quarter the economic damage from the conflict between Russia and the Ukraine continued to contribute to a significant slowdown in global growth in 2022 and adding to rising inflation and interest rates and hence lower demand for new vehicles and components. Vehicle production in Europe for the first quarter of the year was 16% down compared to the corresponding quarter 2021 and globally 5% down over the same period. Similarly new vehicle sales in Europe have been declining for 11 months in a row up to June 2022 and are projected to decline by 7,4% for 2022 compared to 2021 which will be a decline of about a third below the pre-pandemic level of 2019. Global vehicle production and sales impact on the South African automotive industry’s exports of vehicles and automotive components.
