South Africa Autos Report Q2 2012

BMI is expecting significant growth in the South African auto industry over the rest of 2012. We see sales running around 19.9% growth, and within this, car sales operating at 23.57% growth – bringing the figures to 686,456 overall and 491,531 for passenger vehicles. This pushes overall sales towards the previous high of 2006, which saw overall sales of 715,588 and 481,577 cars – meaning that this record figure has now been passed – indicative of a return of strength after the global financial crisis.
We expect 2013 to be the largest volume year in South Africa, with projected sales of 809,304, which will represent both a 17.9% growth over the period, as well as equating to sales of US$16.83bn. This sales growth can be attributed to the low interest rate environment, as well as the constant introduction of new models with favourable offers by automakers, according to Chris de Kock, the head of sales and marketing at domestic vehicle financer WesBank.
February 2012 showed sales growth which was commensurate with these facts, displaying 6.4% growth y-o-y, according to NAAMSA. This equates to 36,657 passenger units over the month, compared to 34,054 in 2011. The rental industry is making up a growing proportion of new sales, accounting for 10.5% of February sales. This may be due to an increase in financing initiatives aimed specifically at this industry, as it is potentially a steady volume and revenue stream.
The effect of flooding in Thailand has had trickle through effects on production in South Africa, Engineering News reported in late February 2012. The suppliers shutdown in Thailand ‘severely impacted’ the availability of imported components in the fourth quarter of 2011, which led to a slowdown of production, as well as a narrowing of the supply chain over the period – with effects on component cost. In addition to this upstream event, the breakdown of the Arcelor Mittal Newcastle steel furnace caused an increase in the price of steel available to the auto industry, as it meant that it was essential for the industry to import the commodity in order to maintain production.
2011 saw a record in the number of import sales in the country, Engineering News reports. This view is supported by BMI’s models. 69% of all vehicles sold in the country were imported, up from 66% in 2010. This is part of a long term growth trend, which saw 9% of all vehicles being imported in 1995. This trend mirrors the production runs which are for export – with 51% of the 2011 production run being marked for export, compared to 30% in 2003. These two trends highlight a couple of crucial things about the SA industry as a whole. One of them is a far deeper integration into the international production system, mainly due to South Africa’s chokepoint position as an access point into Africa as well as ease of entry to and from India and other sub continental areas, and access to international shipping routes.
Secondly, it demonstrates the growing sophistication of the production market, and also the ease of doing business. It must be noted that the top three producers in the country are Toyota, Volkswagen and BMW – who produce 153,000, 137,000 and 52,908 respectively. The significant presence of these companies in particular, three of the largest volume and value companies in the world, strongly indicates a good relationship between government and the auto industry.
These are also the three top three exporters, at 86,941 for Toyota, 81,169 for Volkswagen and 41,886 for BMW – showing the lure of the country as an assembly and export point. The top export markets in 2011 were the US, with 65,000 CBU’s, the UK with 43,700 and Japan with 22,500 – a demonstration of high end production. Central government interest in developing local production facilities is also likely to act as a further boost to this practice, although the heavily import heavy sales system may act as a downside risk to development unless checked in the next couple of years.