Continued spending in South Africa by multinational motor companies shows that the global vehicle industry still sees South Africa as a safe investment destination, says the MD of BMW SA, Tim Abbott in a recent report. The government must stick to the principles of the 2013-20 Automotive Production and Development Programme (APDP), to retain that confidence, he says.
His statement follows the National Association of Automobile Manufacturers of South Africa (Naamsa) 2014 fourth quarter business review where it is projected capital expenditure in the South African automotive assembly industry should reach a record R7.48 billion this year.
Capex by the country’s seven major vehicle manufacturers and various truck producers reached R6.91 billion in 2014, and R4.34 billion in 2013. Last year’s capex already represented a record reported Naamsa.
“Relatively high levels in capex in recent, and particularly future years, may be attributed to investment projects by manufacturers in terms of the Automotive Production and Development Programme.”
BMW SA previously invested R2.2 billion to build the current 3-Series sedan at its Rosslyn assembly plant, near Pretoria. Though production began in 2012, before the APDP, former MD Bodo Donauer extracted government guarantees that the company would receive the full incentive package — allowing the company to claim back about R500 million.
The next generation 3-Series is due in about 2019, so BMW Germany will soon start seeking future policy assurances from the South African government. Mr Abbott, who replaced Mr Donauer late last year, hopes an APDP review, due this year, will not recommend significant changes.
BMW SA needs production certainty. Alongside Mercedes-Benz SA (MBSA), it is South Africa’s most export-focused vehicle manufacturer, shipping more than 80% of 3-Series production to markets as diverse as the US, Japan, Australia, China, Japan, New Zealand and South Korea. Of the 68,000 cars built at Rosslyn last year, 61,000 were for overseas customers. Mr Abbott expects production to increase in 2015; even a 3-Series midlife update this year will not affect operations, he says.
Naamsa also reported that employment in the automotive assembly industry had grown to 30 466 people in the fourth quarter of last year, which was an increase of 1 478 jobs, or 5.1%, compared with the industry headcount at the end of the third quarter of 2014.
The association believed the “substantial increase” in the industry headcount was related to higher levels of vehicle production during the fourth quarter, as well as anticipated growth in vehicle output in 2015.
South African new vehicle production increased marginally to 566 083 vehicles in 2014, up from 545 913 units in 2013.
Naamsa expected 2015 production to grow 10%, to 625 000 units.