Automobiles
• The East London plant of Mercedes-Benz has been ranked number five in the world
All of the world’s major vehicle manufacturers are represented in South Africa, as are eight of the top 10 component manufacturers. Capital investment in the sector has been consistently high, peaking at R6.2-billion in 2006.
The South African automotive sector produced 535 000 vehicles in 2007, but the global recession hit the industry hard. By June 2009 it was reported that export sales figures for May were down 41% on the previous year. Altogether, the national picture showed 88 000 fewer vehicles being sold in the five months to May than in 2008.
The sector represents about 7.5% of national gross domestic product (GDP). According to the National Association of Automotive Component and Allied Manufacturers (NAACAM), vehicle manufacturing employs about 39 000 people, while component manufacturing employs as many as 81 000 and trade employs 200 000.
In the Eastern Cape, the automotive industry provides 30% of the jobs in the province’s manufacturing sector and accounts for 32% of gross added value. Half of South Africa’s passenger vehicles are made in the Eastern Cape and 51% of the country’s motor exports originate here.
This obviously makes the sector a vital and highly valued component of the province’s economic profile. However, as the latest economic downturn has shown, it is advisable to have as diverse an economy as possible. So, while the provincial government, investment agencies and industrial development zones are working hard to grow the automotive sector – as evidenced by the investment in automotivecomponent clusters – they are also mindful that diversification is an important goal.
Paradoxically, the automotive industry in the Eastern Cape has itself invested in its own form of diversification. General Motors South Africa (GMSA) no longer confines itself to manufacturing and assembling motor cars: GMSA is also a leader in producing catalytic converters, a thriving part of the the automotive-parts sector. In fact, the Eastern Cape’s automotiveparts subsector now supplies 14% of the world market in catalytic converters. Among the other products exported by GMSA to Mexico, the US, Europe and Australia are seat belts and aluminium heat shields.
It is no wonder, then, that the Industrial Development Corporation (IDC) has identifed the automotiveparts subsector as a specialist field in which South Africa may have a competitive advantage. The IDC has a 45% stake in Umicore Autocat South Africa, which has a factory in Port Elizabeth. The balance of the equity is held by Belgian concern, Umicore Group.
While the Eastern Cape boasts the Big Five in relation to its tourism and wildlife offering, the province has long been home to the automotive Big Four: Volkswagen South Africa (VWSA) has a plant in Uitenhage, Ford and GMSA have plants in Port Elizabeth, and Daimler Chrysler is based in East London.
Of the four, VWSA is the largest exporter of vehicles, with a standing order to supply China with Jettas making up a significant portion of its work. Even in May 2009, tough times for the automotive industry, VWSA exported 3 450 cars.
About 6 500 people are employed at VWSA, which produces about 112 000 cars per annum. Between 2000 and 2006 the company invested about R6-billion in new models, a paint shop and a new truck-assembly plant. Capital expenditure in 2008 was R1.8-billion on the back of an order to supply diesel particulate filters to the Volkswagen group.
VWSA also has ambitious plans for training its employees. The ‘People for the Future’ project targets company employees at the manufacturing plant, 45 000 people in the national Volkswagen and Audi dealer networks, and more than a million people in the local community.
GMSA employed 4 000 people at the peak of production, but the international group’s decision to phase out production of Saab, Saturn and Hummer – the production of which in Port Elizabeth had been seen as a major boost – was a sign of the times. GMSA was at pains to point out that it is responsible for its own viability, but it did mean big job losses in 2009. Whereas 48 000 vehicles were produced in 2008, in 2009 closer to 30 000 cars came off the assembly line. Despite this, the South African branch has taken positive steps towards building its future: GMSA spent R150-million on a vehicle-conversion centre in 2008, announced an investment of R250-million in a partsdistribution centre, and will start assembling a five-door hatchback passenger vehicle for the first time. The latter two ventures will come on stream in 2010.
Ford Motor Company of South Africa (FMCSA) is set to spend R1.5-billion on the manufacture of a new light truck (in Gauteng) and a new diesel engine at its Port Elizabeth plant, with work due to begin in 2010.
Mercedes-Benz South Africa (MBSA) is a wholly owned subsidiary of the global company, Daimler AG. The company’s manufacturing plant in East London has been operating for more than 60 years. Today MBSA manufactures Mercedes- Benz C-Class cars in right-hand drive for the local market and in left-hand drive for export to the US. It also produces the Mitsubishi Triton van range, Mercedes-Benz commercial vehicles and buses, and Mitsubishi FUSO trucks.
Mercedes-Benz recently spent about R2-billion on upgrading its manufacturing plant in East London and now produces both right- and left-hand-drive vehicles for domestic sale and export. JD Power & Associates named the company’s plant the fifth-best vehicleproduction site in the world in 2009. The factory produces about 200 C-Class vehicles every day. The company’s bus-assembly unit has been contracted to supply 460 buses (168 semiluxury and 292 intercity) for the 2010 Fifa World Cup.
Support industries
The motor-assembly industry needs a large number of anciliary industries for it to function at full capacity. About 150 automotive suppliers of various types operate in the Eastern Cape. Sectors include leather works, batteries, automotive tooling, catalytic converters, glass, lamps, radiators and alloy wheels. Foundries, such as those run by Murray & Roberts, supply the industry with cast iron and aluminium.
The motor industry began in Port Elizabeth in the 1920s and it was not long before tyre manufacturing companies set up shop nearby. Firestone was the first and was followed by Goodyear and General Tyre (now Continental Tyre SA). Continental sells tyres produced at its R180-million factory, which employs 1 600 people, both domestically and internationally.
The Nelson Mandela Bay Logistics Park serves as an automotive cluster and has been operating since 2004, supplying logisitical support and economies of scale for companies servicing Port Elizabeth and Uitenhage’s motor industry. National government has allocated R30-million to this project in its medium-term expenditure framework.
Along the coast in East London, a similar initiative is under way at the East London Industrial Development Zone (ELIDZ ). Ten automotive suppliers have moved to a dedicated area within the IDZ, and are providing parts for the Mercedes-Benz C-Class cars. Among the companies that have relocated to the Automotive Supplier Park (ASP) are Caravelle Automotive Carpets, TI Automotive (a UK company that makes fuel tanks) and Feltex Fehrer, a manufacturer of head rests and seat pads.
ONLINE RESOURCES
Automotive Industry Export Council: www.aiec.co.za
East London Industrial Development Zone: www.elidz.co.za
National Association of Automotive Component and Allied Manufacturers: www.naacam.co.za
National Association of Automobile Manufacturers of South Africa: www.naamsa.co.za
Nelson Mandela Bay Logistics Park: www.nmblp.com
Uitenhage Despatch Development Initiative: www.uddi.co.za
