naacam - october 2011 - for · pdf filethe south african automotive industry, the midp and the...
TRANSCRIPT
1
The South African Automotive Industry, the MIDP and the APDP
Presentation by
Roger Pitot ‐ NAACAM
October 2011
SA Automotive Industry: StructureSA Automotive Industry: Structure• The vehicle manufacturers present in SA‐
Mercedes Benz, BMW, Volkswagen, Nissan/Renault, Toyota, General Motors and Ford are all wholly owned subsidiaries.
• Other major brands are imported –European (Peugeot/Citroen), Japanese (Daihatsu, Honda, Subaru, Suzuki), Korean (Hyundai, Kia), Indian (Tata, Mahindra), with Chinese brands also entering the market (Chery, Chana, GWM and others)
• There are approximately 400 auto component suppliers including diversified manufacturers.
• 16 of the 20 major global first tier suppliers are present in South Africa
2
3
Industry Performance Since 1995 ‐New vehicle sales and projections
New Vehicle Markets in South AfricaHistory and Forecast - 1995 to 2012
0
100000
200000
300000
400000
500000
600000
700000
80000019
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ann
ual S
ales
Vol
ume
Medium and Heavy Commercial Vehicle MarketLight Commercial Vehicle MarketPassenger Car Market
4
Industry Performance Since 1995 ‐New vehicle Production
5
OEM capital expenditure (R millions)Total industry investment since 1995 over R40 billion
6
Annual Average Industry Capacity Utilisation
2005 2006 2007 2008 2009 2010 4th Qtr 2010
Cars 81,1% 80,1% 67,7% 68,3% 59,4% 77,1% 87,2%
LCV 79,9% 87,8% 82,7% 73,9% 56,5% 68,4% 76,4%
MCV 84,4% 97,9% 91,7% 89,9% 64,6% 77,2% 82,6%
HCV 95,9% 95,1% 95,3% 87,6% 66,1% 77,5% 81,1%
Vehicle Production
Production (000s) 2008 2010• VW Polo (new) ‐ 94.0• Toyota Hilux/Fortuner 107.7 89.3• Merc C‐Class 51.6 51.7• BMW 3‐Series 36.6 49.2• Toyota Corolla 74.7 33.9
Total Light Vehicles 515.2 448.4
The Motor Industry Development Programme (MIDP)
Introduced 1995 ‐ Key Objectives:• To improve SA automotive industry’s international competitiveness
• To improve vehicle affordability in the domestic market
• To encourage growth in vehicle and component manufacturing, particularly through exports
• To stabilise employment levels in the industry• To create a better industry foreign exchange balance
9
Industry Performance:1995‐2010International competitiveness
• Significant improvement in quality and productivity. Progressive economies of scale with local vehicle platforms down from 42 to 15
• Average volume per model (cars/LCV’s) produced increased from 9 000 units to 30 000
• In 2010, 4 models > 40 000 units and 6 models > 20 000 units per annum.
• Increase in number of vehicles produced per employee from less than 10 vehicles per annum to 17 vehicles per annum in 2010.
• Significant rationalization and economies of scale production has reduced complexity for domestic component suppliers and enhanced efficiencies
April 201060 Marques1,187 models
January 199417 Marques192 Models
Passenger Car Market Makes & Models : 1994 to April 2010
Motor Vehicle Export since 1995(units)
15,764 11,55319,569 25,896
59,71668,031
108,293
125,306 126,661
110,507
139,912
179,859171,237
284,211
174,947
239,465
291,000
0
50,000
100,000
150,000
200,000
250,000
300,000
Expo
rt u
nits
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
12
Volkswagen - Polo series to Europe
BMW - 3-Series to Japan, Australia and USA
Mercedes Benz - C-Class to USA
Toyota - Hilux to Europe and Africa
Major Vehicle Exports – 2010
13
General Motors – Isuzu KB to Africa
Toyota - Corolla to Europe and Africa
Nissan - Hardbody to Africa
Ford - Focus to Australia
Major Vehicle Exports – 2010 (cont.)
14
Global fuel standards
Profile of NAACAM
• Established 1980 to represent component and spare parts manufacturers
• Over 190 members with 260 plants• Members comprise 70% of dedicated auto component manufacturing companies in SA
• Independently elected National Executive Committee, 5 Regions with Chairmen and Deputy Chairs
• The servicing, spares and retail sectors are represented by the RMI
Size of Component Companies – 2007 Analysis
NAACAM MEMBERSHIP ANALYSIS SURVEY
4
28 27
17 1612
96 6 6
8
31 1 1 1 0 1 1 2 2
11
0
5
10
15
20
25
30<
1010
TO
50
50 T
O 1
00
100
TO 1
5015
0 TO
200
200
TO 2
5025
0 TO
300
300
TO 3
5035
0 TO
400
400
TO 4
5045
0 TO
500
500
TO 5
5055
0 to
600
600
TO 6
5065
1 TO
700
700
TO 7
5075
0 TO
800
800
TO 8
5085
0 TO
900
900
TO 9
5095
0 TO
100
010
00 P
LUS
# EMPLOYEES
# M
EMB
ER C
OM
PAN
IES
Component Manufacturers –Key 2010 Data
• The employment of the component manufacturers totals 65,000, down from the peak of 82,000 (NAACAM membership 44,000)
• Sales exceeded R65 billion ($9 bn), with 35% OE, 45% export, 20% aftermarket
• Capex was R2 billion • Average local content of components exported was 75%
• Real Vehicle local content averages 35%
Service and Sales Outlets
• Workshops 2500• Petrol Stations >1800• New & Used vehicle Dealers 1200 • Tyre workshops 600• Engine specialists 250• Panelbeating shops >1000• Spare parts dealers >700
• Employment over 200,000
18
Electrical / Electronic
Chassis and Drive‐train
Body
Exterior
Interior
Current Breakdown of costs and Local Content
65%: % of total material cost 35%: true local material plus value add as % of total material cost
19%
15%
33%
23%
10%
14%
•Axles•Differentials•Drive shafts•Brakes
•Harnesses•Starter motors•Alternators•Wiper systems•HVAC
•Glass•Paint•Bumpers•Mirrors
•Cockpit•Seats•Door panels•Carpets
•Bonnets•Bootlids•Sideframes•Doors
6%
5%
3%
7%
Why is Local Content so low?
• Volumes in SA much lower than elsewhere, except where component companies export
• The MIDP allows OEMs to offset duties through exports
• The Rand is overvalued, reducing the prices of imported components
• The SA component manufacturers are not yet globally cost competitive
The MIDP: Duty Credits
• A Duty‐Free Allowance for OEMs to import components to the value of 27% of selling price
• A Duty credit certificate system which incentivises component and vehicle exports, equivalent to 14% of the local content of the exports
• A Productive Asset Allowance for OEM and related component investments, equal to a duty credit of 20%
All these encouraged more imports!
Component Exports (R mil)
Component 1995 2000 2008 2010
Catalytic Converters 389 4 683 24 245 14 761
Seats, Stitched Leather 1 019 1 915 3 282 2 898
Engines and Parts 111 485 2 938 2 470
Tyres 213 682 1 670 1 133
Silencers/Exhausts 76 377 1 900 1 696
Transmission shafts/cranks 55 127 782 415
Automotive tooling 153 362 518 447
Automotive glass 43 146 314 305
Total Components 3318 12 640 44 055 30 802
Source : NAACAM
Car Imports - Share of market
40.00%
50.00%
60.00%
70.00%
80.00%
2005 2006 2007 2008 2009 2010
Car Imports % of market
FBU Import DutyMIDP introduced 1 September 1995
EU preferential duty rate introduced end 2006
2006: minus 2%
2007: minus 4%
2008: minus 5%
2009: minus 6%
Background and Objectives of the 2013 Automotive Production and Development Program
(APDP)
• Production increase to 1.2 million vehicles per annum by 2020 with associated deepening of the components industry.
• Provide appropriate levels of support for these ambitious targets.
• Achieve better balance between domestic and export sales to supply growing domestic demand.
• Ensure consistency with WTO rules.
26
The APDP consists out of 4 pillars that will drive the programme:– Import Duty .– Vehicle Assembly Allowance (VAA).– Production Incentive (PI). – Automotive Investment Scheme (AIS).
APDP
Impo
rt D
uty
taxa
tion
Vehi
cle
Asse
mbl
y A
llow
ance
Prod
uctio
n In
cent
ive
Aut
omot
ive
Inve
stm
ent S
chem
e
Background and Objectives of the APDP
Duty Rebates
The New APDP will have stable, moderate import tariffs from 2013:
• 25% for Completely Built Up Vehicles (CBUs).• 18% for CBU’s out of Europe via the EU preferential rate.• 20% for CKD components used by vehicle assemblers.
The Vehicle Assembly Allowance (VAA) will allow vehicle manufacturers with a plant volume of at least 50,000 units per annum to import a percentage of their components duty free.
• 20% of the ex‐factory price reducing to 18% over 3 years. This equates to approximately 30% of the components.
Background and Objectives of the APDP
Import Duty and Assembly Allowance
The Production Incentive will be in the form of an allowance forduty‐free importation of vehicles or components:
• 55% of value added in the South African supply chain, reducing to 50% over 5 years.
• Additional 5% for vulnerable sub‐sectors.= Net benefit of 11% of Value‐added, reducing to 10%
It is expected to increase the depth of localisation by encouraging OEMs and suppliers to source sub‐components locally
Background and Objectives of the APDP
The Production Incentive (PI)
Automotive Incentive Scheme (AIS)Automotive Incentive Scheme (AIS)• AIS is part of the APDP which is to replace the MIDP in 2013• Launched in July 2009• Targets companies that are:
– Automotive assemblers (OEM’s)– Automotive component suppliers
• Objectives:– To stimulate investment and job creation in SA’s automotive
sector– Investment in technologically advanced automotive production
& new and replacement models/ components– Increased plant production volumes & strengthen the
automotive value chain
AIS Incentive BenefitsAIS Incentive Benefits• A taxable cash grant paid over 3 years• Base benefit calculated at 20%; • An additional 5% and 10% benefit subject to Economic Benefit
Requirements • The base benefit is calculated on the investment in the following
Qualifying assets that includes:– Plant, Machinery, Equipment and Tooling; for example– Jigs, dies, moulds;– In‐plant logistics (software and hardware);– Material handling equipment;– Production testing and design equipment;– IT equipment and supporting software.– Owned land and buildings – limited to the value of investment in
plant, machinery and equipment
AIS Incentive Benefits (cont)AIS Incentive Benefits (cont)• An additional taxable cash grant of 5 or 10 percent can be
granted to projects that contribute to the following economic benefits:– Substantial support for the local tooling industry– Significant Research and Development in South Africa related to
the project– Maintain employment levels throughout the incentive period
and or result in the creation of new jobs– Strengthening the automotive supply chain through backward
and forward linkages– Substantial increase in local value addition– Increase in unit production per plant for OEM’s in line w ith
vision 2020– Increase in turnover for component manufacturers
Other dtiOther dti IncentivesIncentivesIncentive Benefit Main Conditions
The EnterpriseInvestment Program(EIP)
The EIP (manufacturing) is a cash grant for locally based manufacturers who wish to establish a new production facility, expand an existing facility or upgrade an existing facility in the clothing and textiles sectors
the EIP will be used to stimulate investment within manufacturing and tourism, it will also be used to deliver on some of the IPAP's key performance areas, as well as priority sectors.
Foreign Investment Grant
To compensate qualifying foreigninvestors for the cost of movingqualifying new machinery andequipment from abroad to SA.
Foreign investors only
Industrial Development Zone
Exemption from VAT when sourcing goods and services from South African customs territory and duty-free imports of raw materials and inputs for export
Prospective IDZ operator companies must apply for permits to develop and operate an IDZ
In Conclusion• Many European OEMs and Suppliers already buy components from South Africa – more than €2 billion annually
• The automotive sector is expanding its capabilities and gearing up for the higher production and localisation levels of the APDP
• Ten new large multinational suppliers have started production in South Africa in past 3 years
Thank You!
Roger PitotExecutive DirectorNAACAM• [email protected]• 011‐3924060