Localisation – the process whereby an increased percentage of the parts and costs of a motor vehicle are either assembled or manufactured in South Africa rather than imported – represents a significant opportunity to transform the automotive sector, while facilitating the entry of BEE participants in its supply chain.<\/p>\n
This was the topic of discussion at a recent automotive sector webinar held by FirstRand Group companies RMB, FNB and WesBank.<\/p>\n
Simon Woodward, automotive sector head at RMB said: \u201cThe need for localisation is an essential ingredient in transforming the domestic automotive sector.\u201d<\/p>\n
The South African Automotive Master Plan [SAAM] 2021 \u2013 2035 could see the automotive industry growing from 600,000 to 1.4 million vehicles a year in production.<\/p>\n
\u201cIt is therefore a massive opportunity to support black-owned automotive suppliers in building their businesses in the industry, and then potentially partnering with leading global suppliers. It will help drive transformation and create jobs.\u201d<\/p>\n
Encouragingly, the car manufacturers, also known as original equipment manufacturers (OEMs), have committed to funding a Transformation Fund, which will help in part to facilitate the entry of BEE participants in the supply chain.<\/p>\n
Khantse Radebe, general manager for corporate clients at WesBank said: \u201cSouth Africa currently contributes 0.7% of the global automotive manufacturing industry value. We would like to see this number trending upwards.\u201d<\/p>\n
Andrew Kirby, keynote speaker at the event, and president and CEO at Toyota South Africa Motors Limited said: \u201cThere\u2019s no silver bullet to these aspirations, but there are massive opportunities for growth in future.\u201d<\/p>\n
The automotive industry is currently a significant contributor to South African GDP (6.8%), with 110,000 people employed across vehicle and component manufacturers. It also has an estimated indirect impact on 1.5 million people.<\/p>\n
South Africa has also made great strides in the automotive industry\u2019s collaboration with the government. The progressive automotive policies in the country are testament to the strength of pro-government\/industry collaboration.<\/p>\n
However, the automotive industry also faces tough challenges in the form of accelerating localisation and developing a future-proof supply chain.<\/p>\n
\u201cWithout localisation, we\u2019re going to struggle to remain competitive,\u201d said Kirby.<\/p>\n
Part of SAAM\u2019s proposed solution to growing the automotive industry is to increase local content in South African assembled vehicles from around 37% [2015] to 60% by 2035.<\/p>\n
\u201cTo meet this objective, the South African automotive industry needs to create 485 new businesses in Tier 2 automotive products by 2035. Of that 50% needs to locally owned and black owned.\u201d said Woodward. Tier 2 businesses typically supply parts that end up in cars despite not selling them directly to vehicle manufacturers.<\/p>\n
To remain competitive however, South African automotive businesses need to recognise that the nature of vehicles is changing dramatically.<\/p>\n
CASE refers to new areas of \u2018Connected\u2019, \u2018Autonomous\u2019, \u2018Shared\u2019 and \u2018Electric\u2019 cars. Technological advances in these areas are greatly changing the concept of the automobile.<\/p>\n
“If we do not work tirelessly to get into this evolution of electric vehicles quicker, this production is under threat,” said Kirby.<\/p>\n
The technology needed for CASE transcends hardware and software and the ambition for SA should be to manufacture and localise these high technology cars.<\/p>\n
There are other challenges. Often car manufacturers\u2019 desire to localise is constrained or complicated by corporate sourcing policies meaning sub-components become difficult to \u201cbreak out\u201d and localise.<\/p>\n
There is also a lack of enabling infrastructure for Tier 2 automotive companies, ranging from a broad lack of access to capital, markets, technology and skill.<\/p>\n
“A deepening of localisation cannot be realised without a collective, intentional and determined drive from all parties – including the financial sector which has an important role to play in providing an enabling environment,\u201d Woodward said.<\/p>\n