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OPINION | Here's why South African car exports should recover

2020-05-13 11:30

Lance Branquinho

toyota hilux

Image: Motorpress

The newly gazetted motor industry lockdown regulations are a glimmer of hope amidst the Covid-19 economic disaster. 

For South Africans desperate to trade down, the anxiety of having to pay instalments on a vehicle they can no longer comfortably afford is ending. 

The phased approach announced by Minister Ebrahim Patel sees dealerships running at 30% staff capacity, increasing to 60% and finally restoring 100% of staff on-site, by June 8. 

With initial social distancing limits calculated by floor space, larger dealerships will be at an initial advantage. The reinstatement of trading in new and used cars will not only lessen the burden of anxiety felt by many South Africans about their monthly budget it will also stimulate crucial economic activity. 

isuzu dmax pe plant

Image: Motorpress

We need to start building – again

The South African motoring retail space is important, but for the country, automotive assembly is of even greater value. It accounts for 30% of the country's manufacturing output. 

Local manufacturing has waned over the last decade, with the only notable investment in new jobs and infrastructure, being from BMW, Ford, Nissan, Isuzu, Mercedes-Benz, Toyota and VW. Some automotive assembly restarted last week but swiftly getting to 100% capacity is vital. 

Automotive exports earn South Africa precious foreign currency. This is especially urgent at a time when the Rand is weak and earnings per vehicle exported, increasing in value.

We build what the world wants 

There is so much uncertainty about what a reawakening of the world economy might hold. The consensus is that buyers of all products will be more price-sensitive and seek greater value. 

In the automotive realm, that means buying-down is going to become a trend for many months, and South Africa vehicle factories have an advantage: we build what global customers want. Our portfolio of locally-built export vehicles will continue to be in demand, even in an economically pressured post-lockdown world. 

South Africa does not assemble overly niche or ultra-luxury vehicles. That means any global trend to buy-down, will not affect us much. 

Emerging markets and oil-producing countries are going to be impacted most, whilst developed markets such as the US and EU, should recover better, and retain more robust demand for new vehicles. Analysing what South African automotive production assets build, and where they go, we are in a great position to export strongly as lockdown lifts.

Ford Silverton Assembly Plant

Image: Quickpic

BMW's X3 is built in Rosslyn and exported to Europe. It serves as an excellent substitute for buyers in X5s, who are wishing to trade down due to budgetary pressure. 

The same can be said for Mercedes-Benz's export program in East London, which builds C-Class for both right- and left-hand drive markets, delivering to 80 countries. With Mercedes-Benz's local production distributed to such a diverse number of markets, it can spread its demand risk.

Although sedans have been under pressure from SUVs and crossovers, in America the four-door body style remains popular. As Mercedes-Benz E-Class customers muse the potential of trading down, it will be into C-Class sedans, supplied in part, by South Africa. 

Both Ford and Toyota's bakkie exports should prove robust too, with Ranger and Hilux being utility vehicles used in a variety of roles: mining, agriculture, civil engineering and supply logistics. All industries which should restart strongly as lockdown regulations ease. 

South Africa's biggest vehicle exporter, in volume, is VW. The German company's Uitenhage plant assembles Polos for global right-hand drive markets, such as the UK, Japan and Australia. It also produces left-hand drive Polos, for Europe. 

All those Polo target markets are strong economies, where the compact hatchback should be very much in demand, as brand loyal VW buyers seek value.

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