How Many Cars In South Africa

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The Car Industry In South Africa

South Africa is traditionally the leader in Africa of the automotive industry and now produces more than half a million automobiles annually of all types. While domestic development of trucks and military vehicles exists, cars built under license of foreign brands are the mainstay.

The Current Situation Of The Car Industry In South Africa

The modern automotive industry in South Africa was launched in 1995 and has since provided a large number of exports. It has motivated global motor vehicle manufacturers to grant production contracts to South African factories. Companies producing in South Africa can take advantage of the low production costs and the access to new markets as a result of trade agreements with the European Union and the Southern African Development Community.

South African factories have built motor vehicles and light truck models since the 1920s. Manufacturers have historically been concentrated in the provinces of the Eastern Cape, Gauteng and KwaZulu-Natal.

Large component manufacturers with bases in the country are Arvin Exhaust, Bloxwitch, Corning and Senior Flexonics. There are also about 200 automotive component manufacturers in South Africa, and more than 150 others that supply the industry on a non-exclusive basis.

The Department of Trade and Industry’s Motor Industry Development Programme (MIDP), which ran from 1995 to 2012, provided a major boost to auto manufacturing in South Africa.

Its successor is the Automotive Production and Development Programme (APDP) which aims to achieve local production of 1.2 million vehicles annually by 2020.

Government Programs For The Car Industry

Regulations for local content requirements first appeared in the 1960s and were quite strict, and led to a limited number of cars being available to South African motorists. Beginning in the late 1960s, engines had to be built locally for the car to be considered a local product. Phase III of the requirements, for instance, was planned for introduction in the 1970s and required local content to reach 70 percent of a vehicle’s total weight. Manufacturers also received tax rebates for additional local content. Early in the program, models were often sold as “declared manufactured”, but the government gradually began enforcing the standards and imposing penalties.

The South African government has provided substantial support for the automotive industry in the past 20 years and is still identifying it as a key growth sector. In a Department of Trade and Industry (dti) Budget Vote Address delivered in July 2014, Trade Minister Rob Davies said that “given that automotive and component manufacturing comprises 30% of our industrial sector, with strong linkages to other manufacturing sub-sectors, the impact of such investment on our domestic economy is significant.”

The Department of Trade and Industry has provided a series of programs in order to assist the sector. The first of the programs—the Motor Industry Development Programme (MIDP)—was introduced in 1995. The program had the following key objectives:

Improvement of the South African automotive industry’s international competitiveness
Improvement of vehicle affordability in the domestic market
Encouragement of growth in vehicle and component manufacturing, mainly through exports
Stabilizing the employment levels in the industry
Creating a better foreign exchange balance in the industry

The program is considered a great success. Under the MIDP, the sector has been exhibiting significant growth – it almost doubled in size since 1994.

Its successor is the Automotive Production and Development Programme (APDP), which was implemented on January 1, 2013. The APDP’s main goal is to simultaneously stimulate the expansion of local production to 1.2 million vehicles a year by 2020 and increase significantly the local content. The intention is to achieve this through investments, unlike the MIDP which relied mainly on exports. According to the National Association of Automotive Component and Allied Manufacturers (NAACAM), the program has four pillars:

Import Duty
Vehicle Assembly Allowance (VAA) BP
Production Incentive (PI)
Automotive Investment Scheme (AIS)

The fourth pillar is not a new initiative but a revised incentive. The Automotive Investment Scheme (AIS) was first introduced in 2010/2011, and, since then, incentives in the public sector have amounted to R6.3 billion and supported investments worth R23 billion by original equipment manufacturers in the automotive sector.