Roy Cokayne
Exports of automotive leather have been overtaken as the second most important vehicle component export category by engine and engine parts.
Shireen Darmalingam, a research analyst at Standard Bank, said there was a concern that multinational companies were choosing to source leather products from suppliers closer to the major markets.
There were also concerns that the Automotive Production and Development Programme (APDP), which will replace the Motor Industry Development Programme (MIDP) from next year, might impact negatively on export-orientated automotive component companies, such as those in the leather industry, Darmalingam said in a new Standard Bank report.
However, Darmalingam said sectors that supplied the aftermarket should benefit from the shift in policy from the MIDP to the APDP. The APDP aims to provide a production incentive rather than the export incentive that has been available in terms of the MIDP.
Darmalingam said that the National Association of Automotive Component and Allied Manufacturers reported that the component industry was continuing its steady recovery after the recession, with the value of exports increasing year on year by 18 percent last year.
But Darmalingam said this was still 20 percent below the peak in exports reached in 2008.
Catalytic converters were the top performer with export sales worth R19.1 billion, a 30 percent increase over sales in 2010.
Exports of engine and engine parts were worth R2.7bn last year and overtook exports of leather kits and parts, which were worth R2.3bn.
The Standard Bank report did not provide any other possible explanation for engine and engine part exports overtaking leather exports.
However, two local motor manufacturers have made significant investments in their engine manufacturing facilities.
Volkswagen South Africa (VW SA) invested R400 million in its engine plant as part of a R4.5bn investment in upgrading and expanding its production facilities over the four years to last year.
Following this investment, VW SA announced in March 2010 that it had been awarded contracts to export 30 000 engines to China and 8 500 engines to India.
The Ford Motor Company of Southern African launched a R3bn investment programme in 2008, with the investment split between its vehicle assembly plant and its engine plant in Port Elizabeth.
This investment increased the annual installed capacity of its engine plant to 220 000 machined components, of which 75 000 would be used for engine assembly for the Silverton plant and the balance exported.
The upgraded and expanded engine plant started production of the next-generation Puma diesel engine last year.
Darmalingam said that it appeared the APDP would go a long way in assisting the South African motor industry to advance to new levels but it was still a contested question whether the programme would benefit certain industries more than others.
“Indeed, it appears that some benefits may be in favour of large firms. Nonetheless, all firms are in line to benefit from the new APDP programme.”
She added that the South African motor industry had performed remarkably well since the introduction of the MIDP in 1995, adding that vehicle exports were almost non-existent then but by last year (they) had increased to 239 465 units.