South Africa was ranked fifth-best choice for investment by car makers globally, placing behind China, India, Russia and Brazil, according to the latest KPMG global auto executive survey.
Among manufacturers in the Brics bloc of Brazil, Russia, India, China and South Africa, South Africa is seen as the third-best investment choice, beating Brazil and Russia.
The survey report is based on interviews with 200 senior executives from global leading automotive companies.
Indian manufacturer Mahindra & Mahindra again confirmed its aim to deepen its roots in Africa through the establishment of a production facility in South Africa.
Ashok Thakur, the chief executive of Mahindra & Mahindra, was quoted as stating that it had been conducting trials on the assembly of cars imported in kit form.
“The logical next step for Mahindra would be to start production in South Africa, something that has been under consideration for a while. However, to make such a commitment, the economic and political landscape needs to be right, so we are looking towards [when] automotive industry growth [is] back to the pre-recession levels,” he said.
Costs were considerably higher in South Africa because of higher wages, energy and in some cases commodities “so even taking into account a 25 percent import tariff, it still makes business sense to produce vehicles in India and import them to South Africa”.
The survey also revealed that South Africa was ranked eighth among the top eight countries in terms of the expected rate of increase in domestic vehicle sales and increase in production, with 60 percent of executives at original equipment manufacturers expecting sales in South Africa to increase, while 52 percent expected vehicle production in the country to rise.
Gavin Maile, KPMG’s Africa head of automotive, said yesterday that this was the first time South Africa had been highlighted as an investment destination in the annual global survey report.
This was a direct result of the government’s commitment to retain, support and grow the existing manufacturers and component suppliers operating in the country through the new Automotive Production and Development Programme, Maile said.
Some of the Brics countries, especially China, were forecasting to invest in South Africa.
“We haven’t really seen any big moves on that yet so I think that is something to come.”
Ashleigh Raine-Botha, an industry research manager at KPMG, said the automotive industry was being shaped by the rise of the developing markets, e-mobility and the changing urban environment.
She said consumers were looking for more efficient, longer-lasting cars, primarily to save costs.
The survey revealed only 11 percent of respondents believed battery electric vehicles would attract the most consumer demand for green technologies by 2018, compared with 36 percent for plug-in hybrids, 20 percent for non plug-in hybrids and 17 percent each for battery electric vehicles with a range extender and fuel cell electric vehicles.
Despite new technological developments, the survey also revealed that internal combustion engine downsizing would be the leading solution for the foreseeable future.