Roy Cokayne

Capital expenditure in the motor manufacturing industry is expected to reach a record R7.9 billion this year.

But the projections for total industry car production and total new vehicle sales have both been revised downwards.

The R7.9bn projected capex is substantially higher than the R4.3bn spent last year and R4.6bn in 2012 and also exceeds the previous record expenditure of R6.2bn in 2006.

The National Association of Automobile Manufacturers of SA (Naamsa) said in its latest quarterly review of business conditions in the industry released yesterday that a proportion of capex earmarked for last year had been carried forward to this year.

This resulted in the record projected industry capex.

The review does not identify the manufacturers that intend making these investments.

Nico Vermeulen, Naamsa’s executive director, said the relatively high levels in capex in recent and future years may be attributed largely to investment projects by manufacturers in terms of the Automotive Production and Development Programme (APDP). The plan this year replaced the Motor Industry Development Programme.

The bulk of the projected capex this year at R7.2bn is earmarked for product, local content, export investment and production facilities.

The review said total industry output figures had been revised downwards by 20 000 units to 571 400 from last year but industry production, particularly of light commercial vehicles, was expected to rise significantly over the next few years on the back of the APDP.

It added that following four successive years of growth in domestic sales of new vehicles, sales projections for this year had been revised downwards because of the challenging macroeconomic environment.

Naamsa now anticipates that domestic market sales this year will fall by about 3.5 percent. It previously expected sales at best to consolidate around levels recorded last year.

However, this is not expected to diminish jobs in the sector.

Total industry employment increased by 47 jobs to 29 904 positions in March this year from the end of last year.

Employment levels should remain stable at current levels and could increase over the medium term as manufacturers ramped up production for export markets.

Vermeulen said sales this year would be affected by subdued economic growth, exchange rate induced above inflation new car price increases and higher interest rates.

He said consumer sentiment remained under pressure due to high levels of indebtedness, escalating energy and transport costs and e-tolling in Gauteng.

“These factors would influence consumer demand, principally in the case of the new car market. Pressure on disposable income was likely to cause consumers to delay replacement and opt for used vehicles.

“Incentives and discounting by dealers, prevalent over the past few years, was likely to be scaled back as the weaker rand exerted pressure on margins,” he said.

But Naamsa expects vehicle exports to benefit from improving global economic conditions and to resume upward momentum from the middle of this year. This is because of the contribution of exports of the new Mercedes-Benz C-Class.

The review said the value of total automotive industry exports increased by 8.2 percent last year to R102.7bn from 2012 to exceed the R100bn export level for the first time.

The value of vehicle and automotive component imports last year totalled R126.7bn compared with R136.1bn in 2012.