Nissan SA's output incentive at risk

By Roy Cokayne Time of article published Jan 19, 2015

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Rosslyn - Nissan South Africa’s key local incentives are at risk.

The company is facing a challenge this year to meet the minimum 50 000 unit annual production threshold that qualifies local vehicle manufacturers for incentives in terms of the Automotive Production and Development Programme (APDP).

It has also not yet concluded negotiations with parent company Nissan Motor Company of Japan for the planned production of a new 1-ton pick-up in South Africa.

Nissan in August 2012 announced the investment of more than R1 billion into South Africa to double the production capacity at its Rosslyn assembly plant to more than 100 000 units a year and for the production of a new 1-ton pick-up for the domestic and export markets.

Nissan SA managing director Mike Whitfield, who is also responsible for the sub-Saharan African region, confirmed last week that Nissan SA had produced “just over 50 000” vehicles last year.

However, he admitted that the real issue and his concern was meeting the 50 000 unit production volume threshold this year and going forward.

“We have models getting towards the end of their lifecycle and we will only ramp up with the new model in the future. I’m not able to say when.

“We are looking at opportunities to ensure we meet it (the volume requirements) but it’s going to be a very tight call and a challenge and related to our product lifecycle,” he said.

Whitfield said meeting this target would depend on vehicle demand in the local market, Africa and the Middle East and how Nissan performed in these markets.

The Rosslyn plant currently only produces the NP200 half ton bakkie and NP300 Hardbody one-ton pick-up following the discontinuation of production of the Renault Sandero.

NEW BAKKIE DELAYED

Whitfield said their current NP300 one-ton pick-up was in the latter phase of its lifecycle and the launch of the new model had been delayed globally. Their focus now was on securing production of the new NP300 Navara one-ton pick-up, which had just been launched in Thailand.

The initial timing was for production to be set up in the course of this year at the Rosslyn plant and the model launched next year.

But Whitfield said that because of the global delay of the launch, Nissan SA was still involved in serious discussions and negotiations with its parent company about the production of the new model.

Whitfield said Nissan SA was not yet at the contract signing stage, but hoped to conclude these negotiations soon, which were aimed at optimising the utilisation of the plant’s capacity.

Nissan SA last year confirmed it was conducting a feasibility study into the possible production in South Africa of its new vehicle for the taxi industry.

Whitfield said that this study was still continuing as part of an overall study that commenced about six months ago into how it could utilise the production capacity at its plant.

“The crux is that this year, and into 2016, it’s going to be marginal in getting to the 50 000 unit production requirement. At this stage we are optimistic, but it comes down to how we can operate in Africa and the Middle East,” he said.

Whitfield stressed that if it did not achieve the production volume requirement, it would still earn the production incentive in the APDP, but lose the vehicle assembly allowance (VAA).

SUPPORT

The VAA support is in the form of duty-free import credits issued to vehicle assemblers. It is based on all compliant local production so that exported vehicles, which pay no duty on imported parts, still get the full allowance.

General Motors South Africa was also believed to be in danger last year of not meeting the 50 000 unit annual production threshold in the APDP.

Denise van Huyssteen, the communications manager at GM Africa, said it had produced more than 45 000 vehicles last year and had complied with the quarterly APDP volume requirements, because the programme provided for quarterly measurement and considered factors such as production losses caused by the run-out or ramp-up of new product programmes, as well as losses attributable to labour disruptions.

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