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Hilux now more local, but rand still hurts

Published Jul 26, 2016


Durban - While Toyota South Africa has increased the local component content of its new Hilux bakkie, the volatility and deterioration of the rand has affected profitability, the Durban Automotive Cluster (DAC) heard last week.

And that was because the foreign exchange has to be spent on the imported parts used in the best-selling vehicle, manufactured at Prospecton, the largest manufacturing plant on the continent.

The rand had devalued by 88% since 2012 and that ongoing situation has had an effect, Anand Pather of Toyota South Africa Motors purchasing and engineering division said at the annual meeting of the DAC at the Dube TradePort conference centre.

“While we have increased the number of localised parts, the final impact is not as desired,” Pather said.

ALSO READ: Should SA be a bakkie-building hub?

The new pick-up was launched in January and is proving so popular that demand is outstripping the supply at the moment. As well as manufacturing for the local market, Toyota has also just started exporting the bakkie to Europe.

“We are using as much local content as possible to eliminate the impact of forex as that becomes more expensive,” Pather said.

About 58% of the pick-up is made from South African-manufactured content from suppliers and Pather said the aim was to get that to 75% in about six years.

Imported engines add cost

Some imported parts were not very technically challenging either, which would provide opportunities for local suppliers.

The highest foreign exchange expenditure went on the engines, imported from Thailand. There were no local programmes for the vehicle’s engines.

Pather, who looks after Toyota’s suppliers, said he was looking forward to the creation of the proposed 1000ha KZN Automotive Supplier Park at Illovu, 16km south of the Prospecton plant. It would cut logistics costs of moving parts from Port Elizabeth and Johannesburg and reduce emissions.

The KZN provincial government recently announced it had bought the land for the R11.5 billion park and Tim Hudson, the senior manager of sales and product development at the Dube TradePort told Monday’s gathering that the land - previously owned by Illovo Sugar - had been transferred.

“Hopefully, we will speed up some processes. We need stakeholder engagement and we will plan this park to suit you,” he told delegates.

Douglas Comrie, the DA’s chief facilitator, said in his annual report that the “medium-term outlook for the industry looked challenging, but not necessarily overly negative. While domestic vehicle sales growth is of concern, the production outlook is somewhat more positive due to the growth in vehicle exports”.

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