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Portfolio Committee on Trade & Industry DC Powels NAAMSA President 7 November 2012

IPAP 2012/19. Portfolio Committee on Trade & Industry DC Powels NAAMSA President 7 November 2012. IPAP 2012/19. Overview. The Global Environment SA Auto Industry in the Global Context Key trends of the SA Auto Industry Challenges facing the Auto Industry

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Portfolio Committee on Trade & Industry DC Powels NAAMSA President 7 November 2012

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  1. IPAP 2012/19 Portfolio Committee on Trade & IndustryDC PowelsNAAMSA President7 November 2012

  2. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  3. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  4. IPAP 2012/19 World Passenger Market Growth/Decline - YTD Sep 2012 vs 2011 WORLD: Market: +7,9% Central and Eastern Europe North America Western Europe 9,4% 13,5% -7,6% South America Rest of the World Asia Pacific 4,8% 7,8% 13,6% 4

  5. IPAP 2012/19 The Global Environment A strong growing trend Auto production - 1945 to 2011 (Million units) 5

  6. IPAP 2012/19 Structure of Car / CV Production by Region1970 - 2011 The Global Environment Structure in % Rest of World Japan North America Western Europe Source: VDA, IHS Global Insight, own calculations

  7. IPAP 2012/19 Ranking of Most Important Production Countries January - December 2011 The Global Environment million units Rank Change vs. previous year 2011 (2010) Cars CV Anmerkung: teilweise geschätzt Source: VDA, Polk Germany, press information

  8. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  9. IPAP 2012/19 SA Auto Industry in the Global Context SA Auto Production vs Global Production

  10. IPAP 2012/19 SA Auto Industry in the Global Context Auto exports as % of total exports

  11. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  12. IPAP 2012/19 SA Automotive IndustryDevelopment of FBU export volume - units -38% 37% 14% 3% 29% Start of MIDP Units

  13. IPAP 2012/19 SA Automotive IndustryDevelopment of Component Exports - R Bio -37% 13% 3% 10% 26% Start of MIDP

  14. IPAP 2012/19 SA Automakers (7 Car and 2 Truck Producers)New Investments R18.7 Bio Start of MIDP R Bio R10.7 Bio R7.9 Bio R5.4 Bio R5.4 Bio R5.0 Bio R5.0 Bio R4.5 Bio Total (1995 – 2013 FC) = R52.2 Bio

  15. IPAP 2012/19 Development of SA Pass. & LCV Market 1995 - 2013 FC 8% 76% 61% - 45% Units LCV Passenger

  16. IPAP 2012/19 Passenger Car Market Development - 2012 vs. 2011 8% 16% 11% 10% Units

  17. IPAP 2012/19 Passenger Car Growth by Channel YTD Oct – 2012 vs. 2011 15% -4% 6% -1% Units

  18. IPAP 2012/19 Development of Auto Production in SA - 1995 to 2012 40% 18% 48% - 33% Units 18 LCV Passenger

  19. IPAP 2012/19 Growth in Auto Industry - SA vs Global

  20. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  21. IPAP 2012/19 Supplier Cost Competitiveness Russia 107 South Korea 88 Cz. Rep 95 China 91 E. Europe 93 W. Europe 100 Thailand 92 Malaysia 94 Mexico 89 India 85 Brazil 104 RSA >110 EUR 1 : ZAR 10.50

  22. IPAP 2012/19 Is this a real threat? – Hyundai/Kia as an example Passenger Market Share Hyundai/Kia produce in South Korea (cost index 88) and India (cost index 85), ship cars to SA, pay 25% import duty and are still highly competitive in SA

  23. IPAP 2012/19 Cum Inflation cost increases: Auto Wages – 1993 to 2012 1992 – Index 100 [%]

  24. IPAP 2012/19 Exchange rate effect on Revenue Project approval in 2008 – Index 100 [%] 100 97 89 83 80 -11% 0 2008 2009 2010 2011 2012 FC Exchange Rate ZAR/ Euro 12.07 11.69 9.71 9.99 10.7

  25. IPAP 2012/19 Estimated avg Auto sector costs Inflation impacts (2008 – 2012) 2008 – Index 100 [%] 218 Electricity 140 Direct Labour 130 Indirect Labour 123 Other Overheads 93 Material 0 2008 2009 2010 2011 2012

  26. IPAP 2012/19 Combined effect of Exchange Rate + Cost Inflation Exchange rate effect on Revenue Est. avg. Auto sector costs Inflation impacts Project approval in 2008 – Index 100 Project approval in 2008 – Index 100 [%] [%] + Dramatic deterioration of export competitiveness! =

  27. IPAP 2012/19 Exporting to Sub-Saharan Africa

  28. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  29. IPAP 2012/19

  30. IPAP 2012/19

  31. IPAP 2012/19 APDP MIDP APDP • Standard materials • 25% deemed value added on local materials • PGM’s • Leather • Aluminium • Steel • Stainless Steel • Brass • Raw automotive glass • Vulnerable products • 40% deemed value added on standard materials (reducing to 25% by 2017) • Alloy wheels • Aluminium products • Cast iron components • Catalytic converters • Flexible couplings • Leather interiors • Machined brass comp. • Steel jacks • Production: • Local Market • Production: • Local Market • Production: • Local Market • Export Market • Production: • Local Market • Export Market Production Incentive (PI)

  32. IPAP 2012/19 APDP MIDP APDP • Standard materials • 25% deemed value added on local materials • PGM’s • Leather • Aluminium • Steel • Stainless Steel • Brass • Raw automotive glass • Production: • Local Market • Vulnerable products • 40% deemed value added on standard materials (reducing to 25% by 2017) • Alloy wheels • Aluminium products • Cast iron components • Catalytic converters • Flexible couplings • Leather interiors • Machined brass comp. • Steel jacks • Production: • Local Market • Export Market Duty Free Allowance (DFA) Production Incentive (PI) Vehicle Assembly Allowance (VAA)

  33. IPAP 2012/19 1995 - 2012 MIDP 2013 - 2020 APDP Export orientated program Production orientated program MIDP APDP MIDP APDP APDP • Production: • Local Market • Standard materials • 25% deemed value added on local materials • PGM’s • Leather • Aluminium • Steel • Stainless Steel • Brass • Raw automotive glass • Vulnerable products • 40% deemed value added on standard materials (reducing to 25% by 2017) • Alloy wheels • Aluminium products • Cast iron components • Catalytic converters • Flexible couplings • Leather interiors • Machined brass comp. • Steel jacks • Production: • Local Market • Export Market Duty Free Allowance (DFA) FBU Production Incentive (PI) Vehicle Assembly Allowance (VAA) FBU (EU pref. Rate) CKD

  34. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  35. IPAP 2012/19 Roadmap towards 1.2 mil units/annum and achieving international competitivenessStatus - as shown 12 months ago Legend: IPAP 2 Other 1,200,000 Enhanced International Competitiveness APDP Infrastructure Development Labour New trade agreements Productivity BRIC Ports and Rail Industrial stability Mercusor Electricity Africa (SSA) Skills / training Tariffs Fuel quality Wage Inflation MIDP Electric vehicles Local production volume per annum Beneficiation Strategy Local market growth Local Content / Global Suppliers 600,000 Domestic supply with some global and regional exports Investment Support Existing trade Agreements EU AGOA SADC Local content Development Tooling Initiative Preferential Procurement IDC 350,000 AIS Light Vehicles Vulnerable Sectors MCV / HCV APDP Domestic Market only 1995 2005 2013 2020 And Beyond

  36. IPAP 2012/19 Progress during past 12 months Legend: Reasonable progress Limited progress Substantial progress 1,200,000 Enhanced International Competitiveness APDP Infrastructure Development Labour New trade agreements Productivity BRIC Ports and Rail Industrial stability Mercusor Electricity Africa (SSA) Skills / training Tariffs Fuel quality Wage Inflation MIDP Electric vehicles Local production volume per annum Beneficiation Strategy Local market growth Local Content / Global Suppiers 600,000 Domestic supply with some global and regional exports Investment Support Existing trade Agreements EU AGOA SADC Local content Development Tooling Initiative Preferential Procurement IDC 350,000 AIS Light Vehicles Vulnerable Sectors MCV / HCV APDP Domestic Market only 1995 2005 2013 2020 And Beyond

  37. IPAP 2012/19 Overview • The Global Environment • SA Auto Industry in the Global Context • Key trends of the SA Auto Industry • Challenges facing the Auto Industry • Automotive Production Development Program (APDP) • Roadmap to 2020 • Conclusion

  38. IPAP 2012/19 Conclusion South African Vehicle Assemblers and Automotive Component Suppliers are committed to the long term sustainability of the Automotive industry and look forward to partnering with key Stakeholders to grow the industry and create jobs whilst achieving international competiveness The ability to realise the 2020 vision and production target is dependant on active engagement between the following 6 key stakeholders • NAAMSA • NAACAM • Government (Central and Provincial) • Labour / NUMSA • Transnet • IDC

  39. IPAP 2012/19 Thank You

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