NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1

17th April, 2003

The Director-General
Department of Trade and Industry
Private Bag X84
PRETORIA
0001

QUARTERLY REVIEW OF BUSINESS CONDITIONS : NEW VEHICLE
MANUFACTURING INDUSTRY : QUARTER ENDED 31st DECEMBER, 2002

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the fourth quarter of 2002.

1. EMPLOYMENT LEVELS AND TRENDS

The number of persons employed by the South African new vehicle manufacturing industry - comprising seven major new vehicle manufacturers and eight specialist commercial vehicle manufacturers - during the fourth quarter of 2002 may be set out as follows -

With the exception of two employers which reported moderate retrenchments, headcount at manufacturing plants, during the fourth quarter, remained stable.

NAAMSA, together with the Automotive industry Export Council, has initiated a project to establish the employment levels and trends in the automotive industry since 1996 to date.  Over 400 companies involved in the production, supply and/or export of automotive components/materials have been approached to participate.
              
2. NUMBER OF SHIFTS

A number of major manufacturers operate on a multi-shift basis in the production of cars, principally for export markets. 

The balance of the industry tends to operate on a single production shift basis, although a number of manufacturers operate double shifts in selected areas. (Machining areas, press shops, paint shop operations and body shop).


3. AVAILABILITY AND PRICE TRENDS OF COMPONENTS AND RAW MATERIALS

(a) COMPONENTS

(i) Imported Components

Overall, the availability and supply of imported original equipment components, during the fourth quarter of 2002, remained satisfactory.  Prices from source country continued stable, however, landed costs in South Africa remain a function of exchange rate movements.

(ii) Local Components

During the fourth quarter, the supply of local components generally remained satisfactory with the exception of plastic painted parts where delivery and quality problems continue to be experienced.

Pricing of local components continued to be affected by local suppliers applying for recovery of cost increases - fuel, energy, steel - including recovery of foreign exchange related costs.

(b) RAW MATERIALS

(i) Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good and prices remain a function of material prices on the London Metal Exchange and exchange rate movements.

Significant worldwide price increased in Polyurethanes were evident and are impacting local pricing negatively.  Rising prices of petrochemical based materials were also evident.

(ii) Local Materials

Local raw material price movements continue to mirror international pricing trends. In the case of Iscor steel products, the planned double digit percentage price increase remains an issue of concern and is the subject of ongoing discussions between the auto industry and the steel supplier.

4. UTILISATION OF PRODUCTION CAPACITY

Average motor vehicle assembly industry capacity utilisation levels, for the periods indicated, may be illustrated as follows -

During the fourth quarter, industry capacity utilisation levels held up well with further improvement evident in car and light commercial vehicle manufacturing operations.

On an annual basis capacity utilisation rates improved significantly in the car, light and heavy commercial vehicle manufacturing sectors.

5. NEW INVESTMENT/INVESTMENT APPROVALS : 2002 ACTUAL AND 2003 PROJECTION

NAAMSA reports the industry's aggregate capital expenditure on an annual basis. Details of actual industry capex for 2000, 2001 and 2002, in Rand millions, as well as the projection for 2003 may be shown as follows -

				Projection
	2000	2000	2001	2003
Product, Local Content and Export Investments	1 108.7	1 072.1	1 423.9	1 775.3
Plant, Machinery and Production Facilities	202.5	727.9	887.5	836.8
Land and Buildings	109.7	33.3	152.0	161.0
OEM Support Infrastructure (including research and development/engineering/ technical)	140.6	244.9	262.4	350.0
TOTAL	1 561.5	2 078.2	2 725.8	3 123.1

6. BUSINESS CONDITIONS

2002 fourth quarter passenger car sales totalled 55 511 units which represents a decline of 3 610 units or 6.1% compared to the 59 121 new cars sold during the corresponding quarter of 2001. Combined commercial vehicle sales during the fourth quarter of 2002 at 27 674 units reflect a fall of 6 759 units or 19.6% compared to 34 433 units sold during the corresponding quarter of 2001.

Industry Domestic Sales Growth : Direction and Extent of Change
(Previous quarter's percentage changes are reflected in brackets)

	Qtr ended 31 Dec 2002 compared with previous Qtr ended 30 Sept 2002	Qtr ended 31 Dec 2002 compared with corresponding Qtr ended 31 Dec 2001

Passenger Cars	- 9.9 %	(+ 12.1 %)	- 6.1 %	(+ 0.9 %)
Light Commercial Vehicles	- 13.2 %	(+ 6.0 %)	- 22.7 %	(+ 3.2 %)
Medium Commercial Vehicles	- 0.2 %	(+ 17.2 %)	+ 14.2 %	(+ 10.7 %)
Heavy Commercial Vehicles	+ 8.2 %	(- 3.7 %)	+ 6.2 %	(- 0.9 %)

New vehicle sales during the fourth quarter of 2002 reflected a mixed picture characterised by weak passenger car and light commercial vehicle sales and strong sales of medium commercials as well as of heavy trucks and buses.

The industry's fourth quarter performance measured in terms of sales volumes, reflected the impact of higher interest rates and above average new vehicle price adjustments during 2002.  However, the resilience in sales of new medium and heavy commercial vehicles confirm the improved fixed investment sentiment in the economy and underscores the positive medium term outlook for the economy and the automotive industry.

Industry vehicle exports during 2002 performed well.  As illustrated by the following figures, in aggregate terms, exports of South African produced vehicles rose by 17 103 or 15.7% during 2002 compared to 2001 -

Exports	1997	1998	1999	2000	2001	2002
Cars	10 458	18 342	52 292	58 204	97 599	113 025
Light Commercials	8 000	6 808	6 504	9 148	10 229	11 699
Medium & Heavy Commercials	1 111	748	787	679	465	582
	19 569	25 898	59 583	68 031	108 293	125 306

Using sales of South African produced vehicles together with export sales as a proxy of now vehicles production in South Africa - vehicle production in South Africa decreased a mere 0.6% in 2002.  Global vehicle production improved by 4.7% during the same period.  The following figures are relevant -

	2000	2001	2002	% Change 2002 / 2001
World Production (units)	58 058 921	55770 001	58 784 587	+ 4.7 %
South African Production (units)	357 364	407 036	404 441	- 0.6 %
South African Production as a %tage of World Production	0.61 %	0.73 %	0.69 %

Regarding the outlook for 2003 - the current strength of the Rand, prospects of lower inflation and an easing in interest rates, tax relief announced in the budget, stable and sound macroeconomic policies and the general resilience of the economy - should support improved demand for new vehicles, particularly during the second half of 2003.  On the assumption of GDP growth rate for 2003 in the range of 3 - 3½%, new vehicles sales are expected to record modest growth for the year as a whole.  Continued growth, albeit at a more subdued pace, in exports of built up vehicles, automotive components, parts and accessories is also anticipated during 2003.

Updated industry sales and import projections through 2005 are reflected on the attached schedule (see Attachment 1, below).

Yours sincerely,

N.M.W. VERMEULEN
DIRECTOR

Attachment 1  -  Industry Vehicle Sales, Export and Import Data :  1995 - 2005
(click to view)

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