NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1

12th June, 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 MARCH, 2003

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the first quarter of 2003.

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 first quarter of 2003 may be set out as follows -

Headcount at all the manufacturing plants, during the quarter, remained stable.  Compared to the 31 705 positions at the end of 2002, aggregate industry employment levels declined by a nominal 24 jobs during the first quarter of 2003.
              
2. NUMBER OF SHIFTS

Various vehicle 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 quarter, remained satisfactory.  Prices from source country continued stable and landed costs of imported components became more competitive as the Rand strengthened.

(ii) Local Components

During the first quarter of 2003, the supply of local components generally remained satisfactory.  A vast improvement in the quality and delivery of plastic painted parts (where problems had previously been experienced) was reported.

Pricing of local components continued to escalate especially steel and plastic based components.

(b) RAW MATERIALS

(i) Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good and the stronger Rand had a positive effect on costs.

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.

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 - are as follows -

	R Millions
	2000	2000	2001	2003 Projection
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

2003 first quarter passenger car sales totalled 59 863 units which represents an improvement of 373 units or 0,6% compared to the 59 490 new cars sold during the corresponding quarter for 2002.   Combined commercial vehicle sales during the first quarter of 2003 at 29 931 units reflect a fall of 165 units or 0,5% compared to     30 096 units sold during the corresponding quarter of 2002.


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

	Qtr ended 31 Mar 2003 compared with previous Qtr ended 30 Dec 2002	Qtr ended 31 Mar 2003 compared with corresponding Qtr ended 31 Mar 2002

Passenger Cars	+  7.8 %	(- 9.9 %)	+ 0.6 %	(- 6.1 %)
Light Commercial Vehicles	+10.0 %	(- 13.2 %)	- 1.3 %	(- 22.7 %)
Medium Commercial Vehicles	- 14.5 %	(- 0.2 %)	- 1.7 %	(+ 14.2 %)
Heavy Commercial Vehicles	+ 3.8 %	(+ 8.2 %)	+ 11.3 %	(+ 6.2 %)

Despite prevailing high interest rates and a modest slow down in economic activity levels, new vehicle sales during the first quarter of 2003 held up extremely well with the continuing strength in sales of new trucks and buses a noteworthy feature.

 Industry vehicle exports continued to perform reasonably well, as illustrated by the following figures -

Exports	1997	1998	1999	2000	2001	2002	Jan-Mar 2003
Cars	10 458	18 342	52 292	58 204	97 599	113 025	26 121
Light Commercials	8 000	6 808	6 504	9 148	10 229	11 699	3 171
Medium & Heavy Commercials	1 111	748	787	679	465	582	110
	19 569	25 898	59 583	68 031	108 293	125 306	29 402

Component Exports, however, came under pressure, during the quarter, as the Rand strengthened well above generally projected levels.

Whilst the second quarter of 2003 was shaping up as difficult for the industry - the strength of the Rand, prospects of lower inflation and an expected easing in interest rates, tax relief announced in the budget, stable and sound macroeconomic policies and the general resilience of the economy – were expected to support improved demand for new vehicles during the second half of 2003.

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

Projections for domestic sales have been the subject of marginal downward revisions.

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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