NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1

24th November, 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 30th SEPTEMBER, 2003

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the third 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 third quarter of 2003 may be set out as follows –

Headcount at most of the manufacturing plants, during the quarter, remained stable. Compared to the 31 687 positions at 30th June, 2003, aggregate industry employment levels declined by 185 jobs during the third quarter of 2003.
              
2. NUMBER OF SHIFTS

An increasing number of manufacturers operate on a multi-shift basis in the production of vehicles, 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

The availability and supply of imported original equipment components, during the quarter, remained satisfactory. With prices from source countries remaining stable, the landed costs of imported components continued to benefit from the Rand’s strength.

(ii) Local Components

During the third quarter of 2003, the overall supply of local components remained satisfactory. 

Pricing of local steel based components continues to be affected by the 2003 price increase structure. Iscor Ltd have however reduced the premium price gap relative to overseas competitors.

(b) RAW MATERIALS

(i) Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good and the stronger Rand continues to have a positive effect on costs. However, global commodity and crude oil price increases are beginning to impact on costs.

(ii) Local Materials

Local raw material price movements continue to mirror international pricing trends.

4. UTILISATION OF PRODUCTION CAPACITY

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

During the quarter, overall industry capacity utilisation levels remained stable.

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
1.	Capital Expenditure
	Product, Local Content and Export Investments	1 108.7	1 072.1	1 423.9	1 775.3
	Production Facilities	202.5	727.9	887.5	836.8
	Land and Buildings	109.7	33.3	152.0	161.0
	Support Infrastructure (including I.T., research and development, 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 third quarter passenger car sales at 69 974 units recorded a substantial improvement of 8 336 units or 13,5% compared to the 61 638 new cars sold during the corresponding quarter for 2002. Combined commercial vehicle sales during the third quarter of 2003 at 33 937 units reflect a gain of 2 734 units or an improvement of 8,7% compared to 31 203 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 30 Sept 2003 compared with previous Qtr ended 30 Jun 2003	Qtr ended 30 Sept 2003 compared with corresponding Qtr ended 30 Sept 2002

Passenger Cars	+  29.5 %	(- 9.7 %)	+ 13.5 %	(- 1.7 %)
Light Commercial Vehicles	+  19.9 %	(- 7.3 %)	+ 6.0 %	(- 6.3 %)
Medium Commercial Vehicles	+ 5.2 %	(+ 16.2 %)	+ 4.0 %	(+ 16.0 %)
Heavy Commercial Vehicles	+ 23.0 %	(+ 9.9 %)	+ 51.4 %	(+ 18.5 %)

Sales in all four sectors registered significant gains during the third quarter for 2003 compared to the corresponding quarter in 2002 as well as compared to the preceding quarter ending 30th June, 2003. The rebound in the market was largely due to interest rate reductions, vehicle price stability and enticing incentives offered by manufacturers.

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

Exports	1997	1998	1999	2000	2001	2002	Jan - Sept 2003
Cars	10 458	18 342	52 347	58 204	97 599	113 025	86 914
Light Commercials	8 000	6 808	6 581	9 148	10 229	11 699	9 007
Medium & Heavy Commercials	1 111	748	788	679	465	582	358
	19 569	25 898	59 716	68 031	108 293	125 306	96 279

Automotive component exports remained under pressure, during the third quarter, as a result of the strong Rand.

As expected, sales of new motor vehicles during the second half of calendar 2003 continue to receive support from lower interest rates, further improvement in new vehicle affordability, in real terms, as a result of price restraint by manufacturers, attractive sales incentive packages and a modest improvement in the momentum of the South African economy.

Looking ahead to 2004, the combination of an expanding economy, lower interest rates and stable new vehicle prices represents a catalyst for above average growth in new vehicle sales. The expected improvement in the automotive industry’s medium term prospects have been incorporated in the updated industry sales, export and import projections through 2005 as reflected on the attached schedule.

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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