NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1 (e-mail)

15^th March, 2004

To: REPRESENTATIVES AT GENERAL MEETINGS

Gentlemen,

QUARTERLY REVIEW OF BUSINESS CONDITIONS :
MOTOR VEHICLE MANUFACTURING INDUSTRY : 4TH QUARTER, 2003

The ATTACHED, for information purposes, is a copy of NAAMSA’s quarterly review of business conditions for the South African motor vehicle manufacturing industry, during the fourth quarter of 2003, as submitted to the Director-General, Department of Trade and Industry.

Updated industry vehicle sales, export and import statistics for 1995 – 2005 are reflected on the attachment to the submission.

N.M.W. VERMEULEN
DIRECTOR
sdb
 

 

NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007
TELEPHONES:	(012) 323-2980/1 – 323-2003
TELEFAX:	(012) 326-3232
WEB ADDRESS:	www.naamsa.co.za
E-MAIL ADDRESS:	naamsa@iafrica.com
OFFICES:	1st FLOOR, NEDBANK PLAZA
	Cnr CHURCH AND BEATRIX STREETS
	ARCADIA, PRETORIA 0083

N8/1

15th March, 2004

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

              
Dear Sir,

QUARTERLY REVIEW OF BUSINESS CONDITIONS : NEW VEHICLE
MANUFACTURING INDUSTRY : QUARTER ENDED 31ST DECEMBER, 2003 


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

Headcount at all of the manufacturing plants, during the quarter, remained stable. Compared to the 31 502 positions at 30th September, 2003, aggregate industry employment levels declined by 139 jobs during the fourth quarter of 2003. The monthly average industry employment complement during calendar 2003 was 31 599.


2. NUMBER OF SHIFTS

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

3.1 COMPONENTS

(i) Imported Components

Overall, the availability and supply of imported original equipment components, during the quarter, remained satisfactory. Prices from source remained stable and landed costs of imported components continued to benefit from the Rand’s strength.

(ii) Local Components

During the fourth quarter of 2003, the overall supply of local components remained satisfactory. Quality and supply problems in respect of rubber parts were reported.

Pricing of local steel based components continued to be affected by the 2003 price increase structure. Excessive price increases in respect of steel wheels were reported.

3.2 RAW MATERIALS

(i) Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good. However, global commodity and crude oil price increases are beginning to impact on costs, offsetting the effect of the improvement in the exchange rate.

(ii) Local Materials

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


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 showed improvement particularly in the car manufacturing sector.

5. NEW INVESTMENT/INVESTMENT APPROVALS : 2003 ACTUAL AND 2004 PROJECTION

NAAMSA reports the industry’s aggregate capital expenditure on an annual basis. Details of actual industry capex for 2000 through 2003, in Rand millions, as well as the projection for 2004 – are as follows –

The decline in the Industry’s 2003 capital expenditure, in Rand terms, is predominantly a function of the strong Rand which would have resulted in lower costs of imported capital equipment (machinery/production technology). Furthermore, in certain instances, capital expenditure originally earmarked for 2003 would have been deferred to 2004.


6. BUSINESS CONDITIONS, PRODUCTION AND EXPORT PERFORMANCE INDICATORS

Business Conditions : Fourth Quarter, 2003

2003 fourth quarter passenger car sales at 63 413 units recorded a substantial improvement of 7 902 units or 14,2% compared to the 55 511 new cars sold during the corresponding quarter for 2002. Combined commercial vehicle sales during the fourth quarter of 2003 at 28 927 units reflect a gain of 1 253 units or an improvement of 4,5% compared to 27 674 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 Dec 2003 compared with previous Qtr ended 30 Sept 2003	Qtr ended 31 Dec 2003 compared with corresponding Qtr ended 31 Dec 2002

Sales in all four sectors registered gains during the fourth quarter for 2003 compared to the corresponding quarter in 2002. The strength in the market was largely due to interest rate reductions, vehicle price stability and enticing incentives offered by manufacturers. The decline in 2003 fourth quarter versus third quarter sales was largely attributable to seasonal factors.

Export Performance

On the back of the strong Rand and highly competitive global market conditions, the momentum of vehicle exports continued to soften throughout most of 2003. Aggregate industry vehicle exports during 2003 increased by 1 355 units or 1,1% to 126 661 units compared to the 125 306 vehicle exports in 2002. In revenue terms, vehicle exports during 2003 would have approximated R19,5 billion. The following annual vehicle export statistics are relevant –

The industry’s 2004 built-up vehicle export performance would be closely allied to conditions in the global economy and current projections for 2004 suggested an improvement in exports of about 11 000 units or 8,5%.

Production Data : International and South Africa

Using sales of South African produced vehicles together with export sales as a proxy of new vehicle production in South Africa - we note that world vehicle production improved by 2,9% in 2003 and vehicle production in South Africa increased by 4,2%. The following figures are relevant –

7. INDUSTRY PROSPECTS FOR 2004 

The performance of the South African automotive industry remains closely allied to that of the overall South African economy which, to a large extent, depends on the performance of the global economy. In this regard, prospects of above average growth in the United States on the back of accommodative monetary policy and the stimulus provided by significant tax cuts, initial signs of recovery in Europe and Japan and continued strong growth in China – should serve to enhance global growth during 2004 which in turn should benefit South Africa’s prospects as a result of growth in commodity prices and improved demand for South African manufactured products. These developments, together with continued strong domestic consumer demand and positive domestic investment sentiment, will serve to support demand for new motor vehicles which is expected to continue to grow at a healthy pace in 2004, particularly during the first half of the year.

In fact, during 2004, the South African automotive new car and commercial vehicle markets could be on track for an exceptional year – one of the best since the mid 1980’s.

Generally positive consumer sentiment, strong replacement demand for medium and heavy commercial vehicles, enhanced overall new vehicle affordability in real terms as a result of stable new vehicle prices and expected further reductions in interest rates – provide an environment for above average growth in new vehicle sales, which, together with an improving economy, potentially could come close to recording double digit growth in industry sales volumes in 2004.

These considerations have been factored into the Industry’s 2004 and 2005 projections reflected in the attached schedule.

Yours sincerely,

N.M.W. VERMEULEN
DIRECTOR
sdb
15th March, 2004 

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

Back to http://www.naamsa.co.za/papers/