QUARTERLY REVIEW OF BUSINESS CONDITIONS : NEW VEHICLE

MANUFACTURING INDUSTRY : QUARTER ENDED 31^ST MARCH, 2005

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the first quarter of 2005. 

1.   EMPLOYMENT LEVELS AND TRENDS 

The number of persons employed by the South African new vehicle manufacturing industry – comprising major new vehicle manufacturers as well as specialist commercial truck manufacturers – during the first quarter of 2005 may be set out as follows –                                                                                                                        

Compared to the 32 548 positions at the end of calendar 2004, aggregate industry employment levels increased by 1 110 jobs during the first quarter of 2005 to reach a total of 33 658 jobs.   This comes on top of the 1 185 new jobs created by the industry during 2004.

Principally, three large companies were responsible for the recruitment of new personnel during the first quarter of 2005.   In the main, the new jobs represent skilled positions.

2.   NUMBER OF SHIFTS

An increasing number of manufacturers operate on a multi-shift basis in the production of vehicles and components for domestic and export markets. The balance of the industry operates on a single production shift basis with a number of manufacturers operating double shifts in selected areas such as machining, press shops, paint shop operations and body shop.

3.   AVAILABILITY AND PRICE TRENDS OF COMPONENTS AND RAW MATERIALS

3.1     COMPONENTS

          Imported Components

Overall, the availability and supply of imported original equipment components, during the quarter, remained satisfactory. 

Shipping capacity availability was cited as a problem.

Prices from source remained stable. Escalating shipping and freight costs continue to impact negatively on the landed costs of imported components.

Local Components

During the first quarter of 2005, there were signs of a tightening of supply of local components due to higher local production volumes.

On pricing, local suppliers continue to experience challenges in competing with imported products which benefit from the strong Rand. Rising domestic labour, steel and fuel costs, as well as increases in global material costs, continue to be mentioned as the biggest impact on local costs.

3.2     RAW MATERIALS

Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good.   Higher global commodity, material and oil prices continue to put pressure on costs.

Local Materials

Local raw material price movements continue to mirror international pricing trends.  Generally, the availability remains stable, however, instances of shortages of local steel were reported.

The rising prices of automotive steel will have a knock on effect on local component pricing and vehicle production costs, despite cost cutting efforts by vehicle manufacturers in other areas.

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

During the first quarter, industry capacity utilisation levels in the light, medium and heavy truck manufacturing sectors rose sharply.   The industry’s capacity utilisation level in the car manufacturing segment was affected by one manufacturer reporting a low 15,3% capacity utilization.  Without this figure, the sector’s capacity utilization (for the other six manufacturers) averaged 88,7% during this quarter.