NAAMSA - 2005 QUARTERLY REVIEW OF BUSINESS CONDITIONS - by RGT

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   (e-mail)
28th February, 2006

 

To:     REPRESENTATIVES AT GENERAL MEETINGS 

 

Gentlemen,

 

QUARTERLY REVIEW OF BUSINESS CONDITIONS :

MOTOR VEHICLE MANUFACTURING INDUSTRY : 4TH QUARTER, 2005
 

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 2005, as submitted to the Director-General, Department of Trade and Industry. 

Latest industry vehicle sales, export and import statistics for 1995 through 2007 are reflected on the attachment to the submission.
 

Key features  

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  
28th February, 2006

                                                                                                                         

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, 2005

 

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

1.   EMPLOYMENT LEVELS AND TRENDS

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

 

 

Industry Total

 

Last pay week October, 2005

34 849

Last pay week November, 2005

35118

Last pay week December, 2005

35 137

Compared to the 34 604 positions at the end of September 2005, aggregate industry employment levels increased by 533 jobs during the fourth quarter of 2005 to reach a total of 35 137 jobs – the highest aggregate industry level in the past seven years.

Two major companies recruited new personnel during the fourth quarter of 2005. Employment at other industry employers remained stable during the quarter.

During calendar 2005 the industry created 2 589 new jobs – an improvement of 8,0% relative to 32 548 head count at the end of 2004. Since the beginning of 2004, 3 744 new jobs have been created in the industry – an increase of 12,0% in aggregate industry employment levels over the past 2 years.

 

2.   NUMBER OF SHIFTS

The trend is for vehicle manufacturers to operate on a multi-shift basis in the production of vehicles and components for domestic and export markets. A number of manufacturers operate on a single production shift basis, whilst the majority operates double shifts in selected areas such as machining, press shops, paint shop operations and body shop. In some instances, three shift operations take place.

 

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 fourth quarter, remained good.

During the quarter, the landed cost of imported components continued to benefit from the strong Rand. Prices from source remained stable except for certain grades of steel and oil based products - rubber, plastics, lubricants – which continued to be affected by increases in the price of crude oil. An increase in shipping costs was reported. 

        Local Components 

During the fourth quarter of 2005, capacity constraints were again noted, in certain instances, due to the tightening of supply of local components as a result of higher local vehicle production volumes.

Increased in prices of lead, copper, fuel and imported steel base components continued to impact on local component costs. 

3.2   RAW MATERIALS 

        Imported Materials 

Generally, the availability of imported raw materials, where applicable, remained good. Rising global commodity and oil prices continue to exert upward pressure on costs.

Internationally, prices of non-specialised steel softened during the quarter. 

        Local Materials 

Local raw material price movements continue to mirror international pricing trends. Generally, the availability remains good. Price increases on all local automotive steed grades were implemented from the beginning of 2006. 

 

4. UTILISATION OF PRODUCTION CAPACITY

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

 

 

Year

2000

Year

2001

Year

2002

Year

2003

Year

2004

Year

2005

4th  Qtr

2005

4th Qt 2005 Range

High

Low

Cars

66,1%

72,2%

73,2%

77,2%

79,7%

81,1%

86,2%

106,1%

47,4%

Light Commercials

60,2%

62,6%

70,6%

69,6%

72,1%

79,9%

74,9%

  98,0%

55,0%

Medium Commercials

64,2%

69,8%

67,8%

60,7%

57,2%

84,4%

89,5%

100,0%

79,0%

Heavy Commercials

74,8%

78,1%

85,7%

85,6%

86,0%

95,9%

91,3%

100,0%

75,0%

During 2005, industry average capacity utilisation levels rose to record levels.

The South African new manufacturing industry’s average capacity utilization levels remain well above international benchmarks.

 

5.   NEW INVESTMENT/INVESTMENT APPROVALS : 2004 ACTUAL AND 2005 PROJECTION 

NAAMSA reports the industry’s aggregate capital expenditure on an annual basis. Details of actual industry capex for 2000 through 2005, in Rand millions, as well as the projection for 2006 – are as follows –

 

 

R Millions
Capital Expenditure

2000

2001

2002

2003

2004

2005

2006 Projection

Product/Local/Content/Export Investment/ Production Facilities

1 311,2

1 800,1

2 311,4

1 989,4

1 816,3

2 805,3

7 369,5

Land and Buildings

109,7

33,3

152,0

141,5

129,6

512,1

669,8

Support Infrastructure (I.T., R&D, Technical, etc.)

140,6

244,9

262,4

193,9

273,7

258,7

374,6

Total

1 561,5

2 078,3

2 725,8

2 324,8

2 219,6

3 576,1

8 413,9

 

Over the past two years, the strong Rand would have contributed to lowering the cost of imported capital equipment (machinery/production technology). In the case of one major OEM, some capital expenditure originally earmarked for 2005 would have been carried forward to 2006 as work in progress.

All the major seven OEM’s and two truck manufacturers participated in the survey. Seven manufacturers project increased capex for 2006.

 

6.    BUSINESS CONDITIONS AND PERFORMANCE INDICATORS 

Business Conditions : Fourth Quarter, 2005  

2005 fourth quarter passenger car sales at 98 506 units recorded an improvement of 17 801 units or 22,0% compared to the 80 705 new cars sold during the corresponding quarter for 2004. Combined commercial vehicle sales during the fourth quarter of 2005 at 48 448 units reflected a gain of 9 094 units or an improvement of 23,1% compared to 39 354 units sold during the corresponding quarter of 2004.
 

 

Industry Domestic Sales Growth : Direction and Extent of Change

(Previous quarter’s percentage changes are reflected in brackets)

 

Qtr ended 31 Dec 2005 compared with previous Qtr ended 30 Sept 2005

Qtr ended 31 Dec 2005 compared with corresponding Qtr ended 31 Dec 2004

Passenger Cars

- 4,5%

(- 3,5%)

+ 22,0%

(+ 27,2%)

Light Commercial Vehicles

- 6,0%

(- 1,2%)

+ 22,4%

(+ 37,1%)

Medium Commercial Vehicles

+ 2,3%

(- 0,5%)

+ 38,0%

(+ 34,4%)

Heavy Commercial Vehicles

- 9,7%

(+ 2,7%)

+ 18,9%

(+ 27,2%)

 

New vehicle sales during the fourth quarter were characterised by further strong upward momentum with sales in all four sectors registering strong, double digit gains compared to the corresponding quarter in 2004.

The strength in the market remains a function of the favourable interest rate environment, vehicle price stability, attractive incentives offered by manufacturers and a positive economic environment.

 

New Vehicle Export Performance : 2005

Following a subdued performance during the first half of 2005, export sales of South African produced motor vehicles rose substantially from the middle of 2005 as a result of existing and new vehicle export programmes.

Higher projected exports of cars and particularly light commercial vehicles should contribute to record export sales during 2006. Overall exports are projected to improve by some 50%.

The following vehicle export statistics summarize the industry’s past and projected export sales performance -

 

 

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

(Projection)

Cars

10 458

18 342

52 292

58 204

97 599

113 025

114 909

101 445

113 899

145 000

Light  Commercials

8 000

6 808

6 504

9 148

10 229

11 699

11 283

9 360

25 589

65 000

Medium & Heavy Commercials

1 111

748

787

679

465

582

469

448

424

400

Total Exports

19 569

25 898

59 583

68 031

108 293

125 306

126 661

111 253

139 912

210 400

  

Industry Prospects : 2006
 

During 2005, South Africa was probably the best performing market internationally. Calendar 2005 represented another outstanding and record year for the South African new vehicle manufacturing industry with both domestic sales and production rising to all time highs.

The combination of strong economic fundamentals should serve to support the positive momentum in the South African economy and demand for new motor vehicles during 2006.

GDP growth of around 5%, strong business confidence and corporate profitability, positive consumer sentiment driven by low inflation, stable interest rates and continued expected improvement in vehicle affordability – should serve to support demand for new motor vehicles during 2006. Moreover, car rental business (boosted by higher levels of economic activity and tourism) and government business (driven by increased investment in infrastructure development and basic services delivery) are also likely to remain strong.

Following the record sales in 2005 and given the considerations outlined – industry sales projections for 2006 anticipate further improvement in sales volumes of about 10% for the year. Importantly, domestic new vehicle production will receive a substantial boost from higher domestic sales and particularly from the projected significant increase in industry vehicle exports and industry output should rise to over 615 000 vehicles compared to the production figure in 2005 of 525 271 units.

Despite the challenges of global production over capacity and the strong Rand – 2006 aggregate new vehicle exports should reach over 210 000 units, an improvement of about 70 000 vehicles or close on 50% on the 139 912 vehicles exported in 2005.

Prospects generally remain positive and this is reflected in the projections in the attached schedule.

 

Yours sincerely,  

N.M.W. VERMEULEN

DIRECTOR

sdb

28th February, 2006

   

Attachment 1  -  Industry Vehicle Sales, Export and Import Data :  1995 - 2007
(click to view)

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