South Africans love cars as much as Emiratis do; sweeping roads amid vivid scenery make it ideal road-tripping country and, for motor manufacturers, it is a great base from which to export to the rest of the world.
Seven of the major manufacturers are already present with assembly lines. BMW, Mercedes, Ford, GM, Nissan/Renault and Volkswagen manufacture for both the local and international markets.
BMW’s plant near the capital Pretoria has for years produced 3 series cars for the United States, and recently said it would now switch to building the X3 4x4 instead. The German company will spend 6 billion rand (Dh1.5bn) upgrading its plant in order to do so.
“They are looking at Africa, where demand for luxury vehicles that can handle poor road conditions is growing,” says Ryan Bax, an industry analyst at Frost and Sullivan in Cape Town.
“South Africa is ideal as a base for manufacturing because of good infrastructure, port facilities and a relatively stable power supply.”
In April, BMW opened its second M dealership globally in Pretoria; the “M” being for motorsport. The M marque are a range of high-performance vehicles similar to the safety car used on the current F1 racing calendar.
The latest maker to take advantage of the Africa factor is Chinese producer Beijing Automobile International Corporation (BAIC). In late April the firm said it would build an 11bn rand factory in Port Elizabeth, on the east coast.
BAIC is one of the largest manufacturers in China, selling 2.5 million units in 2014, according to the company’s website.
The announcement comes as South Africa struggles to grow its economy amid a fall in commodity sales, traditionally its most important export product.
Activity in South Africa’s private sector shrank again in April, albeit at a slower pace than it had in the previous month, as output and new orders fell and companies cut jobs to the greatest extent on record, a survey showed yesterday.
The Standard Bank Purchasing Managers’ Index (PMI), compiled by Markit, edged up to 47.9 in April from 47 in March but remained below the 50 mark which indicates expansion.
“Output has been in contraction for 12 consecutive months and companies’ intentions to downscale are evident from the employment index falling to its lowest recorded level since the inception of the series,” says the Standard Bank economist Kuvasha Naidoo. “This could be due to a combination of both wage increases, which rose at a faster pace, as well as declining demand.” Businesses are feeling the pressure of slowing growth in Africa’s most industrialised economy. The Treasury cut its 2016 growth forecast to 0.9 per cent in February from the 1.7 per cent forecast earlier. The economy has struggled to create new jobs, leaving South Africa saddled with a chronically high unemployment rate of around 25 per cent of the labour force.
The automotive industry contributes 7.2 per cent of South Africa’s GDP, accounting for 3.8 trillion rand in 2014, according to National Association of Automobile Manufacturers of South Africa. Car exports then, are vital to South Africa’s economy. The competition is fierce though.
The vast majority of cars sold across Africa are used vehicles, mostly from Japan and Europe. They are bought by dealers who cram them into containers which are then shipped to Lagos, Mombasa and Accra. Once cleared through customs, dents and dings are beaten out, and they are sold for a few hundred dollars a car.
However a growing middle class wants the prestige of a brand new vehicle. At the same time, ride sharing services such as Uber are growing in major cities, and drivers need late model cars to sign up.
Kenya has about 1,000 Uber vehicles on the road, South Africa 4,000, and it has recently launched in Abuja, Nigeria’s capital.
* with Reuters
