October 30, 2014
MARKET FOCUS: SOUTH AFRICA
With a population of 54 million people, and an annual GDP of $371 billion, South Africa is considered the most developed of the African economies. The country is politically stable, has a well-capitalised banking system, abundant natural resources, well developed infrastructure and regulatory systems, advanced research and development capabilities, and a large established manufacturing base.
With its newly acquired membership of the BRICS group of nations (joining Brazil, Russia, India and China), South Africa is viewed as the gateway to the rest of Sub-Saharan Africa.
The South African automotive industry is the largest on the continent, and plays a vital role in South Africa’s economy as the sector accounts for about 10% of South Africa’s manufacturing exports. Local sales in 2013 reached 620,000 vehicles overall. Approximately 550,000 vehicles were produced locally in that year, with total vehicle exports standing at 275,822. Domestic production of vehicles in 2014 is expected to rise about 11% to 611,000 vehicles. While year-on-year sales figures have remained positive, the growth rate has been increasingly sluggish since 2009.
The South African market offers a great variety of vehicles, with over 50 manufacturers represented, and over 2,000 variants of cars, recreational vehicles and light commercial vehicles currently available. In terms of market share by brand, Toyota and Volkswagen consistently lead the field, with a combined share of a third of the market. These strong sales have been built upon their extensive product line-ups, with both brands being very well represented in the larger volume segments, and supported by local production facilities. Some differences do exist however, with Volkswagen having a greater share of the key entry-level small hatch and sedan segments, while Toyota has the strongest presence in the light-commercial segments.
Other brands with a significant and established market share, supported by a wide market presence, include Ford and Nissan. The premium German brands Mercedes-Benz and BMW also have a substantial market share in South Africa. Other trends in the market over recent years have included the decline in share by Mazda and Opel, while Hyundai/KIA have maintained impressive growth rates, with a strong focus on the entry-level small hatch and SUV segments.
Looking at the top 10 models, the market leader for a substantial period has been Volkswagen’s Polo and its outgoing model year counterpart, the Polo Vivo. The strength of the local light commercial market is evidenced by the strong sales shown by the Toyota Hilux range, and to a slightly lesser extent, the Ford Ranger. While the market share of commercial vehicles has decreased slightly in recent years, they still account for approximately a third of the local market, and half of the top 10 selling models.
Looking again to the market as a whole, the automotive and components industry is well placed for investment opportunities. Many major multinational companies currently use South Africa to source components and assemble vehicles for both the local and overseas markets. All of the large manufacturers in the country have launched major export programmes in recent years.
OEMs such as BMW, Ford, General Motors, Mercedes-Benz, Nissan, Toyota and Volkswagen have production plants in South Africa. There are also in the region of 200 automotive component manufacturers in South Africa, and more than 150 others that supply the industry on a non-exclusive basis.
Companies with production plants in South Africa are well placed to take advantage of the low production costs, coupled with access to new markets as a result of trade agreements with the European Union and the Southern African Development Community free trade area.
South Africa has identified the automotive industry as a key growth sector. It already exhibited significant growth under the Motor Industry Development Programme (MIDP), doubling in size since 1994. Its successor, the Automotive Production and Development Programme, aims to stimulate the expansion of local production to 1-2 million vehicles a year by 2020 while significantly increasing local demand at the same time.
At JATO we are striving to provide insights to help our customers take advantage of the opportunities the market presents. We have recently re-launched our JATO Source Volumes product, now with more detailed information, which is also allowing us to develop and launch our JATO Model Mix and Specifications into Model Mix products later in the year. Please click here to make an enquiry.
*Data for Q3 Year-to-Date 2014