Committed to growth of automotive industry

TRADE and Industry Minister Rob Davies says government remains committed to the development of the automotive industry in line with the National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP).
The long term development of the sector would be achieved through high vehicle production volumes and associated local value addition, says Davies.

He was reacting to the findings of the Automotive Production and Development Programme (APDP) review, which, among others, states that the 2020 target of producing 1.2 million vehicles per year is unlikely to be achieved. The review attributes this to a variety of reasons such as the fact that the global economy is still recovering from the effects of the 2008/9 financial crisis.

In February 2014, the dti mandated specialist advisor Roger Pitot to co-ordinate a review of the APDP with a mandate to make recommendations to secure optimal outcomes to the sector and economy whilst retaining long-term certainty for investment.

The APDP was fully implemented by January 2013 with a view to steer the automotive industry towards producing about 1.2 million vehicles by 2020 with attendant expansion of the domestic supplier base.

Proposals to push vehicle production

In an effort to sustain and grow the industry whilst steering it towards the APDP vision of high volume vehicle production, the following proposals will be implemented:
1. A post-APDP support framework will be developed during the course of 2016 in order to provide certainty in the policy environment for automotive manufacturing in SA after 2020.
2. The volume threshold for vehicle production will be reduced from 50 000 units to 10 000 units per annum in order to allow new entrants into the local industry from 2016.
3. The Volume Assembly Allowance (VAA) will be offered on a sliding scale based on volume commencing at 10% for 10 000 units to 18% at 50 000 units from January 2016.
4. A suitable capital incentive (AIS) level will be provided for new entrants at the less than 50 000 per annum threshold (details will be captured in guidelines that should be finalised by April 2016).
5. The production incentive for catalytic converters will be frozen at the 2017 level of 65% rather than continue the phase down.
6. The qualification for component suppliers to earn APDP benefits will be tightened in order to avoid these benefits being earned on non-core automotive products and therefore preference will be afforded to those products that add value in the value chain.
7. Lastly, the dti will engage the National Treasury in an effort to secure improved investment support for tooling as a means of encouraging further component localisation. Overall national budget constraints are noted in this context.

In addition, the Department of Trade and Industry will engage the industry in efforts that seek to promote meaningful transformation.

“As we develop a post-APDP automotive master plan we will also actively engage the industry in efforts that seek to promote meaningful transformation of the industry through the inclusion of previously excluded groups along the entire automotive value chain,” said Davies.