The Department of Trade and Industry has revised the targets for the Automotive Production and Development Programme, acknowledging that the current targets would not be met.
Trade and Industry Minister, Rob Davies, says the findings of the APDP review state that the 2020 target of producing 1.2 million vehicles per year is unlikely to be achieved .
He said this is due 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.
Davies said it would also be extremely difficult to achieve significant expansion and deepening of the local supplier base under the prevailing economic conditions.
One of the key new proposals by the Minister is that 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.
Davies said "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:"
*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.
*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.
*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.
*A suitable capital incentive (AIS) level will be provided for new entrants at the less than 50 000 pa threshold (details will be captured in guidelines that should be finalised by April 2016).
*The production incentive for catalytic converters will be frozen at the 2017 level of 65% rather than continue the phase down.
*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.
*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 localization. Overall national budget constraints are noted in this context.
Industry association, Naamsa says it endorses governments' continued commitment to the principle of consistency and stability in the official automotive industry development policy regime.
In a statement Monday Naamsa said it also welcomed the high level of continuity between the current and the planned post 2020 development programme.
Naamsa said certainty and stability in the official policy regime over the past 30 years had contributed to a number of noteworthy achievements by the vehicle manufacturing.
"An important feature of the APDP Review outcome is the proposed higher investment support for automotive tooling which, if implemented, would drive additional localisation particularly in respect of automotive components. NAAMSA welcomes the stated intention by the Minister to proceed with the formulation of a post 2020 APDP framework taking account of the planning and investment cycles of vehicle and component manufacturers. The post APDP policy framework should be completed before the end of 2016," Naamsa said.
"The Dti and the industry have agreed to cooperate in the development of regional value chains and initiatives to facilitate the industrialisation of African automotive industries through bilateral trade involving the supply of original equipment components and vehicles to African markets."
"NAAMSA will also continue to work with the Dti black economic empowerment desk, as well as with other industry stakeholders, in the formulation of initiatives to promote transformation throughout the automotive value chain."
Meanwhile, Naacam, which represents the country's vehicle component manufacturers says the APDP review will ensure continued growth of the automotive and component sectors, legitimising Governments continued support.
However, Naacma says having digested the contents of the announcement, it is disappointed this review did not yield more meaningful requirements for local manufacture of components and sub-assemblies.
President, Ken Manners, said "having digested the contents of the announcement, we are disappointed this review did not yield more meaningful requirements for local manufacture of components and sub-assemblies. In spite of vehicle assemblies growth, real local content percentages have declined in this period, especially in the manufacturing sub sector, most notably at tier two level, where real employment, skills development and transformation opportunities lie."
"The announcement of lower VAA thresholds may welcome new participants, but will do little to change this local content deterioration."
Manner said NAACAM was cognisant and appreciative of significant OEM investments based on the principles of the APDP, but with no changes to the current parameters for another five years, we are concerned that the component manufacturers will find it more challenging to compete on a sustainable basis."
"NAACAM will work actively with all the Automotive Industry stakeholders to bring about the required changes to the programme post 2020 that will result in real localisation and job creation whilst finding the appropriate stability and balance in the industry," he said.
