The Eastern Cape's Automotive Industry Development Centre, says the Province's automotive supply chain is outperforming global peers in many respects.
Speaking on the state of the Eastern Cape's automotive sector at an annual briefing in Port Elizabeth on Tuesday, AIDC Managing Director, Lance Schultz, said that while many suppliers were struggling to remain economically viable, their measured productivity and manufacturing benchmarks matched or exceeded many global peers.
Schultz said input costs, particularly the rising costs of electricity, water and logistics, had brought into question the sustainability of many suppliers.
He says the automotive sector in the Province is still poised for growth.
"The key functions and ability of the sector to grow will remain the ability of stable of electricity, the ability to ensure we have a well regulated and stable workforce and the necessary skills level is provided for the sector. I must concur that government has played its part in ensuring that it provides the necessary policy instruments. The Eastern Cape remains one of the leading manufacturers in the country, largely due to the three OEM's that exist."
However, Schultz added that another long term strike within the industry would be devastating.
"Strikes that had been manifesting itself over the recent past had not been healthy in that it halted a lot of production. As a result a lot of volumes could not be achieved. A long term strike again would be devastating, I believe a number of the parent OEM's have already voiced their concerns, that it is not sustainable and would re-consider their decisions for new capital expansion and investment if strike situations continues to perpetuate as it had done in the recent past." said Schultz.
On a positive note, Schultz said many higher tier automotive manufacturers were achieving high standards.
"On a recent industry trip to Thailand It was interesting to note that Operational Equipment Efficiency and in particular machine downtime and Changeovers are benchmarked at 70%, almost 15% lower than the accepted benchmark set by local suppliers.The Thailand industry's productivity benchmark was 80% versus local industry's 90%. One can extrapolate then that it is not efficiency as much as volumes that drives the success of Thailand and other industry peers. Where many other manufacturing companies globally have a competitive advantage as a result of access and proximity to markets or to economies of scale created by sheer volumes, South African manufacturers have to develop other areas of competitiveness, a key aspect of which is operational efficiency."
Whereas Thailand's restrictive 200% import duty on vehicles and subsidies for 1st time car owners had spiked local volumes in that country, Schultz said increasing production volumes remained a key obstacle for Eastern Cape suppliers.
