NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1

21st August, 2003

The Director-General
Department of Trade and Industry
Private Bag X84
PRETORIA
0001

QUARTERLY REVIEW OF BUSINESS CONDITIONS: NEW VEHICLE
MANUFACTURING INDUSTRY: QUARTER ENDED 30th JUNE, 2003

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the second quarter of 2003.

1. EMPLOYMENT LEVELS AND TRENDS

The number of persons employed by the South African new vehicle manufacturing industry - comprising seven major new vehicle manufacturers and eight specialist commercial vehicle manufacturers - during the first quarter of 2003 may be set out as follows -

Headcount at all the manufacturing plants, during the quarter, remained stable.  Compared to the 31 681 positions 31^st March, 2003, aggregate industry employment levels improved by a nominal 6 jobs during the second quarter of 2003.
              
2. NUMBER OF SHIFTS

A number of vehicle manufacturers operate on a multi-shift basis in the production of cars, principally for export markets. 

The balance of the industry tends to operate on a single production shift basis, although a number of manufacturers operate double shifts in selected areas. (Machining areas, press shops, paint shop operations and body shop).


3. AVAILABILITY AND PRICE TRENDS OF COMPONENTS AND RAW MATERIALS

(a) COMPONENTS

(i) Imported Components

Overall, the availability and supply of imported original equipment components, during the quarter, remained satisfactory. Prices from source remained stable and landed costs of imported components continued to benefit from the Rand’s strength.

(ii) Local Components

During the second quarter of 2003, the supply of local components overall remained satisfactory. Inconsistent availability of wheel bolts, as a result of poor chroming, was however cited as a problem area.

Pricing of local steel based components continued to escalate.

(b) RAW MATERIALS

(i) Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good and the stronger Rand continues to have a positive effect on costs.

(ii) Local Materials

Local raw material price movements continue to mirror international pricing trends. Price pressures in respect of automotive steel products remains an issue of concern to vehicle manufacturers.

4. UTILISATION OF PRODUCTION CAPACITY

Average motor vehicle assembly industry capacity utilisation levels, for the periods indicated, may be illustrated as follows -

During the quarter, industry capacity utilisation levels continued to hold up well with some improvement evident in new car and light commercial vehicle manufacturing operations.

5. NEW INVESTMENT/INVESTMENT APPROVALS : 2002 ACTUAL AND 2003 PROJECTION

NAAMSA reports the industry’s aggregate capital expenditure on an annual basis. Details of actual industry capex for 2000, 2001 and 2002, in Rand millions, as well as the projection for 2003 – are as follows -

	R Millions
	2000	2000	2001	2003 Projection
Product, Local Content and Export Investments	1 108.7	1 072.1	1 423.9	1 775.3
Production Facilities	202.5	727.9	887.5	836.8
Land and Buildings	109.7	33.3	152.0	161.0
Support Infrastructure (including I.T., research and development, technical)	140.6	244.9	262.4	350.0
TOTAL	1 561.5	2 078.2	2 725.8	3 123.1

6. BUSINESS CONDITIONS

2003 second quarter passenger car sales at 54 009 units recorded a decline 954 units or 1,7% compared to the 54 963 new cars sold during the corresponding quarter for 2002. Combined commercial vehicle sales during the second quarter of 2003 at 28 416 units reflect a fall of 1 063 units or a decline of 3,6% compared to 29 479 units sold during the corresponding quarter of 2002.


Industry Domestic Sales Growth : Direction and Extent of Change
(Previous quarter's percentage changes are reflected in brackets)

	Qtr ended 30 Jun 2003 compared with previous Qtr ended 31 Mar 2003	Qtr ended 30 Jun 2003 compared with corresponding Qtr ended 30 Jun 2002

Passenger Cars	-  9.7 %	(+ 7.8 %)	- 1.7 %	(+ 0.6 %)
Light Commercial Vehicles	-  7.3 %	(+ 10.0 %)	- 6.3 %	(- 1.3 %)
Medium Commercial Vehicles	+ 16.2 %	(- 14.5 %)	+ 16.0 %	(- 1.7 %)
Heavy Commercial Vehicles	+ 9.9 %	(+ 3.8 %)	+ 18.5 %	(+ 11.3 %)

The burden of high interest rates and the modest slow down in economic activity levels, impacted negatively on new car and light commercial vehicle sales during the second quarter of 2003. Sales of new trucks and buses and medium commercial vehicles, however, recorded strong gains which suggests continued positive investment sentiment and replacement demand.

Industry vehicle exports continued to perform reasonably well, as illustrated by the following figures -

Exports	1997	1998	1999	2000	2001	2002	Jan - Jun 2003
Cars	10 458	18 342	52 292	58 204	97 599	113 025	54 794
Light Commercials	8 000	6 808	6 504	9 148	10 229	11 699	6 210
Medium & Heavy Commercials	1 111	748	787	679	465	582	220
	19 569	25 898	59 583	68 031	108 293	125 306	61 224

Industry Component Exports remained under pressure, during the second quarter, as a result of the strong Rand.

Looking at the balance of calendar 2003, NAAMSA continues to project that domestic new vehicle sales will record modest growth for 2003 as a whole. Sales of new motor vehicles during the second half of calendar 2003 should receive support from further expected reductions in interest rates, further improvement in new vehicle affordability, in real terms, as a result of price restraint by manufacturers, attractive sales incentive packages and an expected overall improvement in the momentum of the South African economy.

Industry sales, export and import projections through 2005 are reflected on the attached schedule. 

The projections remain unchanged from the previous quarter.

Yours sincerely,

N.M.W. VERMEULEN
DIRECTOR

Attachment 1  -  Industry Vehicle Sales, Export and Import Data :  1995 - 2005
(click to view)

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