NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

                 

                    

 N8/1 (e-mail)

10^th May 2004 

To :     REPRESENTATIVES AT GENERAL MEETINGS

Gentlemen,

QUARTERLY REVIEW OF BUSINESS CONDITIONS :  

MOTOR VEHICLE MANUFACTURING INDUSTRY : 1^ST QUARTER, 2004

ATTACHED, for information purposes, is a copy of NAAMSA’s quarterly review of business conditions for the South African motor vehicle manufacturing industry, during the first quarter of 2004, as submitted to the Director-General, Department of Trade and Industry.

Updated industry vehicle sales, export and import statistics for 1995 through 2006 are reflected on the attachment to the submission. 

N.M.W. VERMEULEN

DIRECTOR

sdb  

NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

N8/1    

10^th May, 2004

                                                                                                                         

The Director-General  

Department of Trade and Industry

Private Bag X84

PRETORIA

0001

Dear Sir,

 

QUARTERLY REVIEW OF BUSINESS CONDITIONS : NEW VEHICLE

MANUFACTURING INDUSTRY : QUARTER ENDED 31^ST MARCH, 2004

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the first quarter of 2004.

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 2004 may be set out as follows –                                                                                                      

		Industry Total
	Last pay week January, 2004	31 280
	Last pay week February, 2004	30 987
	Last pay week March, 2004	30 894

 

Compared to the 31 363 positions at the end of 2003, aggregate industry employment levels declined by 469 jobs during the first quarter of 2004.  The monthly average industry employment complement during calendar 2003 was 31 599.

During the first quarter of 2004, headcount at three of the industry major manufacturers showed modest increases, two reflected declines at a result of voluntary retrenchment schemes and the employment at the three other major employers remained stable.

                                                                                                                         ..... /2

 

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2.   NUMBER OF SHIFTS

An increasing number of manufacturers operate on a multi-shift basis in the production of vehicles for domestic and 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

3.1     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.  However, increased shipping cost were cited as a concern.

(ii)     Local Components

During the first quarter of 2004, the overall supply of local components remained satisfactory.  Quality and supply problems in respect of rubber parts were reported.  Some local suppliers experienced supply problems with domestic steel.

On pricing, suppliers experienced difficulty in competing with imported products benefiting from the strong Rand.  Instances of resourcing of specific components were reported.

3.2     RAW MATERIALS

(i)     Imported Materials

Generally, the availability of imported raw materials, where applicable, remained good.  However, global commodity and crude oil price increases continue to impact on costs, partially offsetting the effect of the improvement in the exchange rate.

 (ii)    Local Materials

Local raw material price movements continue to mirror international pricing trends. Availability remains stable.

 

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, overall industry capacity utilisation levels remained relatively stable.

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5.   NEW INVESTMENT/INVESTMENT APPROVALS : 2003 ACTUAL AND 2004 PROJECTION

NAAMSA reports the industry’s aggregate capital expenditure on an annual basis.   Details of actual industry capex for 2000 through 2003, in Rand millions, as well as the projection for 2004 – are as follows –

 

 

The decline in the Industry’s 2003 capital expenditure, in Rand terms, is predominantly a function of the strong Rand which would have resulted in lower costs of imported capital equipment (machinery/production technology). Furthermore, in certain instances, capital expenditure originally earmarked for 2003 would have been deferred to 2004.

   

6.    BUSINESS CONDITIONS, PERFORMANCE INDICATORS

 

Business Conditions : First Quarter, 2004

 

2004 first quarter passenger car sales at 69 842 units recorded a substantial improvement of 9 979 units or 16,7% compared to the 59 863 new cars sold during the corresponding quarter for 2003.  Combined commercial vehicle sales during the first quarter of 2004 at 34 988 units reflect a gain of 5 057 units or a sharp improvement of 16,9% compared to 29 931 units sold during the corresponding quarter of 2003.

 

Industry Domestic Sales Growth : Direction and Extent of Change (Previous quarter’s percentage changes are reflected in brackets)
	Qtr ended 31 March 2004 compared with previous Qtr ended 31 Dec 2003		Qtr ended 31 March 2004 compared with corresponding Qtr ended 31 March 2003
Passenger Cars	+ 10,1%	(- 9,3%)	+ 16,7%	(+ 14,2%)
Light Commercial Vehicles	+ 25,2%	(- 16,6%)	+ 16,1%	(+ 2,0%)
Medium Commercial Vehicles	- 1,3%	(+ 8,3%)	+ 30,6%	(+ 13,1%)
Heavy Commercial Vehicles	-  3,4%	(- 9,1%)	+ 18,7%	(+ 27,2%)

 

Sales in all four sectors registered further strong, double digit gains during the first quarter for 2004 compared to the corresponding quarter in 2003.  The continuing strength in the market remains a function of interest rate reductions, vehicle price stability and enticing incentives offered by manufacturers. 

Export Performance : First Quarter, 2004

The influence of the strong Rand and highly competitive global market conditions contributed to reduce the momentum of vehicle exports throughout most of 2003 and during the first quarter of 2004.  Aggregate industry vehicle exports during the first quarter of 2004 also reflected a softer overall sales trends.   The following new vehicle export performance statistics are relevant –

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In aggregate terms, first quarter 2004 exports registered a decline of 4 896 vehicles or 16,6% compared to the 2003 first quarter export performance

Prospects for 2004 and Beyond

During 2004, the South African automotive new car and commercial vehicle markets appear on track for an exceptional year – one of the best since the mid 1980’s.

Expectations of a higher economic growth rate, generally positive consumer sentiment, strong replacement demand particularly for medium and heavy commercial vehicles, enhanced overall new vehicle affordability in real terms as a result of stable new vehicle prices – provide an environment for above average growth in new vehicle sales, which, together with an improving economy, potentially should translate into double digit growth in industry sales volumes in 2004.

These considerations have been factored into the Industry’s 2004 through 2006 projections reflected in the attached schedule.

Yours sincerely,  

N.M.W. VERMEULEN

DIRECTOR

sdb

10^th May, 2004

   

Attachment 1  -  Industry Vehicle Sales, Export and Import Data :  1995 - 2006
(click to view)

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