NATIONAL ASSOCIATION OF AUTOMOBILE MANUFACTURERS OF SOUTH AFRICA 

PO BOX 40611, ARCADIA 0007

                 

                    

 N8/1 (e-mail)

16^th August 2004 

To :     REPRESENTATIVES AT GENERAL MEETINGS

Gentlemen,

QUARTERLY REVIEW OF BUSINESS CONDITIONS :  

MOTOR VEHICLE MANUFACTURING INDUSTRY : 2^nd 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 second 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    

16^th August, 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 30^th JUNE, 2004

NAAMSA submits the following report on business conditions in the South African new motor vehicle manufacturing industry during the second 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 second quarter of 2004 may be set out as follows –                                                                                                      

		Industry Total
	Last pay week April, 2004	30 982
	Last pay week May, 2004	31 302
	Last pay week June, 2004	31 708

 

Compared to the 30 894 positions at the end of March, 2004, aggregate industry employment levels increased by 814 jobs during the second quarter of 2004 to reach a total of 31 708 jobs. The monthly average industry employment complement during calendar 2003 was 31 599.

During the second quarter of 2004, headcount at most of the industry’s major manufacturers remained stable. The significant increase in headcount during the second quarter was due to recruitment by a major Eastern Cape manufacturer involved in export business.

                                                                                                                         ..... /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 and components 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. Instances of supply problems ex South America were reported due to logistics and related problems. 

Prices from source remained stable and landed costs of imported components continued to benefit from the Rand’s strength. However, increased shipping costs were again cited as a concern.

(ii)     Local Components

During the second quarter of 2004, the overall supply of local components remained satisfactory. Supply problems in respect of rubber parts and instances of steel availability problems were reported. 

On pricing, suppliers experienced difficulty in competing with imported products benefiting from the strong Rand. Labour, steel and fuel costs were cited as the biggest impact on local costs for the balance of the year.

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. Generally, availability remains stable, however, instances of shortages of local steel were reported.

 

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 in the car manufacturing sector rose and utilization levels in the commercial vehicle manufacturing sectors 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, may be attributed to the strong Rand which resulted in lower costs of imported capital equipment (machinery/production technology).

   

6.    BUSINESS CONDITIONS, PERFORMANCE INDICATORS

 

Business Conditions : Second Quarter, 2004

 

2004 second quarter passenger car sales at 66 947 units recorded a further substantial improvement of 12 938 units or 23,9% compared to the 54 009 new cars sold during the corresponding quarter for 2003. Combined commercial vehicle sales during the second quarter of 2004 at 34 267 units reflected a gain of 5 851 units or an improvement of 20,6% compared to 28 416 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 30 June 2004 compared with previous Qtr ended 31 March 2003		Qtr ended 30 June 2004 compared with corresponding Qtr ended 30 June 2003
Passenger Cars	- 4,1%	(+ 10,1%)	+ 23,9%	(+ 16,7%)
Light Commercial Vehicles	- 4,7%	(+ 25,2%)	+ 19,4%	(+ 16,1%)
Medium Commercial Vehicles	+ 17,5%	(- 1,3%)	+ 32,1%	(+ 30,6%)
Heavy Commercial Vehicles	+ 16,2%	(- 3,4%)	+ 25,5%	(+ 18,7%)

 

The remarkable strength in new vehicle sales during the second quarter continued unabated with sales in all four sectors registering further strong, double digit gains compared to the corresponding quarter in 2003. The continuing strength in the market remains a function of interest rate reductions, vehicle price stability and attractive incentives offered by manufacturers. 

Export Performance : Second Quarter, 2004

The influence of the strong Rand and highly competitive global market conditions contributed to soften the momentum of vehicle exports throughout 2003 and first half of 2004. The following new vehicle export performance statistics are relevant –

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In aggregate terms, first half 2004 exports registered a decline of 10 105 vehicles or 16,5% compared to the industry’s export performance during the first six months of 2003. Vehicle exports are, however, expected to recover during the second half of 2004.

Prospects for 2004 and Beyond

During 2004, the South African automotive new car and commercial vehicle markets remain on track for an exceptional year – one of the best since the early 1980’s and close to the all time record sales recorded in 1981.

Expectations of low inflation and accommodating monetary policy, positive business and 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 conducive to above average growth in new vehicle sales, which, together with an improving economy, should translate into significant, near record growth in industry sales volumes in 2004.

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

Yours sincerely,  

N.M.W. VERMEULEN

DIRECTOR

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16^th August, 2004

   

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

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