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Naamsa Quarterly Review Of Business Conditions

The following is NAAMSA’s quarterly review of business conditions for the South African motor vehicle manufacturing industry, during the fourth quarter of 2011, as submitted to the Director‐General, Department of Trade and Industry.
1. Employment Levels And Trends
The number of persons employed by the South African new vehicle manufacturing industry – comprising the major new vehicle manufacturers and specialist commercial vehicle and bus manufacturers – during the fourth quarter of 2011 may be set out as follows:
Industry Total
Last pay week October, 2011 29 150
Last pay week November, 2011 28 200
Last pay week December, 2011 28 147
Industry employment levels reflect employees on the payroll of vehicle manufacturers.
Compared to the 28 623 positions at the end of September 2011, aggregate industry employment declined by 476 jobs during the fourth quarter of 2011 to 28 147 jobs – a reduction of 1.7 per cent.
The decline in Industry headcount was due primarily to a major manufacturer, during the last two months of 2011, reducing the number of temporary employees.
Employment at all the other major plants remained stable during the quarter. The average monthly Industry employment number for 2011 was 28 292.
2. Number Of Shifts
A single production shift remains the norm. Some manufacturers operate double shifts in selected areas such as machining, press shops, paint shop operations and body shop.
3. Availability And Price Trends Of Components And Raw Materials
3.1 Components Imported Components

In a number of instances, the availability and supply of imported original equipment components, during the fourth quarter of 2011 was severely impacted by the Thailand suppliers’ shutdown as a result of floods.
The disruption caused by the events in Japan during March 2011, compounded more recently by the severe flooding in Thailand, will result in multinational automotive corporations reviewing the design of their respective supply chains, especially in relation to risk.
Local Components
During the fourth quarter of 2011, the flooding in Thailand affected the supply of imported subcomponents and also impacted on the availability and supply of a number of locally produced components.
Ongoing relentless focus on global cost competitiveness and general cost reduction targets continues to pressurise suppliers. Above inflation wage settlements, coupled with sharply higher electricity price increases, continues to add significant risk to suppliers’ competitiveness.
3.2 Raw Materials
Imported Materials
The availability of imported raw materials, where applicable, remained satisfactory. Pricing trends remain a function of exchange rate movements and commodity prices. Increases in prices of steel and natural rubber are anticipated.
Local Materials
Local raw material price movements were impacted by higher commodity prices. The breakdown of the Arcelor Mittal Newcastle furnace caused severe pressure on the supply of forged steels. Local production had to be supported with imported steels. The Newcastle furnace is expected to be in full operation by February 2012.
4. Utilisation Of Production Capacity
On an annualised basis, Industry average capacity utilisation levels showed improvement in 2011 relative to previous years. Fourth quarter capacity utilisation in the car manufacturing sector remained close to record levels.
5. New Investment/Investment Approvals: 2011 Actual And 2012 Projection
NAAMSA reports the industry’s aggregate capital expenditure on an annual basis.
The aggregate projected data for 2012 is based on Capital Expenditure details supplied by the seven major vehicle manufacturers and one truck producer. The projected increase in capital expenditure during 2012 is related in a large part to Automotive
Production and Development Programme (APDP) Investment projects.
6. Business Conditions And Performance Indicators
2011 fourth quarter aggregate industry new car sales at 100 611 units recorded an improvement of 13 741 units or 15.8 per cent compared to the 86 870 new cars sold during the corresponding quarter of 2010. Aggregate industry commercial vehicle sales during the fourth quarter of 2011 at 46 405 units recorded an increase of 5 473 units or a gain of 13.4 per cent compared to 40 932 units sold during the corresponding quarter of 2010.
All sectors registered strong growth compared to the corresponding quarter of 2010. However, fourth quarter sales were mixed in relation to the Industry’s third quarter performance.
Brief comment on the outlook for 2012
On balance, 2011 turned out to be a year of relatively solid growth. Industry trading conditions however remained intensely competitive with over 60 brands and close on 2200 model derivatives, in the new car and light commercial vehicle sectors, competing for consumer’s franchise. In the event aggregate sales for
2011 at 572 241 vehicles registered an improvement of 79 334 units or 16.1 per cent relative to the 492 907 units recorded for 2010.
Export sales also performed relatively well during 2011. However, 2011 Industry vehicle exports of 272 457 units remain below the original projections for the year of exports of over 300 000 vehicles. Nevertheless, the 2011 exports represented the second highest annual export figure on record and reflected an increase of 32 992 export vehicles or an increase of 13.8 per cent on the aggregate export number of 239 465 units in 2010.
New vehicle sales during 2012 would remain a function of the performance of the domestic economy. On the assumption that the South African economy would grow, in real terms, by about 2.7 per cent and taking account of the prevailing historic low interest rates, improved vehicle affordability, new model introductions and easier access for consumers to vehicle financing, as well as continued strong demand by the car rental Industry ‐ NAAMSA’s projection for 2012 translated into an expected improvement of about 7.5 per cent in domestic sales volumes for the year.
Export sales would remain a function of the performance and direction of global markets. Vehicle exports into Europe were likely to soften as a result of the recession and debt crisis in the Eurozone, however, projected higher exports to African countries and factoring in the contribution of the Ford global compact vehicle new export programme – should enable the Industry to record growth. 2012 aggregate exports were estimated to reach about 301 000 vehicles compared to the 272 457 vehicles exported in 2011. The standard attached schedule reflects latest projections of industry sales, production, exports and imports.
Nico Vermuelen