Fuelling The Economy
South Africa needs exports to propel the level of economic growth that its economy demands. From virtually no exports before 1995, automotive exports have grown exponentially over the past three decades. Vehicle exports under the Motor Industry Development Programme (MIDP), the Automotive Production Development Programme (APDP) and the APDP Phase 2 (APDP2), from 1995 up to 2023, totalled 6 041 238 units of which 4 106 746 passenger cars, 1 911 146 light commercial vehicles (bakkies), 20 270 heavy commercial vehicles and 3 076 buses.
The export value of vehicles for this period amounted to R1 751,3 billion while the export value of automotive component exports over the same period amounted to R959,5 billion. The significant export growth has been accommodated by major investments in best practice assets and state-of-the-art equipment, skills upgrading, productivity gains and upgrading of the whole automotive value chain.
Source: naamsa, 2022
The automotive industry is widely regarded as one of the industrial policy success stories of South Africa’s democratic era. Benefits of the manufacturing sector as the engine of the economy include its synergies with most other productive economic sectors, along with positive spill-over effects to non-manufacturing sectors as well. As the largest manufacturing sector in the country’s economy, a substantial 21,9% of value addition within the domestic manufacturing output was derived from vehicle and automotive component manufacturing in 2023, while the broader automotive industry’s contribution to the GDP comprised 5,3% (3,2% manufacturing and 2,1% retail).
The economic muscle of the South African automotive industry, with its economic gains far outweighing its fiscal costs, cannot be underplayed. Despite a constrained economic environment undermining the domestic new vehicle market’s ability to fully recover to pre-pandemic levels in 2023, record high vehicle exports ensured that the automotive industry outperformed the rest of the manufacturing sector. The export value of vehicles and automotive components increased by R43,5 billion, or 19,1%, from the R227,3 billion in 2022 to a record R270,8 billion in 2023, comprising 14,7% of total South African exports. Vehicle exports increased by 47 809 units to a record 399 594 units in 2023, up from the 351 785 units exported in 2022, while the vehicle export value increased by R46,9 billion from R157,0 billion in 2022 to a record R203,9 billion in 2023.
Automotive component exports, however, reflected a decline of R3,4 billion from R70,3 billion in 2022 to R66,9 billion in 2023. The domestic automotive industry exported to 148 countries in 2023, down from the 152 destinations in 2023, with the export value more than doubling in the case of 29 of these countries from 2022 to 2023. South African automotive trade under the APDP2, amounting to a significant R520,5 billion in 2023, comprised 16,7% of South Africa’s total trade GDP, up from 16,5% in 2022.
Global vehicle production in 2023 improved as OEMs and their suppliers have adapted to the current environment and have ramped up their production schedules with improved inventory to compensate for the shortages in 2021 and 2022.
Global vehicle production increased by 10,3% to reach 93,5 million vehicles in 2023, up from the 84,8 million units produced in 2022, exceeding the pre-pandemic level of 91,9 million vehicles in 2019. South African vehicle production increased by 13,9%, from 555 885 units in 2022 to 633 332 units in 2023, exceeding the global year-on-year increase in global vehicle production of 10,3% in 2023. The country’s global vehicle production market share thus increased from 0,65% in 2022 to 0,67% in 2023, but its global vehicle production ranking remained at 22nd. In terms of global LCV production, South Africa was ranked 15th with a market share of 1,2%.
Economic factors are the most important aspects affecting new vehicle sales, and these include interest rates, unemployment rates, GDP growth rates, disposable income, and exchange rates. Following sound rebounds, with year-on-year increases of 22,2% in 2021 and 14,0% in 2022 from the COVID-19 affected 2020, the new vehicle market was still 1,3% below the pre-pandemic level when 2023 commenced. Despite an upbeat start to the year and predictions that new-vehicle sales would return to pre-COVID levels in 2023, the resilience of the South African new vehicle market finally yielded to the pressures of a strained economic environment and financially vulnerable consumers during the second half of 2023. Consequently, new vehicle sales inched up by only 0,4% in 2023 to 531 787 units, compared to the 529 541 units in 2022, and was now likely to take four years to recover to the pre-pandemic level of 536 612 units in 2019. On a positive note, heavy commercial vehicle sales already exceeded the pre-pandemic level in 2022, supported by the increased reliance on road transport due to rail inefficiencies.
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