25 Jan Motor industry leaders cautiously optimistic for 2024
Motor industry growth is anticipated to be modest as SA continues to deal with a variety of issues.
This seems to be the general expectation in 2024 according to key figures in the sector.
Sowetan Motoring this week approached leadership of prominent manufacturers, the head of the national automotive business council naamsa, as well as a high-level vehicle asset finance executive, to gauge predictions for the road ahead.
Volkswagen SA (VWSA) managing director Martina Biene reiterated that the brand plans to strengthen roots on the continent, describing Africa as the next frontier for automotive growth.
Load shedding, a dysfunctional rail freight service, mounting logistics costs and socio-political economic issues such as high unemployment were cited as core challenges to domestic operations.
She described our region as a powerhouse on the continent and said the country should be leveraging potential trade opportunities associated with the African Continental Free Trade Area (AFCFTA); to stimulate economic growth and forge strategic partnerships, boosting the local automotive industry and economy.
VWSA, whose manufacturing facility in Kariega dates back to 1951, leads the passenger car sales race with its budget-orientated Polo Vivo. In December 2023 the brand reported 2,448 units of the model. The standard Polo is built for domestic and overseas markets. Last year, the brand claimed to have exported 101,557 copies.
Biene anticipates a recovery in the exchange rate, which may augur well for local market sales, also noting that SA would be celebrating 30 years of democracy.
“[VWSA] will be taking a keen interest in how the elections unfold with the hopes that business and investor confidence will not be affected,” she said.
According to Biene, a buy-down trend will continue, resulting in stronger demand for used cars. On the new model front, the manufacturer has five releases on the cards for this year.
While Suzuki Auto SA does not build cars locally, it has become a familiar sight in the top three of monthly new vehicle sales performers. Last December, it sold 3,355 vehicles, behind Volkswagen (5,274 units) and Toyota (11,200 units).
Local MD for the Japanese brand, Teruo Katakawa, believes that consumers will continue to focus on economical vehicles in 2024, as the market corrects itself in the wake of an overstock situation experienced in 2023.
Katakawa said the popular automaker intends to expand its market share, emphasising the cost-effective nature of the range of vehicles offered. He forecast an increase in trade-ins, after used vehicle inflation seen in 2021 and 2022.
On the premium front, BMW Group SA (BMW SA) views potential to get closer to pre-pandemic levels of growth. Its CEO Peter van Binsbergen believes that a stabilising rand, reduced inflation and interest rates, as well as renewed hope for improved national power supply, could contribute favourably to business confidence. He said that although progress would be slow and small to start, it would be a step in the right direction.
“I am optimistic, as I believe that we have the right products in our current line-up, including petrol, diesel, full electric and plug-in hybrid vehicles,” said Van Binsbergen.
“We will also launch important and exciting new models in this year, including the new BMW 5-Series, the new Mini Family, new BMW R 1300 GS motorcycle and, our local hero, the BMW X3 built at our plant in Rosslyn, Pretoria.”
The plant dates back to 1968. BMW SA ended off December 2023 with 980 units, ahead of competitor Mercedes-Benz, which recorded 736 units locally.
CEO of the national automotive business council naamsa, Mikel Mabasa, took a stern view of matters on the horizon.
“Businesses would continue to face myriad challenges, including supply chain bottlenecks, a global economic slow-down, a worsening energy crisis and protracted geo-political turmoil,” he said.
Mabasa asserted that there was no immediate solution in sight that would provide relief to logistical challenges across the country’s port and freight rail networks, which have worsened.
“Consistent with the close correlation between new vehicle sales and the GDP growth rate, the new vehicle market would likely only improve by single digits of around 5% compared to the level of 2023 given a GDP growth rate of 1% in 2024.”
Light commercial vehicles are expected to retain their upward growth trajectory, while new energy vehicle (NEV) sales are poised to grow, though remaining “minuscule as a percentage of total new vehicle sales”.
naamsa has significant ambitions on the agenda for the year ahead. This includes aggressively lobbying, in collaboration with other business partners, to secure stable electricity supply for the big seven manufacturers producing vehicles locally, as well as their supply chain of component producers.
“Our immediate priority is to secure exemption agreements with our local municipalities where many of our manufacturing [and] production plants are located.”
Mabasa said the organisation would place “measured pressure” on Transnet, to address logistics constraints at national ports, which impact on the costs of the economy and the automotive industry’s international competitiveness, as well as its long-established image as a reliable supplier to global markets.
He said that Transnet must revitalise its Rail South Corridor between Gauteng and the Eastern Cape. “This line is strategically important to help us de-risk and reduce our dependence on the Durban Port as the main port of entry, that processes the movement of our vehicles in and out of the country,” said Mabasa.
Lastly, he confirmed that NEV regulatory framework details will be announced in the 2024 national budget in February, believing that it would provide an injection of confidence for the domestic automotive industry to accelerate its transition toward production, as well as stimulating demand.
Compounding the logistics constraints and shaky power supply situations, Mabasa noted that uncertainty about the outcome of the 2024 SA general election posed a potential negative impact on the economy.
“Overall, the Consumer Confidence Index for SA fell to -17 points in the fourth quarter of 2023, the worst fourth quarter reading in 23 years, amid ongoing concerns over the country’s economic situation,” reminded Charl Potgieter, managing executive, Absa Vehicle and Asset Finance.
Despite this, the institution is of the view that there are “encouraging pockets of resilience” in the automotive market.
Potgieter cited the promising direction of new vehicle sales performance shown in the first three quarters of 2023, as well as the emergence of challenger brands, particularly from China.
“General expectations are for interest rates to turn the cycle in the second quarter of 2024 and this will bring relief for both strained consumers and vehicle finance businesses such as ours,” he said.
*Andrew Kirby, CEO of Toyota SA Motors, the best-selling carmaker overall in the country, opted to reserve insights for the annual State of the Motor Industry event hosted by the brand, set to happen on Thursday. We will carry a report on the conference on 31 January.
Article sourced from Brenwin Naidu: https://www.sowetanlive.co.za/business/2024-01-24-motor-industry-leaders-cautiously-optimistic-for-2024/