South Africa’s automobility market: a bright future is within reach

South Africa is well-positioned to spearhead the African automobility
revolution, with its mature manufacturing base and established connections
across the continent. The automobility sector is already an essential part
of the South African economy, exporting vehicles and components to more than
155 markets globally and contributing 6.8 percent to the country’s GDP. In
addition, activities related to vehicle assembly and the manufacture of
automotive components make up almost a third of the country’s domestic
manufacturing sector and contribute approximately 110,000 jobs.

Unfortunately, the coronavirus pandemic resulted in a 29.8 percent drop in
vehicle exports from South Africa last year – and although the sector is
still recovering, there is cause for optimism. The market is still young,
and its best years lie ahead. Across the African continent, car density
remains at a low 42 cars per 1,000 people – less than one-quarter of the
global average of 180 cars per 1,000 people. South Africa’s automobility
industry can cater to these untapped customers, but it will first be
required to reshape its supply chains and optimise logistics at business,
national and international levels.

Increasing domestic production and relying on technology

South Africa’s OEMs have become increasingly eager to bring the supply chain
in-country to drive efficiencies. Currently, the industry mainly imports
finished components and assembles them domestically. This is partly due to
the commodification of low value-added processes such as plastic moulding
and metal pressing. South Africa also produces a minimal amount of high
value-added components such as electronics, telematics, and powertrain
technology.

The South African government has proposed a robust recovery plan which
includes the Automotive Master Plan 2035, organised by the National
Association of Automobile Manufacturers of SA (NAAMSA). To meet the plan’s
goal of increasing localisation content from 39 percent to 60 percent by
2035, South African manufacturers will have to master the production of both
traditional commodities and high value-add components.

As technology continues to disrupt traditional priorities in the automotive
industry and with further developments such as autonomous vehicles on the
horizon, OEMs and other interested parties must appreciate that it has
become inextricably part of the automobility sector. Within the industry
itself, automation and digitalisation will also play essential roles in
keeping prices down and streamlining processes. This merging between
technology and automobility is likely to continue until the two form a
singular “super sector”.

Overall, the government’s significant investments represent confidence in
the country’s automobility sector and an understanding that it will play a
major role in creating a sustainable economy in the wake of the covid
crisis. Accordingly, NAAMSA has welcomed the president’s support for the
vital sector and vowed to do its part in driving economic recovery.

Overcoming supply chain bottlenecks and building international links

Supply chain management will also determine winners and losers in the
sector. As new participants enter the market to produce vehicles centred on
technology, South African OEMs are placing significant investment in
mega-plants and moving production chains closer to the end customer. These
manufacturers understand that tomorrow’s supply chains will need constant
evaluation to ensure they are suitable for meeting customer demands.
Fortunately, the greater visibility enabled by technology and further
“plug-and-play” interchangeability, offer solutions to these challenges.

At DHL, we are doing our part to support the ambitious goals of South
Africa’s automotive sector. For example, in Gqeberha (Port Elizabeth), we
recently opened a first-of-its-kind automotive competence centre designed to
provide reliable, compliant logistics solutions to support businesses as
they future-proof their supply chains. Similarly, DHL is investing over ZAR
125 million to build a new 13,000m2 facility in a business park close to the
O.R. Tambo International Airport. In addition, the company recently joined
the Cape Town Air Access Partnership.

South Africa will also rely on its neighbours to efficiently move parts and
finished products across the continent, thus eliminating tariffs and red
tape. In this respect, the recent African Continental Free Trade Area
(AfCFTA) is a positive development, ensuring the free movement of labour and
capital across the continent. Trade within Africa is expected to increase to
over half of the continent’s total trade by 2022, and automobility products
will form a significant portion of this.

Preparing for tomorrow’s market

If government plans, OEM initiatives and continent-wide connectivity efforts
are successful, South Africa will rebound from the coronavirus pandemic and
establish itself as a dominant player in the African automobility space.
However, none of this will be possible without a robust, trusted logistics
base to maintain supply chain efficiency. Therefore, governments and private
entities should continue to partner with global, end-to-end logistics
experts that provide local and international expertise and unparalleled
resources. There are undoubtedly challenges ahead for South Africa’s
automobility sector, but no challenge is insurmountable with the backing of
the right logistics partner.