Auto sector may set 1st trade surplus record soon

In fact, the industry’s trade deficit of R34,6-billion recorded in 2007 may be eliminated completely in 2008, with a positive trade balance of R3-billion projected – which is a “fantastic turnaround” of close on R38-billion, says National Association of Automobile Manufacturers of South Africa and Automotive Industry Export Council executive manager Norman Lamprecht.

Exports in 2007 amounted to R76,6-billion, with vehicles responsible for R28,5-billion of this figure, and components R39,1-billion. Vehicle and component imports were valued at R102-billion.

"However, this year, vehicle exports are set to double to 300 000 units as several new export programmes have come on stream,” says Lamprecht.

He expects vehicle exports to reach around R50-billion this year, with component exports expected to match this number.

For the first seven months of 2008, South Africa's vehicle export sales have already increased by 59,5%, compared with the same period last year.

“With local demand for vehicles softening, we expect vehicle and component imports to remain stable at around R100-billion for 2008,” notes Lamprecht.

“We are finally moving in the right direction.”

Lamprecht adds that the trade balance is expected to remain in positive territory going forward, as export volumes are expected to stabilise at current levels, offering sufficient counterbalance to imports.

The biggest criticism levelled against the industry's government-support programme, the Motor Industry Development Programme (MIDP) – launched in 1995 – has always been its track record of not only encouraging exports, but having the unintended consequence of growing vehicle imports.

In 2005 and 2006, the industry's trade deficit was just under R30-billion, for example.

In simple terms, the MIDP is an import/export complementary arrangement, whereby the local content value of components or built-up vehicles exported, earn credits which can be used to rebate import duties on components and vehicles.

This means several vehicle manufacturers use their credits to import models, not manufactured locally, from their parent companies.

South Africans' growing appetite for new cars – persisting until 2007 when the consumer boom started to fizzle out – has also seen a growing number of vehicle badges being imported over the last few years, with up-and-coming vehicle manufacturers from China and India seeking new markets again contributing to the trade deficit.

In contrast to booming imports, vehicle exports from South Africa have been more sluggish in gaining ground – until now.

The MIDP is currently the subject of a review, and is set to be replaced by a more production-based support mechanism after 2012.