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Mr DC Powels (Naamsa President and VWSA Managing Director). The Vision for the Year 2020 under the new Automotive Production Development Program (APDP) and it’s impact on the Automotive Industry. Car Conference 1 2 th October 2011. Overview. SA Auto Industry in the Global Context - PowerPoint PPT Presentation
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Mr DC Powels
(Naamsa President and VWSA Managing Director)
2
The Vision for the Year 2020 under the new Automotive Production Development
Program (APDP) and it’s impact on the Automotive Industry
Car Conference 12th October 2011
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
SA Auto Industry in Context
SA Auto Industry in Context
SA Auto Industry in Context
SA Auto Industry in Context
Year 2008 2009 2010
Global vehicle Production
70.52 Mio 61.7 Mio 77.9 Mio
SA vehicle Production 0.563 Mio 0.374 Mio 0.472 Mio
SA share of Global Production
0.8% 0.61% 0.61%
SA Auto Production vs Global Production
SA Auto Industry in Context
Auto exports as % of total exports
YearYear 19951995 20002000 20072007 20082008 20092009 20102010
Total SA ExportsTotal SA Exports(R Billion)(R Billion) 102.1102.1 210.4210.4 494.4494.4 656.0656.0 515.4515.4 584584
Total Automotive Total Automotive ExportsExports(R Billion)(R Billion)
4.24.2 23.423.4 67.667.6 94.294.2 61.061.0 69.569.5
Automotive exports Automotive exports as a % of total SA as a % of total SA exportsexports
4.1%4.1% 11.1%11.1% 13.7%13.7% 14.4%14.4% 11.8%11.8% 11.9%11.9%
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
The importance of consistency and certainty in Government Policy for the Auto Industry
Phase 6 Local Content Programme
Motor Industry Development Programme (MIDP)
Automotive Production Development Plan
(APDP)
1989 – 1994
1995 – 2012
2013 – 2020
1989 202020102000
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
Development of Competition in SA Passenger Car Market
Brands & Models: 1994 to October 2011
Oct 201160 Brands1,309 models26% Import Duty
January 199417 Brands192 Models115% Import Duty
SA Automotive IndustryDevelopment of FBU export volume - units
15 764
68 031
171 237
284 211
174 947
239 465
301 000
1995 2000 2007 2008 2009 2010 2011 FC
Un
its
-38% 26%37%
SA Automotive IndustryDevelopment of Component Exports - R Bio
3.3
12.6
39.1
44.1
27.930.8
34.5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
1995 2000 2007 2008 2009 2010 2011 FC
R B
io
-37% 12%10%
SA Automakers (7 Car and 2 Truck Producers)New Investments
0
5
10
15
20
1995-1999 2000-2004 2005-2009 2010-2011FC
Support Infrastructure (I.T,R&D, Technical, etc.)
Land and Buildings
Product / Local Content / ExportInvestment / ProductionFacilities (R Mio)
R B
io
Total (1995 – 2011FC) = R42.3 Bio
Total = R4.5 Bio
Total = R10.7 Bio
Total = R18.7 Bio
Total = R8.5 Bio
Rationalisation of Platforms in the SA Auto Industry
OEM Pre 1995 2010 2011 (projected)
BMW 4 1 1
Fiat 2 Ceased in 2008 -
GM 3 2 2
Ford 9 3 1
MBSA 5 2 2
Nissan 7 3 2
VW 5 2 2
Toyota 6 2 2
Total 41 15 12
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
SA Pass. & LCV Market 1950 to 2011
LCV Passenger
91%- 45%
41%
Growth in Auto IndustrySA vs Global
Year Global Production (Mio units)
SA Production (Mio units)
SA Exports (Mio units)
SA Component Exports (R Bio)
2000 57.8 0.357 0.068 12.6
2011 FC 78 0.566 0.301 36
% Growth 35 59 343 186
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
Objectives of the APDP
• Production increase to 1.2 million vehicles per annum
by 2020 with associated deepening of the
components industry.
• Provide appropriate levels of support for these
ambitious targets.
• Achieve better balance between domestic and export
sales to supply growing domestic demand.
• Ensure consistency with WTO rules.
Structure of the APDP
The APDP consists out of 4 pillars that will drive the programme:
1. Import Duty
2. Vehicle Assembly Allowance (VAA)
3. Production Incentive (PI)
4. Automotive Investment Scheme (AIS)
APDP
Imp
ort
Du
ty
taxa
tio
n
Veh
icle
Ass
emb
ly
All
ow
ance
Pro
du
ctio
n
Ince
nti
ve
Au
tom
oti
ve
Inve
stm
ent
Sch
eme
Duty Rebate Mechanisms Cash Grants
1 2 3 4
Pillar 1: Import Duty
36%
25%25% 25%
29%
24%
18%18%18%
10%
15%
20%
25%
30%
35%
40%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
FBU Import Duty FBU Import Duty (EU Pref Rate)
20%
24%
20%20%
28%
10%
15%
20%
25%
30%
35%
40%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
CKD Import Duty Rate
The New APDP will have stable, moderate import tariffs from 2012:
• 25% for Completely Built Up Vehicles (CBUs).
• 18% for CBU’s out of Europe via the EU preferential rate.
• 20% for CKD components used by vehicle assemblers.
FBU Import Duty Rate CKD Import Duty Rate
MIDP APDP MIDP APDP
Pillar 2: Vehicle Assembly Allowance (VAA)
The Vehicle Assembly Allowance (VAA) will allow vehicle manufacturers
with a plant volume of at least 50,000 units per annum to import a
percentage of their components duty free.
• 20% reducing to 18% over 3 years.
• Introduction in 2013.
27% 27%
19%18%18%
20%
14%
16%
18%
20%
22%
24%
26%
28%
30%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
DFA% of Domestic Turnover VAA% of Domestic and Export Turnover
MIDP APDP
Pillar 3: Production Incentives (PI)
The Production Incentive will be in the form of a duty credit aimed at raising production value-added:
• 55% reducing to 50% over 5 years.
• Value-added = Sales minus Imported Components and Non qualifying Raw materials.
• Additional 5% for vulnerable sub-sectors.
• OEM’s accrue the PI Benefit for the parts supplied by component manufacturer
55%
52%
50%50%51%
54%53%
45%
50%
55%
60%
'13 '14 '15 '16 '17 '18 '19 '20Production Incentive
Qualifying Raw Materials
25% Standard Value added on raw materials
• PGM’s
•Leather
• Aluminium
• Steel
• Stainless steel
Pillar 4: Automotive Investment Scheme AIS)• The AIS program provides support to light motor vehicle manufacturers and
automotive component manufacturers.
• AIS provides for a taxable Cash Grant of 20% of the qualifying investment in Productive Assets (OEM has / will achieve 50 000 annual production within 3 years).
• An additional taxable Cash Grant of 5% to 10% is available to projects that are considered as strategic by the DTI and meet specified performance requirements.
• Project below R 30 mio by light motor vehicle manufacturers and R1 mio by component manufacturers will not qualify.
• The approved AIS grant is paid over a period of 3 years.
• The commencement date of the program was 1st of July 2009 (Retroactive legislation).
Overview
1. SA Auto Industry in the Global Context
2. The importance of stable Government Policy for the Auto Sector
3. Reflection on achievements from the MIDP Program
4. Automotive Production Development Program (APDP)
5. Roadmap
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013
350,000
600,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exportsMIDP
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
OtherIPAP 2
APDP
1995
0%
20%
40%
60%
80%
100%
Past Future
Imported Imported in Local Local
40%
70-80%Loca
l Con
tent
Exc
l. en
gine
& g
earb
oxLocal Content Development
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
OtherIPAP 2
APDP
PreferentialProcurement
APDP
1995
Beneficiation Strategy
• Why is a beneficiation strategy so important? Because in
general local raw material costs provide no competitive
advantage for local beneficiators as they are internationally
priced commodities (LME etc.).
• NAAMSA endorses the importance of the early introduction
of effective beneficiation strategy as a key intervention to
establish sustainable long term competitiveness.
• In particular, reference was made to “developmental pricing”
that would support a lower commodity input cost for our
Industry.
Raw Material cost
Imported parts
Local parts
Operating costs
Overheads
Typi
cal e
xpor
t par
t cos
t mak
e up
%
50
100
70
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Electricity
Tariffs
OtherIPAP 2
APDP
PreferentialProcurement
APDP
1995
100.0
120.0
140.0
160.0
180.0
200.0
220.0
240.0
260.0
2007 2008 2009 2010 2011 FC
CPI Energy Increase (Eskom)
%
Cumulative Inflation Cost IncreasesEnergy vs CPI (2007 – 2011)
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Ports and Rail
Electricity
Tariffs
OtherIPAP 2
APDP
PreferentialProcurement
Labour
Industrial stability
Productivity
APDP
1995
Nr of working days lost due to strikes SA vs other Countries
Note: Days lost during 2010 for SA = 20.6 Mio
CountryGDP
(Mio USD) 2010
Canada 1,574,051
South Africa 357,259
France* 2,582,527
Spain 1,409,946
Britain 2,247,455
Ireland 204,261
Italy 2,055,114
Australia 1,235,539
Germany* 3,315,643
USA 14,657,800
Belgium 465,676
Finland 239,232
Denmark 310,760
Poland 468,539
Netherlands 783,293
Sweden 455,848
Russia 1,465,079
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Ports and Rail
Electricity
Tariffs
OtherIPAP 2
APDP
PreferentialProcurement
Labour
Industrial stability
Skills / training
Productivity
APDP
Wage Inflation
1995
100.0
105.0
110.0
115.0
120.0
125.0
130.0
135.0
140.0
2007 2008 2009 2010 2011 FC
CPIWage Increase
%
Cumulative Inflation Cost Increases Wages vs CPI (2007 – 2011)
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Local Content /Global Suppliers
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Ports and Rail
Electricity
Tariffs
New tradeagreements
Mercusor
Africa(SSA)
BRIC
OtherIPAP 2
APDP
PreferentialProcurement
Labour
Industrial stability
Skills / training
Productivity
APDP
Wage Inflation
1995
Exporting to Sub-Saharan Africa
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Local Content /Global Suppliers
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Ports and Rail
Electricity
Tariffs
New tradeagreements
Mercusor
Africa(SSA)
BRIC
OtherIPAP 2
Fuel quality
APDP
PreferentialProcurement
Labour
Industrial stability
Skills / training
Productivity
APDP
Wage Inflation
1995
SA Fuel Quality vs Global Players
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and achieving international competitiveness
2005 2013 2020 And Beyond
350,000
600,000
1,200,000
Loca
l pro
ducti
on v
olum
e pe
r ann
um
Domestic supply with some global and regional exports
Enhanced International Competitiveness
MIDP
Tooling Initiative
Beneficiation Strategy
Local market growth
Local Content /Global Suppliers
Vulnerable Sectors
Light Vehicles MCV / HCV
Investment Support
IDC
AIS
Local contentDevelopment
Existing tradeAgreements AGOA SADCEU
InfrastructureDevelopment
Ports and Rail
Electricity
Tariffs
New tradeagreements
Mercusor
Africa(SSA)
BRIC
OtherIPAP 2
Fuel quality
APDP
PreferentialProcurement
Labour
Industrial stability
Skills / training
Productivity
APDP
Wage Inflation Electric vehicles
1995
354632555000
1200000
0
200000
400000
600000
800000
1000000
1200000
1400000
2000 Actual 2011 FC 2020 Vision
Passenger and LCV Market in SA
Annual Local Market increase required until 2020 = 8.9%U
nits