0
The Challenge of Localisation
Nigel Ward
Senior Vice President
Toyota SA Motors
Vision 2020
Manufacture 1.2 million vehicles in
South Africa !
Vision 2020 : Manufacture
1 200 000 vehicles in South Africa !
Questions that we need to Ask :
• Is it possible ?
• What n...
Contents
• History of the Sectoral Development Policy
in the SA motor industry
• Vision 2020
– Growth plan for Motor Manuf...
Sectoral
Development Policy
Motor Industry in SA
Years Policy Instrument
1959 Increase in duty on passenger cars and light commercial vehicles,
levy a...
Motor Industry in SA
Years Policy Instrument
1971 – 1976 Phase III : 52% at the beginning of 1971 to increase to 66% on 1
...
Motor Industry in SA
Years Policy Instrument
1989 - 1995 Import duty was increased to 50% ad valorem and on passenger
vehi...
• Customers
– Affordability
• Industry
– Plant modernisation
– Model line-up rationalisation
– Local production of volume ...
1
• Significantly Grow Vehicle
Production in South Africa
2
• Increase local value addition in
the automotive supply chain...
Vehicle Production and the Various phases of
the Motor Industry Development Plan
0
100 000
200 000
300 000
400 000
500 000...
Vision 2020
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
13
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
14
2005 2013...
0%
20%
40%
60%
80%
100%
Past Future (High-volume
Players)
Future (Low-
volume/Premium Players)
Imported Imported in Local ...
Brazil
104
W. Europe
100
Mexico
89
Russia
107
Malaysia
94
E. Europe
93
Cz. Rep
95
India
85
China
91
Thailand
92
RSA
107-11...
Is this a real Threat?
Hyundai/Kia in SA as an example
17
Hyundai/Kia produce in South Korea (cost index 88) and India (co...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
18
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
19
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
20
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
21
2005 2013...
[%]
2008 – Index 100
Energy 30 25 25.3 25.6 11 10
22
CPI 9.5 6.3 3.5 6.1 5.7 5.5
Cumulative Inflation Cost Increases
Energ...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
23
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
24
2005 2013...
Nr of working days lost due to strikes
SA vs other Countries
25
Note: Days lost during 2010 for SA = 20.6 Mio
Country
GDP
...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
26
2005 2013...
Cumulative Inflation Cost Increases
Auto Wages vs. CPI (1993 – 2013 FC)
[%]
1992 – Index 100
27
0
100
200
300
400
500
600
...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
28
2005 2013...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
2005 2013 20...
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
2005 2013 20...
SA Fuel Quality vs Global Players
31
Legend:
Domestic Market only
The roadmap towards 1.2 mil vehicles and
achieving international competitiveness
2005 2013 20...
Passenger and LCV Market in SA
354632
623921
1200000
0
200000
400000
600000
800000
1000000
1200000
1400000
2000 2012 2020 ...
+8% for Euro
+21% for Dollar
[%]
2008 – Index 100
Exchange rate impact on revenue
R/Euro 12.07 11.69 9.71 9.99 10.53 13.00...
Extended Auto Industry – Cumulative Costs
Inflation Impacts (2008 – 2013 FC)
[%]2008 – Index 100
Wages 8 7.5 10 9 9 7.5
En...
+
Major deterioration of export competitiveness!=
Costs inflation impacts (2008 – 2013 FC)
[%]
2008 – Index 100
Exchange r...
“Competitive”
Localisation
Weakness
Build to print industry
Assembler culture
Limited skills and resources
Low local content (value added)
Inter...
JSP/MSP
Parts
54%
Local Parts
46%
LocalVendor
V-V
• 46% of Local
Parts Cost is V -
V Parts from
Overseas
• Highly affected...
Opportunities
Electrical / Electronic
Chassis and Drive-train
Body
19%
15%
23%
10%
• Axles
• Differentials
• Drive shafts
...
– Exchange Rate
5
7
9
11
13
15
17
19
Exchange Rate Projection
USD1 EUR1
Now
2013
FC
2025
USD
EUR Inflationary Differential...
• Job Creation
Why Local Content ?
Unemployment: National Average = 24.9% SA Population by Age: 2012
Sustainable Future
Ways to Improve Local Content
Using The APDP Benefits
Improve Competitiveness NOT Profits
Price CIM CIL Price CIM CIL
Glas...
Ways to Improve Local Content
Beneficiation
Export
Destinations:
China, Europe,
Japan, Asia-Pacific,
Middle East, South
Ko...
Ways to Improve Local Content
Beneficiation
Finished Part Machining
FoundryDie MakingAlusaf
Not OEM
Specific
Ways to Improve Local Content
OEM Collaboration
Imperatives to sustain (manufacturing)
industry
• Policy certainty and predictability with appropriate levels of support
a...
Upcoming SlideShare
Loading in...5
×

Nw dac august 2013

126

Published on

Published in: Business, Automotive
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
126
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Nw dac august 2013"

  1. 1. The Challenge of Localisation
  2. 2. Nigel Ward Senior Vice President Toyota SA Motors Vision 2020 Manufacture 1.2 million vehicles in South Africa !
  3. 3. Vision 2020 : Manufacture 1 200 000 vehicles in South Africa ! Questions that we need to Ask : • Is it possible ? • What needs to happen to be able to produce 1 200 000 vehicles in SA ? • What will the results be if we manufacture 1.2 million vehicles?
  4. 4. Contents • History of the Sectoral Development Policy in the SA motor industry • Vision 2020 – Growth plan for Motor Manufacturing in SA : Towards 1 200 000 production • Localisation – A Strategic Pillar • Conclusion
  5. 5. Sectoral Development Policy
  6. 6. Motor Industry in SA Years Policy Instrument 1959 Increase in duty on passenger cars and light commercial vehicles, levy an excise duty, additional protection to domestic component manufacturers, create rebate provisions subject to local content requirements. 1961 – 1963 Phase I :15% to 40%. Ad valorem duty set at 35% up to a maximum of 100% depending on the value and the weight of the car. 1964 - 1969 Phase II : increase local content in mass from 45% in 1964 to 55% in 1969.
  7. 7. Motor Industry in SA Years Policy Instrument 1971 – 1976 Phase III : 52% at the beginning of 1971 to increase to 66% on 1 January 1977. 1977 - 1978 Phase IV : A two-year standstill phase 1980- 1988 Phase V :66% by mass in respect of motorcars and 50% by mass in respect of light commercial vehicles. 1989 - 1995 Phase VI : Local content based on value as opposed to mass. 55% at the inception of the programme to 75% (including exports) by the year 1997. Reduce the foreign exchange used by the vehicle manufacturing industry by about 50% over the period 1989 – 1997.
  8. 8. Motor Industry in SA Years Policy Instrument 1989 - 1995 Import duty was increased to 50% ad valorem and on passenger vehicles to 100% ad valorem. 1994 Reduction of the duty on passenger cars to 80% af valorem from 1Janury 1994. 1995 Reduction of the duty to 75% ad valorem from 1 January 1995 on passenger cars.
  9. 9. • Customers – Affordability • Industry – Plant modernisation – Model line-up rationalisation – Local production of volume models • Economy – Employment – Investment – Exports OBJECTIVES OF THE MIDP
  10. 10. 1 • Significantly Grow Vehicle Production in South Africa 2 • Increase local value addition in the automotive supply chain 3 • Increase employment in the automotive supply chain OBJECTIVES OF THE APDP 21
  11. 11. Vehicle Production and the Various phases of the Motor Industry Development Plan 0 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 900 000 1 000 000 1960 1970 1980 1990 1995 2000 2005 2006 2010 2015 2020 Exports Local Market Start-up Phase Initial Growth Isolation Phase Revitalisation Growth Phase 149,7% 36% -17,3% 16% -8,3% 48% 57,7% ☀ 20,4% ?
  12. 12. Vision 2020
  13. 13. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 13 2005 2013 350,000 600,000 Localproductionvolumeperannum Domestic supply with some global and regional exports MIDP Investment Support AIS OtherIPAP 2 MIDP/ APDP 1995 Vulnerable Sectors Light Vehicles MCV / HCV IDC
  14. 14. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 14 2005 2013 350,000 600,000 Localproductionvolumeperannum Domestic supply with some global and regional exports MIDP Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development OtherIPAP 2 1995 MIDP/ APDP
  15. 15. 0% 20% 40% 60% 80% 100% Past Future (High-volume Players) Future (Low- volume/Premium Players) Imported Imported in Local Local 35-40% 70-80% LocalContent Excl.engine&gearbox Local Content Development 40-50% 15
  16. 16. Brazil 104 W. Europe 100 Mexico 89 Russia 107 Malaysia 94 E. Europe 93 Cz. Rep 95 India 85 China 91 Thailand 92 RSA 107-110 Supplier Cost Competitiveness 2013 16EUR 1 : ZAR 10.50 South Korea 88 USA/Canada 91 North Africa 86
  17. 17. Is this a real Threat? Hyundai/Kia in SA as an example 17 Hyundai/Kia produce in South Korea (cost index 88) and India (cost index 85), ship cars to SA, pay 25% import duty and are still highly competitive in SA PassengerMarketShare
  18. 18. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 18 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum Domestic supply with some global and regional exports MIDP Tooling Initiative Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development OtherIPAP 2 Preferential Procurement 1995 MIDP/ APDP
  19. 19. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 19 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum Domestic supply with some global and regional exports MIDP Tooling Initiative Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development Existing trade Agreements AGOA SADCEU OtherIPAP 2 Preferential Procurement 1995 MIDP/ APDP
  20. 20. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 20 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU OtherIPAP 2 Preferential Procurement 1995 MIDP/ APDP
  21. 21. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 21 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Electricity Tariffs OtherIPAP 2 Preferential Procurement 1995 MIDP/ APDP
  22. 22. [%] 2008 – Index 100 Energy 30 25 25.3 25.6 11 10 22 CPI 9.5 6.3 3.5 6.1 5.7 5.5 Cumulative Inflation Cost Increases Energy vs. CPI (2008 – 2013 FC)
  23. 23. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 23 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs OtherIPAP 2 Preferential Procurement 1995 MIDP/ APDP
  24. 24. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 24 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs OtherIPAP 2 Preferential Procurement Labour Industrial stability Productivity 1995 MIDP/ APDP
  25. 25. Nr of working days lost due to strikes SA vs other Countries 25 Note: Days lost during 2010 for SA = 20.6 Mio Country GDP (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
  26. 26. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 26 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs OtherIPAP 2 Preferential Procurement Labour Industrial stability Skills / training Productivity Wage Inflation 1995 MIDP/ APDP
  27. 27. Cumulative Inflation Cost Increases Auto Wages vs. CPI (1993 – 2013 FC) [%] 1992 – Index 100 27 0 100 200 300 400 500 600 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013FC Cum CPI (%) Cum Auto Wage increase (%)
  28. 28. Legend: Domestic Market only The roadmap towards 1.2 mil vehicles and achieving international competitiveness 28 2005 2013 2020 And Beyond 350,000 600,000 1,200,000 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs OtherIPAP 2 Preferential Procurement Labour Industrial stability Skills / training Productivity Wage Inflation 1995 MIDP/ APDP
  29. 29. 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 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs New trade agreements Mercusor Africa (SSA) BRIC OtherIPAP 2 Preferential Procurement Labour Industrial stability Skills / training Productivity Wage Inflation 1995 29 MIDP/ APDP
  30. 30. 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 Localproductionvolumeperannum 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 content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs New trade agreements Mercusor Africa (SSA) BRIC OtherIPAP 2 Fuel quality Preferential Procurement Labour Industrial stability Skills / training Productivity Wage Inflation 1995 30 MIDP/ APDP
  31. 31. SA Fuel Quality vs Global Players 31
  32. 32. 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 Localproductionvolumeperannum Domestic supply with some global and regional exports Enhanced International Competitiveness MIDP Tooling Initiative Beneficiation Strategy Local market growthLocal Content / Global Suppliers Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development Existing trade Agreements AGOA SADCEU Infrastructure Development Ports and Rail Electricity Tariffs New trade agreements Mercusor Africa (SSA) BRIC OtherIPAP 2 Fuel quality Preferential Procurement Labour Industrial stability Skills / training Productivity Wage Inflation 1995 32 MIDP/ APDP
  33. 33. Passenger and LCV Market in SA 354632 623921 1200000 0 200000 400000 600000 800000 1000000 1200000 1400000 2000 2012 2020 Vision 33 Annual Local Market increase required until 2020 = 8 - 9% Units
  34. 34. +8% for Euro +21% for Dollar [%] 2008 – Index 100 Exchange rate impact on revenue R/Euro 12.07 11.69 9.71 9.99 10.53 13.00 R/Dollar 8.26 8.42 7.32 7.27 8.21 10.00
  35. 35. Extended Auto Industry – Cumulative Costs Inflation Impacts (2008 – 2013 FC) [%]2008 – Index 100 Wages 8 7.5 10 9 9 7.5 Energy 30 25 25.3 25.6 11 10 Local Material 10.9 -2.2 -3.5 1.1 -0.3 3.93 CPI 9.5 6.3 3.5 6.1 5.7 5.5
  36. 36. + Major deterioration of export competitiveness!= Costs inflation impacts (2008 – 2013 FC) [%] 2008 – Index 100 Exchange rate impact on Revenue [%] 2008 – Index 100 Combined effect of Exchange Rate + Cost Inflation 36
  37. 37. “Competitive” Localisation
  38. 38. Weakness Build to print industry Assembler culture Limited skills and resources Low local content (value added) International not competitive Strength Wide supplier base to the 7 OEM‘s Availablity of basic raw materials International certification of management systems Strong automotive assembly experience Threat Political situation High crime level Free capacities in Asia and Europe Monopoly situation of suppliers Price increases Opportunities Export of single components Local OEM‘s to use common suppliers Localisation of current CKD parts Currency development APDP / BBBEE IPAP Initiative to support supplier Industry SWOT Analysis Understanding where we are!
  39. 39. JSP/MSP Parts 54% Local Parts 46% LocalVendor V-V • 46% of Local Parts Cost is V - V Parts from Overseas • Highly affected by exchange rate fluctuation • Logistics cost is high Other 2% JPY 12% EUR 14% USD 18% ZAR 54% Local Vendor Parts Breakdown Reality: Net Local Content = ONLY 25% Current Local Content Image
  40. 40. Opportunities Electrical / Electronic Chassis and Drive-train Body 19% 15% 23% 10% • Axles • Differentials • Drive shafts • Brakes • Harnesses • Starter motors • Alternators • Wiper systems • HVAC • Cockpit • Seats • Door panels • Carpets • Bonnets • Bootlids • Side frames • Doors 6% 5% 3% 7% XX%: % of total material cost YY%: True local material plus value add as % of total material cost Note: %’s indicative only • Glass • Paint • Bumpers • Mirrors Exterior Interior 33% 14%
  41. 41. – Exchange Rate 5 7 9 11 13 15 17 19 Exchange Rate Projection USD1 EUR1 Now 2013 FC 2025 USD EUR Inflationary Differential > 37% Why Local Content ? Increasing Differential - Competitiveness
  42. 42. • Job Creation Why Local Content ? Unemployment: National Average = 24.9% SA Population by Age: 2012 Sustainable Future
  43. 43. Ways to Improve Local Content Using The APDP Benefits Improve Competitiveness NOT Profits Price CIM CIL Price CIM CIL Glass 100 1.77 1.06 91 1.68 0.97 Casting 100 1.06 0.87 89 0.95 0.76 Before APDP After APDP Examples 9% Improvement 11% Improvement
  44. 44. Ways to Improve Local Content Beneficiation Export Destinations: China, Europe, Japan, Asia-Pacific, Middle East, South Korea Iron 6th Largest of 50 Export Destinations: China, Europe 20th of 45 countries Copper 1 2 4 5 7 9 8 12 14 15 18 20 22 23 25 27 34 35 36 43 45 Export Destinations: China, Europe 12th of 38 countries Lead 1 2 3 4 5 6 7 8 9 1011121314151617181920212223242526272829303132333435363738 Export Destinations: China1 2 3 4 5 7 8 9 13 14 16 15 19 21 22 23 27 28 33 34 41 42 43 9th of 43 countries Aluminium • Primary Raw Materials All major Commodities available in RSA – High Potential Strategy Alignment Maximize Government Support and Utilize Local Materials
  45. 45. Ways to Improve Local Content Beneficiation Finished Part Machining FoundryDie MakingAlusaf Not OEM Specific
  46. 46. Ways to Improve Local Content OEM Collaboration
  47. 47. Imperatives to sustain (manufacturing) industry • Policy certainty and predictability with appropriate levels of support and investment incentives • Labour stability • Average annual volumes per platform produced to increase to globally competitive levels (minimum 80 000 units) with local content levels to increase to 70% plus for volume producers • SA Supplier Competitiveness to improve to/align with average European costs • Focused Industrialisation Strategy to broaden SA supplier chain and increase manufacturing depth • Productivity to improve from 15 cars to 30 cars per employee per annum and continued industrial relations stability • Massive investment in Training and Skills development at all levels • Substantial improvement in logistics competitiveness and infrastructure
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×