Automotive Industry Development Centre CEO Lance Schultz says revision of certain aspects of the South Africa Automotive Masterplan would be an important consideration given the current position of the local automotive sector due to COVID-19. Schultz says “Given the marginal 0.6% contribution to global manufacturing output the situation has placed the SA automotive sector in a precarious position. The current dilemma will affect the manufacturing landscape forever.”
South African automotive component manufacturers have taken the lead from global counterparts and have commenced diversification efforts into the manufacture of medical equipment used in fight COVID-19. These efforts are noble as they not only provide for a much-needed shortage but also employment during this time.
Furthermore, the speed with which production tooling is being manufactured for medical equipment, indicates that a rapid increase in SA vehicle local content is eminently possible.
GlobalData was recently reported in the media stating that “Globally, our base Covid-19 scenario forecasts a fall in light-vehicle sales of 15.2%, to 76.2-million, with declines heavily weighted to the second quarter. This scenario allows for actions to suppress the virus being successful and that economies do not suffer much collateral damage. In Europe and North America, GlobalData estimates that in the past few days some 2.5-million light vehicles have been removed from production schedules at a cost of $77.7-billion in lost potential revenue if one assumes the stoppages last at least up until the end of April. The latest indicators are that sales in the US will fall around 45% in March, after tracking as normal up to March 11. In the past week, five automakers have turned to the capital markets to secure credit lines worth some $55-billion to see them through the crisis.”
“The South African automotive industry will require a stimulus package to survive. This is more so evident for lower tier manufacturers and suppliers who have smaller cashflow reserves. The Government has provided support to SMME’s but has limitations and a larger injection will be required to support SMME’s and incubatees. The size and quantum of this support package will depend on how long the shutdown will last and how quickly global supply chains will reactivate to full-scale production,” says Lance Schultz.