New auto incentive plan approved

5 September 2008

The South African government has approved the new Automotive Production and Development Programme (APDP), the Department of Trade and Industry announced on Thursday.

The new APDP, which will replace the Motor Industry Development Programme (MIDP), aims to stimulate growth in the automotive vehicle production industry to 1.2-million vehicles per annum by 2020 with associated deepening of the components industry.

This would provide an opportunity to increase the local content of domestically assembled vehicles. The automotive industry is regarded as a strategic sector for the South African economy and is the largest and leading manufacturing sector.

“The revised MIDP would seek to provide industry with a reasonable level of support in a market neutral manner,” Trade and Industry Minister Mandisi Mpahlwa said in Pretoria this week.

“There would be no discrimination for products sold domestically and those exported.”

Appropriate levels of support

Mpahlwa said the APDP would provide appropriate levels of support for these targets while achieving a better balance between domestic and export sales to supply growing domestic demand.

With import tariffs in mind, the APDP would further create “stable and moderate” import tariffs from 2012, set at 25% for completely built up vehicles (CBVs) and 20% for components used by vehicle assemblers.

“Close working relations have been vital for the industry and given the strong interaction that has been shown so far, there is no doubt that we will make a remarkable impact on manufacturing broadly,” Mphahlwa said.

Four key elements

The new APDP is structured in four key elements namely, tariffs, local assembly allowance, production incentives and automotive investment allowance.

The programme will include a local assembly allowance (LAA) which 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.

The LAA would come in the form of duty credits issued to vehicle assemblers based on 18% to 20% of the value of light motor vehicles produced domestically from 2013, Mpahlwa said.

Manufacturers would also receive value-add support to help encourage increased levels of local value addition along the automotive value chain, with positive spin-offs for employment creation.

The duty rebate credit will replace the current export based scheme.

Industry review

The APDP comes after a review of the MIDP was undertaken, which noted that although the MIDP had recorded successes since 1995, the industry faced a number of challenges.

The review revealed that South Africa and the sub-region remained a relatively small market in global terms, isolated from larger markets and shipping routes.

In addition, challenges of major domestic infrastructure and logistical inefficiencies were identified, while there was a severe skills shortage, among other things.

The review further noted that the revised programme needed to be comparable with major competitors and consistent with World Trade Organisation (WTO) rules.

Source: BuaNews