Indian cars spice up local market

11 November 2004

South Africa is increasingly being seen as a lucrative market for overseas vehicle manufacturers. Now India’s second-largest car manufacturer, Tata Motors, wants 7% of the local passenger car market by 2007-8.

The group’s ambitions were revealed at the launch of its Indica hatchback and Indigo sedan in South Africa last month. Tata also said it was looking into the feasibility of making cars locally.

South Africa’s automotive industry has become an increasingly important contributor to the country’s gross domestic product, mainly through strong growth in the motor vehicle and component exporting sector.

The industry is ranked 19th in the world in terms of vehicle production. It is responsible for approximately 80% of Africa’s vehicle output and produces 0.7% of the world’s vehicles.

According to the National Association of Automotive Manufacturers of SA (Naamsa), exports of components amounted to about R22.5-billion in 2002, while exports of motor vehicles amounted to about R18-billion in the same year. New car sales in 2003 were over 350 000, compared to exports of well over 100 000. Exports of passenger cars (11 267) in September 2004 where 1700 up from the same month in 2003.

So bright is the outlook that Standard Bank has projected that South Africa can expect foreign earnings from auto industry exports to equal earnings from gold exports for the first time in 2004.

The catalyst for this unprecedented growth is the government’s Motor Industry Development Programme (MIDP), introduced in 1995 and recently extended until 2007 by the Department of Trade and Industry.

The programme is aimed at making South Africa’s automotive sector internationally competitive through phased global integration, increasing the volume and scale of local production, expanding exports, and modernising and upgrading the industry.

Tata is already investimg some R40-million in a bus assembly factory in Johannesburg, and, according to Business Day, is on a short-list to supply the government with 15-35 seater vehicles.

Tata also says South Africa could be a stepping stone for the group into other markets in the region. Business Day says the company has been expanding overseas to lessen its dependency on the Indian market.

Tata’s announcement follows increased interest in doing business in South Africa among Indian firms.

India is South Africa’s sixth largest trading partner in Asia, with two-way trade worth more than US$2-billion a year, and South Africa recently adopted the “New Delhi Agenda for Cooperation” – a South-South co-operation agreement with India and Brazil.

Tata’s Asian rival in South Africa, Mahindra & Mahindra, has also announced plans to expand into the local vehicle retail market. reporter