The Auto industry is controlled by corporations with locally owned subsidiaries. Automotive manufacturers with presence in South Africa include Toyota, General Motors, Ford and Mercedes Benz among others. Ford Motor Company is the largest manufacturer currently, while General Motors recently announced that it was shrinking its investing in the country due to hard economic times. The supply chain is flexible, robust and is well managed by local and international agents. Most of suppliers in the chain provide products to be used in manufacture of vehicles and mostly come from United States. The markets for finished products include parts of Africa, North America and Asia. Culture and social orientation has been crucial in providing an enabling environment to support the growth. In line with international environmental initiatives, the industry has developed its green production plans and road map.
The Auto industry in South Africa is dominated by European motor companies such as Mercedes, BMW and Volkswagen that are wholly owned subsidiaries. Similarly, Japanese and American manufacturers such as Toyota, General Motors and Ford are 100 percent controlled subsidiaries. The marquee imported vehicles are also present in the global supply chain. These domestic and foreign companies have respective models as described. Despite most manufacturing taking place within the country, the global supply chain is also characterized by the importation of already manufactured automobiles. Importers are essential for the success of the supply chain.
Literature, Empirical Research and Analysis
The auto industry has over 75 percent multinationals creating a supplier employment to approximately 80,000 in 2014 (DTI, 2015). Auto industry is the largest manufacturing sector in South Africa according to data of 2014 and contributes to over 7.2 percent of GDP (DTI, 2015). However, the sector came under scrutiny in 2009 as a result of the global economic crisis. Since then, the industry has witnessed significant growth. According to an interview with Department of Trade and Industry officials, it is reported that approximately 566,083 were produced in 2014 and 2015 projection stood at 627,500 (DTI, 2015). This is possible due to the ever-increasing demand for new models that must be released fast. Significantly, Ministry officials opine that auto product exports accounts for 12.7 of total South Africa exports (DTI, 2015). Success of the industry has been largely pegged on high quality and competitive production.
Competitiveness is achieved by diverse production of unique models by the different companies. Companies such as Toyota, Ford and Mercedes Benz always study the markets, analyze and settle down to address existing demands. Automobiles and products produced in South Africa are exported to countries such as Australia, Parts of Africa, EU, USA, Brazil, China and Japan among others. Enablers of competitive advantage are based on differentiation of products and how the companies meet customer needs and demands. However, global economic crisis and tides have inhibited competitive advantage where some units that are not profitable have always been closed down.
Import and exports are supported by stable tariffs of 25 on automobiles and 20 percent on products (DTI, 2015). Considerably, vehicle assembly allowance given to manufacturers with minimum plant volume of 50,000 annually has been supportive. Here they are allowed to import a percentage of their raw material duty free. Tariffs favor manufacturers with large plant volume because of their apprehensive contribution to the growth of the industry and economy. The costs involved in the production of automobiles are both fixed and variable.
Significantly, the industry heavily depends on human capital taken through competitive remunerations calculated based on job descriptions. Workers undergo extensive training to sharpen their skills to produce high quality automobiles. Some of the companies like Ford organize oversea training for their staff. The quality of labor in the market is good and has been one of the reasons why companies gain competitive edge. Employees have their unions to advocate for their pay and improved working conditions. Sustainable supplier management is critical for the success of the automotive industry. Most raw materials come from European countries, United States and China and Japan.
Social and cultural factors such as discrimination, population, beliefs, values and poverty have contributed to the development of the sectors and thus created competitive advantage for manufacturers. For a long time South Africa has not discriminated multinational corporations in regards to their ethnic balance. The county has been accommodating diverse people with different rich cultural orientations and histories. The country is one of the most populated in Africa thereby creating ready market for manufactured automobiles. Available rich culture has been critical in promoting growth of the sector. Economists believe that presence of supportive culture and sufficient culture might catapult industry and economic growth (Jeremy, 2007). Logistical infrastructure model is well established in the industry. Most of the top automotive component suppliers have representatives in South Africa. Sectors stakeholders assert that suppliers include Johnson Controls, Lear, TRW Automotive, Tenneco, Federal Mogul, Delphi, Visteon, and Arvin Meritor, amongst others (Export. Gov, 2017). These suppliers have managed to establish strong business relationship to enhance the potential mutually beneficial trade and supply chain management with South Africa and international stakeholders.
Africa’s growth opportunities have catalyzed and boosted automotive exports to North America, a business that is controlled by both local and international agents. The supply chain is always complete because the manufacturers acquire raw materials from suppliers, process and then exports to customers. Among the automotive corporation, Ford Motor Company is the leading automotive manufacturer in South Africa. Distinctively, in 2017, General Motors announced that it was divesting from South because of declining sales as a result of competitive market (Export. Gov, 2017). The market is very competitive and companies must adjust their production and improve on their supply chain management to survive. Notably, the industry has finished its electric vehicle and green production roadmap. The roadmap is anchored on creating an environment in which electric vehicles can operate on the South African roads, and support the production of vehicles that are relevant in the quest for environmental conservation.
DTI, Republic of SA. (2015). Presentation on SA automotive sector. EDD Parliamentary
Portfolio Committee. Department of Trade and Industry. Available at: https://www.thedti.gov.za/parliament/2015/SA_Automotive_Sector.pdf. Retrieved April 15, 2018.
Export. Gov. (2017). South Africa-Automotive. Export. Gov. Available at:
https://www.export.gov/article?id=South-Africa-automotive. Retrieved April 15, 2018.
Jeremy Williams. (2007). Cultural and social factors that affect development. Make Wealth
History. https://makewealthhistory.org/2007/07/01/cultural-and-social-factors-that-affect-development/. Retrieved April 15, 2018.