South Africa Places Local Content at Heart of New Autos Program

(Bloomberg) -- South Africa extended its auto-manufacturing incentive program through 2035, a plan that aims to keep international manufacturers such as Toyota Motor Corp., Volkswagen AG and BMW AG operating plants in the country.

  • One of the conditions of the new incentives is an increase in the proportion of vehicle components that come from South Africa to 60 percent, up from about a third. In return, the carmakers get tax breaks generous enough to ship vehicles all the way to Europe.

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  • The government, automakers and trade unions have been in talks for several months to update the program expiring in 2020. At stake is an industry that accounts for about 7 percent of GDP, employing an estimated 150,000 people in a country where joblessness is rife.
  • The focus on local content will help support suppliers, engineers and other professions that rely on the manufacturers to boost employment, but also to support black-owned businesses -- part of ongoing efforts to redress economic inequality caused by apartheid.
  • Carmakers get guaranteed incentives for another 17 years -- so long as they meet certain targets. That allows them to make decisions about investment and production of new models with some degree of certainty about the costs.

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  • The plan is “aspirational but also quite ambitious,” according to the National Association of Automobile Manufacturers of South Africa. The extension also got the seal of approval from the National Union of Metalworkers of South Africa.
  • A rise in overall production levels from last year’s 600,000 vehicles -- or less than 1 percent of global production -- would depend on the development of markets elsewhere in Africa, Mike Whitfield, managing director of Nissan in South Africa, said by phone.
South Africa Places Local Content at Heart of New Autos Program

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