What A Mess

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Almost 70% of all motor vehicles sold in South Africa are imported. I have to admit I had no idea that India manufactured/assembled so many different legacy car models. 13 of the top 20 cars sold in SA came from India. Thailand supplies the Ford Everest models for those that are curious.

Not that long ago local legacy car brand manufacturers in South Africa were complaining about the unfairness of cheaper Chinese imports. The cheaper Chines imports are subsidized by the Chinese government which gives them the edge to grow in the local SA market and scooping up easy market share. The local manufacturers quite rightly complained that they were not being protected, but their way of doing business is what is going to destroy them.

Chinese auto brands are being charged a 25% import duty and no one knows the exact subsidized government figure they are receiving, but the thought is they are selling at cost and still able to turn a profit. Those that were around doing business in the 1990's will have seen this play book before and how they decimated the local manufacturing. This did not just happen in SA, but globally and the manufacturing business was not protected by the governments at the time.

This week about 5 years too late the SA Government announced they are looking at increasing the car imports to 50% on Indian and Chinese made cars so this would double the import duties and in real terms add an extra 25% to the Chinese and Indian supplied vehicles selling price. This would either force the Chinese government to increase their subsidy matching the extra duties that the Chinese companies would now be paying. This would not protect local manufacturers in the slightest. The only way this could protect local manufacturing is exempting brands from the extra import duty if they have an assembly plant locally. This would work and thus would exempt most of the imports coming from India from the extra duties,

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You would think that the local legacy brands would be clapping their hands and celebrating this move, but it turns out they are horrified. BMW were the first to say this was a very bad move which left me slightly perplexed until I realized what they manufacture locally. BMW only manufactures/assembles the X3 model locally and every other model is imported meaning these models would be liable for the added 25% import duties. The new added price would make their models unsellable due to being non competitive.

The same story is repeated amongst all the other legacy auto brands with only 20 models being manufactured/assembled locally. Toyota, Volkswagen and Ford export from SA to over 100 international markets.

Toyota 6 models- Hilux (bakkie/van), Fortuner, Corolla Cross (including Hybrid), Corolla Quest, and Hiace (local taxi industry).
Ford - Ranger
Volkswagen- Amorok, Polo and Polo Vivo
BMW - X3
Mercedes Benz- C Class
Isuzu - D Max
Nissan = Navara
Mahindra - Pik Up
Baic - Beijing X55, BJ40 and BJ30
Hyundai - H100 and EX8.

So looking at this data one can clearly see that increasing the import duties benefits no one except the government and would not protect local manufacturers/assemblers besides Toyota. They would be the only ones to benefit if this happened and possibly BAIC due to the number of models they do locally.

What this tells us quite clearly is the legacy auto brands deserve what is coming to them as they are clearly over pricing themselves out the market and cannot justify the selling prices. These brands have been ripping everyone off for years and this is their just desserts hitting them all at once. Unbelievable really that they could justify these types of prices when they are under threat of being completely destroyed by the Chinese. The legacy auto brands have done this too themselves by charging the prices they have for so many years and their days are numbered in South Africa. Toyota is the only legacy brand that I see as being safe due to the number of models they assemble locally plus their market share being the highest and they are maintaining the sales numbers.

Posted Using INLEO