Optimization of local content in the automotive component industry in KwaZulu-Natal.

Abstract

The South African government has acknowledged the global competitiveness of the automotive industry and has identified it as a key economic growth sector, with the aim of increasing vehicle production to 1.2 million units by 2020, while significantly increasing the value of local content to a target of 75%. The automotive industry has identified the automotive component industry as the most valuable source of contributing to increasing the value of local content in domestically assembled vehicles. It is imperative for the automotive component industry to focus on optimising local content by improving technology and capabilities to remain competitive globally. The aim of this study was to determine the impact optimisation of local content in domestically assembled vehicles will have on the future growth potential of the automotive component sector. The objectives of the study examined the extent of localisation in the automotive component industry, the role of government in optimising local content, the challenges of optimising local content and economic impact of localisation on future growth of the industry. The objectives were explored through the aid of quantitative research and theory comparisons. Sixty five component manufacturers located in a 100 km radius from Toyota South Africa assembly plant were targeted. A response rate of 72.3% was achieved using a questionnaire as the research instrument. The respondents indicated that the two major challenges faced by the automotive component industry were, the local manufacturers pricing in comparison to global manufacturers was higher and the high level of dependence that local manufacturers have on foreign licences. A large percentage of the respondents believe that to optimise local content in locally assembled vehicles, government intervention and support will have to be at a high level. Improving internal competitiveness, rationalisation to achieve economies of scale and maximising government support are some of the key drivers to achieving optimal local content in the automotive component industry.