Isuzu CEO Billy Tom moots a shared car plant in SA

Isuzu Motors SA CEO Billy Tom has mooted the idea of a combined assembly plant that could be shared by different motoring brands to help protect and grow the local vehicle manufacturing industry.

There is an opportunity for a shared plant for brands that import cars to SA but don’t yet have the sales volumes to justify local manufacture. They could share the costs of setting up a plant and potentially start with semi knocked-down (SKD) production which requires less investment, then move to full-scale completely knocked-down (CKD) production once they grow their volumes.

“Capital intensive manufacturing makes it difficult for a single manufacturer to go it alone but a combined facility could create scale to make local production viable. You could also build a local components supply chain,” said Tom at a media briefing in Joburg on Thursday.

Isuzu builds trucks and D-Max bakkies at its Qqeberha factory and imports the MU-X sports utility vehicle.

Tom, who is also president of motor industry umbrella body Naamsa, presented the idea as a potential solution to the deindustrialisation happening in SA’s motor manufacturing industry which has seen foreign competition from subsidised imports and low-cost vehicle assembly threatening the viability of the SA motor industry.

He echoed recent statements by Toyota SA CEO Andrew Kirby, who called for changes to automotive policy to protect localisation and job creation.

The government introduced the latest automotive production and development programme (APDP) in 2021 with the aim of doubling industry production and employment by 2035, but between 2018 and 2024 the local market share of SA-made vehicles declined from 46% to 40%.

Over the same period, imported vehicles from India doubled their market share to 34% while vehicles from China soared 645% to account for 10% of sales today.

With state-owned Chinese car brands enjoying subsidies from their government, it has allowed Chinese companies to offer cars at big discounts compared to legacy brands and disrupt the market.

“We’ve created scale and skills. This is an area of opportunity for the SA auto industry so we’re not a nation of consumers, but producers.”

Tom said he was not looking for protectionism but to level the playing field in a market that has become unfairly skewed, and a shared assembly plant may be an opportunity to boost local manufacturing in an industry that is a major contributor to the economy, accounting for 5.3% of GDP.

There are seven long-standing high-volume car manufacturers in SA that produce vehicles for the local market and export: BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen.

Stellantis will soon start producing the Peugeot Landtrek bakkie at a new factory in Coega, Eastern Cape, while there are unnamed Chinese brands reportedly interested in setting up local plants. The Chinese BAIC factory in Coega has assembled a handful of cars since its establishment in 2018.

Mahindra this week announced it aims to build a full-scale vehicle factory using local components. After assembling imported SKD vehicle kits near Durban, the Indian brand is conducting a feasibility study to build CKD cars from scratch.

Tom said local car manufacturers also needed to look for more opportunities on the continent.

“Only 15% of what we export is to Africa. We need more bilaterals on the continent, for instance with Egypt, which has become an important hub,” he said.

He acknowledged Africa has logistical challenges, which made it a lot easier to get goods out to Europe and Asia than within the continent.

“The African free trade agreement would work better if it’s easier to trade on the continent, with improved logistics,” he said.

The African Continental Free Trade Area (AfCFTA) was formed in 2018 as an agreement between African countries to create a single market for goods and services without tariffs.

Tom said Isuzu would not consider reducing its vehicle prices in SA by converting unspent import-duty credits into cash, as recently mooted by Volkswagen and BMW.

SA motor manufacturers will ask government to allow them to convert billions of rand in unused import-duty credits into the cash equivalent to bring down production costs and reduce the severity of retail price increases.

The credits allow local car manufacturers to reduce import duties on vehicles they import and on components used in SA vehicle production, thereby rewarding high-volume vehicle manufacture.

Volkswagen Group Africa (VWGA) chair Martina Biene recently said certain motor companies had a surplus of duty credits because their value outweighed vehicle import requirements.