DAVID FURLONGER: Floody hell! Will it never end?

“It never rains but it pours.” The proverb, referring to the tendency of misfortunes to follow one another in quick succession, could not be more literally true for the motor industry.

The devastating KwaZulu-Natal floods forced Toyota to suspend production last week after its vehicle assembly plant in Prospecton, Durban, was breached by floodwaters. Also affected were dozens of components manufacturers, some supplying other vehicle manufacturers in addition to Toyota.

Durban’s port, the local motor industry’s main import-export hub, is overwhelmed. This week, public enterprises minister Pravin Gordhan said up to 9,000 excess containers (not just for the motor industry) had accumulated at the port because trucks could not reach them. He didn’t mention the thousands more sitting on ships offshore, waiting to be unloaded, or those stranded inland because Durban had no space.

Freight railway lines serving Durban have also been affected, with some sections swallowed by mudslides. Suggestions that the situation could return to normal in a week or so seem very optimistic.

All this is devastating for a trade-driven SA motor industry that exports most of the vehicles it builds and imports most of those it sells locally. Overseas assembly plants also rely on SA-made components.

The timing of the floods is impeccably bad. Days before they hit, the local industry was celebrating great March domestic sales figures of new cars and commercial vehicles. The 50,607 total was the highest monthly figure since October 2019. Two years of Covid-inflicted difficulties were finally shrinking in the rear-view mirror.

Toyota was particularly buoyant. It accounted for 30% of all new-vehicle sales in the first three months of 2022. Sales and marketing head Leon Theron called the achievement “monstrous”.

Given events of the past two years, perhaps we should not be surprised that this joy should be short-lived. Covid, of course, was the great waster. It stopped the global motor industry stone-dead. As its impact diminished, other issues came into play: war, inflation, shortages of key components, shipping crises and, of course, extreme weather.

Ryan Robinson, global automotive research head for Deloitte, recently listed current challenges facing the industry. He prepared his remarks before the SA floods but they simply add to the complexity he set out. As an integral part of the international motor industry, what happens in SA affects the rest of the world. 

The automotive supply chain has been stretched for many months, through shortages of both components and the shipping capacity required to carry them to assembly plants in other countries. Recent Covid lockdowns in China “threaten to [further] disrupt global distribution”, says Robinson.

He says the war in Ukraine has made the situation worse. The country is a significant producer of some components, while Russia is an important source of raw materials like palladium, platinum and carbon black. Robinson says price inflation caused by the conflict is likely to spread to other automotive raw materials.

A worldwide shortage of semiconductor microchips has forced motor companies to cut planned vehicle production by millions since early last year. Ukraine supplies 50% of the neon gas used in their manufacture. Robinson says the microchip shortage is likely to last until at least 2024.

Vehicle price inflation is proving “less transitory” than expected as supply chain issues, political instability and interest rate rises make their mark on costs.

As a result, Robinson says, buyers may have to wait longer for their new vehicles — not just because inventories are down but also because motor companies are rethinking the way they do business. “They are moving away from building as many as they can, then cramming them into retail outlets,” he says.

Instead, companies may adopt a more build-to-order approach, responding directly to customer orders. With new-vehicle inventories around the world likely to remain low in the short term, Robinson warns of “substantial price increases and pullback on incentives for both new and used vehicles for the remainder of the year”.

How this will play out in SA is not clear. Local motor companies and dealers have worked hard to keep new vehicles available and affordable — with varying degrees of success. Our recent floods, allied to events elsewhere, will make the task even harder.

So spare a thought for your dealer when they tell you your dream car may only be available late this year, at a price well beyond what you budgeted for. When they claim none of this is their fault, they may actually be telling the truth.​