In order to support the motor industry, details of an motor vehicle development programme that aims to boost local production to 1,2-million units a year by 2020 were released in early September.  The automotive industry is the largest and leading manufacturing sector in the domestic economy.

The revised programme will have the following four key elements;

Tariffs: Stable, moderate tariffs will remain at 25% for light motor vehicles and 20% for components from 2012.

Local Assembly Allowance: This support will be in the form of duty credits issued to vehicle assemblers based on 20 - 18% of the value of light motor vehicles produced domestically from 2013.

Production Incentive: From 2013 this support of 55-50% of value added computed in simple terms as sales less raw materials, in the form of a duty rebate credit, will replace the current export based scheme. Thus the actual benefit will be 55% X value add X applicable duty rate in 2013.

Automotive Investment Allowance: From 2009, this assistance will replace the current Productive Asset Allowance and will be 20% of qualifying investment paid over to participants over a three year period.

The new tariffs are meant to protect continued local vehicle assembly. Besides having the huge Toyota manufacturing facility located at Prospecton, south of Durban, the region benefits substantially from an increasing number of automotive suppliers locating in KZN. Other vehicle manufacturers include MAN Truck and Bus SA, Volvo Trucks and Bell Equipment.

This support is effectively providing a lower duty rate for local assemblers and should provide enough encouragement for high volume vehicle production in line with the target of doubling production.

The value-added support aims encourage increasing levels of local value addition along the automotive value chain with positive spin-offs for employment creation. The industry generates strong linkages with:

Input industries such as aluminium, chemicals, electronics, leather & textiles, plastics, steel, machinery and equipment,

Service industries such as engineering, logistics, tooling,

Others such as financial, wholesale & retail, advertising.

More than 50 major automotive component suppliers are located in KZN, with 18 of them being secondary suppliers who provide individual components or raw materials to the manufacturers of components or sub-assemblies for the motor assembly plants.