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The contribution of the automotive industry to South Africa’s economy this year is likely to be dented by the floods in KwaZulu-Natal.
Toyota South Africa Motors (TSAM) confirmed on Wednesday that extensive damage was caused to its plant at Prospecton south of Durban, after flooding this month left a trail of destruction in the province.
Production at the plant has been suspended since April 11 and TSAM has not yet given an indication of when it will resume.
“Plant activities have been suspended while assessment and clean-up takes place. The cessation of operations will be extended when the plant enters the reparation phase,” it said.
“The damage caused to the TSAM facility has not yet been fully quantified. A more accurate forecast concerning the resumption of production will be provided once assessments are completed.”
ALSO READ: Hundreds of Toyotas destroyed, 500 survive the floods at Prospecton plant
TSAM said that from a sales perspective, this natural disaster has impacted its immediate ability to deliver vehicles.
It said only 500 units of the total number of water-damaged vehicles assessed have passed inspection and will be retailed, with the remainder scrapped.
It did not specify how many vehicles will be scrapped.
The plant produces the Hilux, Corolla Cross, Quest, Hiace Ses’fikile and Fortuner.
TSAM senior vice president of sales and marketing Leon Theron said customers whose vehicles were destroyed will be prioritised.
“This will be easier to facilitate with imported CBU [completely built up] vehicles, as these are sourced from other plants.
“Of course, there is a pipeline for all imported vehicles but we will try to increase this supply in order to make up for the units lost.
“Locally produced models, such as Hilux, are more of a challenge and we will be personally reaching out to customers to inform them of the delays in production,” he said.
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Toyota’s considerable share of the market
The importance of TSAM to the performance of South Africa’s automotive industry and its contribution to the economy is evident from the fact that TSAM was the best-selling automotive brand in South Africa in 2021 for the 42nd consecutive year, with a market share of 25.4%.
This means that one in every four vehicles sold locally last year was a Toyota product.
It achieved an average market share of 30% in the first three months of 2022, setting a new sales record with 15 008 vehicles sold in March.
Theron said almost 70% of the vehicles sold by TSAM in March were either produced or assembled locally at the Prospecton plant.
But the impact of the floods extends beyond TSAM.
Port disruptions’ wider impact
Mikel Mabasa, CEO of automotive business council Naamsa, said the floods in KwaZulu-Natal have not only impacted Toyota as the local manufacturer based in that particular province, but also caused delays to imports and exports because of disruption to the operations of the Port of Durban.
Mabasa said that, for example, BMW has about 300 export vehicles and the Ford Motor Company another 400-odd export vehicles stuck on trains bound for the Port of Durban.
He is unsure what impact this will have on the export performance of South Africa’s motor industry this year but hopes the Port of Durban will only be affected in the short term.
“Once Transnet has cleared and finalised all their mop-up operations, we hope to recover because we export purely based on demand.
“We get an export order and send our vehicles because there has been an order. If there is a delay, it does not necessarily mean that those exports will not leave the country. They will still leave the country, but certainly not on time as we had initially planned,” he said.
Mabasa said there would also be delays in customers receiving orders until the situation returns to normal.
Logistics
National Automobile Dealers’ Association (Nada) director Gary McCraw said on Wednesday the association was unable to comment specifically on the Toyota SA situation because of insufficient information.
However, McCraw said Nada is concerned about the impact the floods have had on logistics because almost 800 containers that need to be moved are sitting in the Port of Durban – while ships are sitting offshore, potentially with automotive components or other automotive products on board.
McCraw said getting goods out of the Port of Durban is a problem and ships have been delayed in getting into the port because the harbour has to be dredged as a result of so much sand, silt and other debris going into the harbour.
“That has got more of a potential impact than just what has happened at Toyota,” he said.
McCraw said quite a lot of component manufacturing facilities are based in KwaZulu-Natal and Nada is unsure how many of those are affected and what impact that will have on the industry.
National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal confirmed last week that automotive component suppliers had been impacted by the floods and several suppliers had shut down their operations, but was unable to name the affected companies.
ALSO READ: KZN flood victims struggle with despair
Vehicle sales, GDP
Mabasa said the new vehicle sales figures for April this year are going to be under a lot of pressure.
He said many of the brands available in South Africa were already under pressure and anticipating a slowdown in April sales because of the Russian invasion of Ukraine, particularly from the momentum the new vehicle market has built up since the beginning of this year.
“Since January up until now we have seen some double-digit increases in new vehicle sales in the country,” he said.
SA’s automotive industry contributed 4.9% to GDP in 2020 – 2.8% manufacturing and 2.1% retail – accounting for 18.7% of the country’s manufacturing output.
Exports of vehicles and automotive components in 2020 reached a record R175.7 billion, equating to 13.9% of South Africa’s total exports.
This article originally appeared on Moneyweb and has been republished with permission.
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