Manufacture of vehicle retail
accessories and components used
in the assembly of new vehicles
The Automotive Components division is well placed
through its economy of scale and international technology
agreements and partnerships to benefit from continued
new model introductions in South Africa.
With world-class quality and manufacturing capabilities, South Africa remains an attractive production destination for international vehicle original equipment manufacturers (‘OEMs’). Annual vehicle production by international OEMs in South Africa remained relatively flat for the year at 552 260 units compared to 555 597 units in the prior year, primarily as a result of the introduction of two replacement models during the current year compared to only one replacement model introduction in the prior year. South Africa’s vehicle build is spread over seven OEMs that build 15 models, with approximately 55% of all vehicles produced being exported.
The Automotive Production and Development Programme (‘APDP’), which currently runs to 2020, provides investment certainty to the business environment. As a result of this, replacement models continue to be secured by the South African OEMs as the current models reach the end of their production periods. It is anticipated that this programme will be replaced with a similar programme after 2020 in order to facilitate the sustainability and growth of this critical sector.
The trend of centrally manufacturing ‘stripped down’ model configurations for global distribution, with the fitment of accessories taking place in-country according to regional requirements, provides a sound base for the sale of aftermarket automotive accessories like those manufactured by Autovest and Maxe. The increased demand for SUVs* and LCVs• is also encouraging as these vehicles provide greater scope for accessorising.
* Sport utility vehicle. • Light commercial vehicle.
The Automotive Components division reported a 2% increase in revenue to R2 025 million from R1 979 million in the prior year. The introductions of the replacement VW Polo and the BMW X3 were successfully completed in September 2017 and April 2018 respectively. Total production volumes of the division for the year remained relatively stable, in line with OEM assembly volumes. The division experienced a major explosion, which affected its operations in East London, and major weather damage, which affected its operations in Durban. Both situations were well managed with limited disruption of supply to the division’s customers.
Subdued new vehicle sales weighed negatively on Autovest, the division’s retail vehicle accessories operation. This was offset by a strong performance by the Maxe operation as a result of new product introductions.
In spite of an extremely challenging year, the Automotive Components division grew operating proﬁt by 4% over the prior year.
New model introductions provide Feltex with the ability to increase its parts penetration (market share) and to employ new technology, which improves operational efficiency. This, however, also results in major disruption to normal manufacturing activities, as was experienced during 2018. With no replacement model introductions scheduled for the 2019 financial year, management will be focused on extracting full value from its recent investments through continuous improvement and optimisation projects and extracting scale benefits of increased manufacturing volumes.
Positive sentiment toward the finalisation of the replacement APDP programme is encouraging.