Automotive Components

Manufacture of vehicle retail accessories
and components used in the assembly
of new vehicles

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As the manufacturer 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/licence agreements and partnerships to benefit from continued new model introductions in South Africa.

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auto-components-icons-green-01

As the manufacturer 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/licence agreements and partnerships to benefit from continued new model introductions in South Africa.

16
MANUFACTURING
PLANTS
2 668
EMPLOYEES
28 million
COMPONENTS PRODUCED ANNUALLY,
USED IN 15 ASSEMBLY MODELS
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1 225
TONNES OF OFFCUT
MATERIAL RECYCLED
BACK INTO PRODUCTS
82 469
ACCESSORIES SOLD

“Our aim is to be the supplier of choice with leading technology and globally competitive manufacturing capabilities.”

– Ugo Frigerio

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Business environment

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 grew from 552 260 units to 615 161 units, primarily as a result of the introduction of two replacement models during the prior year. South Africa’s vehicle build is spread over seven OEMs that build 15 models, with approximately 60% of all vehicles produced being exported.

The Automotive Production and Development Programme (‘APDP’), which has been extended to 2035, 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. An amendment to the APDP now also encourages an increase in local content requirements in assembled vehicles.

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 Maxe. The increased demand for SUVs and LCVs is also encouraging as these vehicles provide greater scope for accessorising.

Commentary

The Automotive Components division reported a 19% increase in revenue to R2 202 million from R1 853 million in the prior year. The model replacements of the VW Polo

and the BMW X3 introduced in the prior year were ramped up as planned. The division’s total production volumes for the year grew by 11% in line with OEM assembly volumes. Efficiency improvement projects and new technologies associated with the new model introductions were successfully implemented during the second half of the year.

The aftermarket accessories business was rationalised during the year. In this regard, the Maxe operation, which is aligned with the strategy of the division and remains an area of potential expansion, performed well for the year despite subdued industry new local vehicle sales volumes. A process for the disposal of the remaining aftermarket accessories operations, namely Kilber, Auto Armour, Rhino Linings and Autovest, was initiated during the year and will be completed in FY20. These operations, including potential closure costs, are reflected as discontinued operations in the company’s income statement (prior year figures have been restated for comparative purposes).

Despite an extremely challenging year, the Automotive Components division’s operating profit grew by 7% over the prior year.

Outlook

The extension of the APDP to 2035 provides much-needed clarity and stability to the automotive sector. This will lead to growth opportunities for the division. The introduction of a material replacement model is expected to cause production disruptions in FY20.

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