1. Portfolio Committee on Trade & Industry DC Powels NAAMSA President 7 November 2012 1 IPAP 2012/19

2. 2 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

3. 3 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

4. 4 North America Central and Eastern Europe Rest of the World Asia Pacific Western Europe South America 9,4% 7,8% -7,6% 13,6% 4,8% World Passenger Market Growth/Decline - YTD Sep 2012 vs 2011 WORLD: Market: +7,9% 13,5% IPAP 2012/19 4

5. 5 A strong growing trend Auto production - 1945 to 2011 (Million units) The Global Environment IPAP 2012/19 5

6. 6 Structure in % Rest of World Japan Western Europe North America million vehicles 29.53939.14548.46857.81477.61280.274 Structure of Car / CV Production by Region 1970 - 2011 Source: VDA, IHS Global Insight, own calculations The Global Environment IPAP 2012/19

7. 7 million units Rank 2011(2010) CVCars Anmerkung: teilweise geschätzt 1.(1.) 2.(3.) 3.(2.) 4.(4.) 5.(5.) 6.(6.) 7.(7.) 8.(9.) 9.(8.) 10.(10.) 11.(11.) 12.(13.) 13.(14.) 14.(12.) 15.(16.) 16.(15.) 17.(20.) 18.(19.) 0.8% 11.7% -12.8% 6.9% 9.0% 10.7% 0.7% 14.4% -1.4% 2.9% 3.2% 41.5% 5.3% -11.4% 11.5% 8.6% 19.3% 15.7% Ranking of Most Important Production Countries January - December 2011 Source: VDA, Polk Germany, press information Change vs. previous year The Global Environment IPAP 2012/19

8. 8 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

9. 9 Year200820092010 Global vehicle Production 70.52 Mio61.7 Mio77.9 Mio SA vehicle Production 0.563 Mio0.374 Mio0.472 Mio SA share of Global Production 0.8%0.61% SA Auto Production vs Global Production 2011 80.1 Mio 0.533 Mio 0.66% SA Auto Industry in the Global Context IPAP 2012/19

10. 10 Auto exports as % of total exports Year19952007200820092010 Total SA Exports (R Billion) 102.1494.4656.0515.4584 Total Automotive Exports (R Billion) 4.267.694.261.069.5 Automotive exports as a % of total SA exports 4.1%13.7%14.4%11.8%11.9%2011694.2 82.2 11.8% SA Auto Industry in the Global Context IPAP 2012/19

11. 11 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

12. 12 -38%14%37%3% Units 29% Start of MIDP SA Automotive Industry Development of FBU export volume - units IPAP 2012/19

13. 13 -37% 3% 10% 26% 13% Start of MIDP SA Automotive Industry Development of Component Exports - R Bio IPAP 2012/19

14. 14 R Bio Total (1995 – 2013 FC) = R52.2 Bio R4.5 Bio R10.7 Bio R18.7 Bio R7.9 Bio R5.0 Bio R5.4 Bio SA Automakers (7 Car and 2 Truck Producers) New Investments R5.0 Bio R5.4 Bio Start of MIDP IPAP 2012/19

15. LCVPassenger 8% - 45% 61% 76% Units Development of SA Pass. & LCV Market 1995 - 2013 FC 15 IPAP 2012/19

16. 16 8%16%11%10% Units Passenger Car Market Development - 2012 vs. 2011 IPAP 2012/19

17. 17 Passenger Car Growth by Channel YTD Oct – 2012 vs. 2011 15%6%-4% -1% Units IPAP 2012/19

18. 18 LCVPassenger 40% - 33% 48% 18% Units Development of Auto Production in SA - 1995 to 2012 IPAP 2012/19 18

19. 19 YearGlobal Production (Mio units) SA Production (Mio units) SA Exports (Mio units) SA Component Exports (R Bio) 200057.80.3570.06812.6 201180.10.5330.27338.8 % Growth 2011 vs 2000 3949302208 2012 FC830.5550.28140 % Growth 2012 FC vs 2011 4433 Growth in Auto Industry - SA vs Global IPAP 2012/19

20. 20 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

21. 21 Supplier Cost Competitiveness Brazil 104 W. Europe 100 Mexico 89 Russia 107 Malaysia 94 E. Europe 93 Cz. Rep 95 India 85 China 91 Thailand 92 RSA >110 EUR 1 : ZAR 10.50 South Korea 88 IPAP 2012/19

22. 22 Is this a real threat? – Hyundai/Kia as an example Hyundai/Kia produce in South Korea (cost index 88) and India (cost index 85), ship cars to SA, pay 25% import duty and are still highly competitive in SA Passenger Market Share IPAP 2012/19

23. 23 Cum Inflation cost increases: Auto Wages – 1993 to 2012 [%] 1992 – Index 100 IPAP 2012/19

24. 24 Exchange rate effect on Revenue 201020112012 FC 20082009 0 100 97 80 83 89 9.719.9910.712.0711.69 Exchange Rate ZAR/ Euro [%] Project approval in 2008 – Index 100 -11% IPAP 2012/19

25. 25 Estimated avg Auto sector costs Inflation impacts (2008 – 2012) Material Other Overheads Indirect Labour Direct Labour Electricity 20102011201220082009 0 [%] 2008 – Index 100 218 140 130 123 93 IPAP 2012/19

26. 26 Combined effect of Exchange Rate + Cost Inflation + Dramatic deterioration of export competitiveness! = Est. avg. Auto sector costs Inflation impacts [%] Project approval in 2008 – Index 100 Exchange rate effect on Revenue [%] Project approval in 2008 – Index 100 IPAP 2012/19

27. 27 Exporting to Sub-Saharan Africa IPAP 2012/19

28. 28 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

29. 29 IPAP 2012/19

30. 30 IPAP 2012/19

31. 31 Production:  Local Market Production:  Local Market  Export Market APDPMIDP Production:  Local Market Production:  Local Market  Export Market Production Incentive (PI) APDP Standard materials 25% deemed value added on local materials  PGM’s  Leather  Aluminium  Steel  Stainless Steel  Brass  Raw automotive glass Vulnerable products 40% deemed value added on standard materials (reducing to 25% by 2017)  Alloy wheels  Aluminium products  Cast iron components  Catalytic converters  Flexible couplings  Leather interiors  Machined brass comp.  Steel jacks IPAP 2012/19

32. 32 APD P MIDPAPDP Standard materials 25% deemed value added on local materials  PGM’s  Leather  Aluminium  Steel  Stainless Steel  Brass  Raw automotive glass Production:  Local Market Duty Free Allowance (DFA) Vehicle Assembly Allowance (VAA) Production:  Local Market  Export Market Vulnerable products 40% deemed value added on standard materials (reducing to 25% by 2017)  Alloy wheels  Aluminium products  Cast iron components  Catalytic converters  Flexible couplings  Leather interiors  Machined brass comp.  Steel jacks Production Incentive (PI) IPAP 2012/19

33. APDP - Automotive Production Development Programme DutyRebate MechanismCash Grant Import DutyVehicle Assembly Allowance (VAA) Production Incentive (PI) Automotive Incentive Scheme (AIS)  Effective July 2009  Taxable cash grant of up to 30% on Qualifying Investment  OEM must achieve 50.000 units/ p. a. (within 3 years)  Payable over 3 years  Light motor vehicle manufacturers - Investment: > 30 Mio. ZAR  Component manufacturers - Investment: > 1 Mio. ZAR  Stable import tariffs from 2012  Preferential duty rate on FBU imports from EU  If Production > 50.000 units/ p. a.  20% Allowance based on net turnover value  Reduces to 18% over 3 years  Duty credit based on production value added (Sales minus Imported components/materials minus non qualifying local raw materials)  Additional benefit available for the export of vulnerable components  PI factor will be 80% for 2013/2014 reducing by 5% pa to 50% by 2020 1995 - 2012 MIDP2013 - 2020 APDP Export orientated programProduction orientated program APDPMIDPAPDPMIDPAPDP Standard materials 25% deemed value added on local materials  PGM’s  Leather  Aluminium  Steel  Stainless Steel  Brass  Raw automotive glass Production:  Local Market FBU FBU (EU pref. Rate) CKD Duty Free Allowance (DFA) Vehicle Assembly Allowance (VAA) Production:  Local Market  Export Market Vulnerable products 40% deemed value added on standard materials (reducing to 25% by 2017)  Alloy wheels  Aluminium products  Cast iron components  Catalytic converters  Flexible couplings  Leather interiors  Machined brass comp.  Steel jacks Production Incentive (PI) 33 IPAP 2012/19

34. 34 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

35. 35 Legend: Domestic Market only 2005 20132020 And Beyond 350,000 600,000 1,200,000 Local production volume per annum Domestic supply with some global and regional exports Enhanced International Competitiveness MIDP Tooling Initiative Beneficiation Strategy Local market growth Local Content / Global Suppliers Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development Existing trade Agreements AGOASADCEU Infrastructure Development Ports and Rail Electricity Tariffs New trade agreements Mercusor Africa (SSA) BRIC OtherIPAP 2 Fuel quality APDP Preferential Procurement Labour Industrial stability Skills / training Productivity APDP Wage Inflation Electric vehicles 1995 Roadmap towards 1.2 mil units/annum and achieving international competitiveness Status - as shown 12 months ago IPAP 2012/19

36. 36 Legend: Domestic Market only 2005 20132020 And Beyond 350,000 600,000 1,200,000 Local production volume per annum Domestic supply with some global and regional exports Enhanced International Competitiveness MIDP Tooling Initiative Beneficiation Strategy Local market growth Local Content / Global Suppiers Vulnerable Sectors Light Vehicles MCV / HCV Investment Support IDC AIS Local content Development Existing trade Agreements AGOASADCEU Infrastructure Development Ports and Rail Electricity Tariffs New trade agreements Mercusor Africa (SSA) BRIC Reasonable progress Substantial progress Fuel quality APDP Preferential Procurement Labour Industrial stability Skills / training Productivity APDP Wage Inflation Electric vehicles 1995 Limited progress Progress during past 12 months IPAP 2012/19

37. 37 1.The Global Environment 2.SA Auto Industry in the Global Context 3.Key trends of the SA Auto Industry 4.Challenges facing the Auto Industry 5.Automotive Production Development Program (APDP) 6.Roadmap to 2020 7.Conclusion Overview IPAP 2012/19

38. 38 Conclusion South African Vehicle Assemblers and Automotive Component Suppliers are committed to the long term sustainability of the Automotive industry and look forward to partnering with key Stakeholders to grow the industry and create jobs whilst achieving international competiveness The ability to realise the 2020 vision and production target is dependant on active engagement between the following 6 key stakeholders NAAMSA NAACAM Government (Central and Provincial) Labour / NUMSA Transnet IDC IPAP 2012/19

39. Thank You 39 IPAP 2012/19