The government's long awaited motor industry support programme to replace the Motor Industry Development Programme (MIDP) from 2013 has been given a general thumbs up by the industry, although some companies have reservations.

Dubbed the Automotive Production and Development Programme (APDP) this new initiative is aimed at significantly increasing growth and ramping up development in the SA vehicle and component manufacturing industries through 2020. The aim is for the industry to produce 1,2-million vehicles a year by 2020 - up from a projected 570 500 units for 2008, with almost half of these scheduled for export markets. (The doubling of output is in line with the government's National Industrial Policy Framework).

The long delay in the Department of Trade and Industry announcing the new programme - it was scheduled originally to have been made at the time of Auto Africa in October 2006 - has proved very frustrating for the manufacturers who wanted to know details of the new plan when they submitted tenders to their parent companies to manufacture new models. It is believed that the delay resulted in at least one manufacturer missing the boat in terms of a manufacturing contract.

The APDP framework and provisions cover import duties, a local assembly allowance, a production incentive and investment allowances, which are claimed will make the local industry globally competitive as a manufacturing base. In line with the requirements of the World Trade Organisation (WTO) there will be no discrimination for products sold domestically or exported.
(The motor industry is the biggest exporter outside natural resources and accounted for 16% of export revenue in 2007).

The programme is also seen as a strong catalyst for additional component localisation, with the possibility of future support extending to components for medium and heavy commercial vehicles that were excluded under the MIDP rules, which came in to force originally in 1995.

Minister of the DTI, Mandisi Mpahlwa, declined to say what the new programme would cost the country, but said the government's investment would be "similar to the MIDP." The first phase would kick off next June, with subsidies of up to 20% of project value over three years for new investments in the industry.

He said there would be a "tick up" in state expenditure when other aspects of the programme were implemented in 2013, but spending would then decline towards 2020, when the government hoped the motor industry would be "able to stand on its own feet".

The APDP includes a freeze on import duties between 2012 to 2020 at 25% for light vehicles and 20% for components. The component import tariff would drop from 20-18% over three years for those manufacturers producing at least
50 000 vehicles a year. Commentators say this could be the "kiss of death" for vehicle importers as they would face a non-discountable duty of 25%.

There will also be an initial duty credit of 55%, falling to 50% over five years, based on the value added during production.

There will be further incentives, which have yet to be finalised, to encourage platinum-based component manufacturing (catalytic converters) and heavy vehicle assembly.

General Motors SA's CEO, Steve Koch is one of those who have expressed concerns about the APDP. He believes the level of duty on imported vehicles at only 25% is too low, as he says he has not seen any local vehicle manufacturing industry in the world operate profitably with less than 35% protection.

He added that the new programme seemed satisfactory for one model change, but the effects would have to be evaluated carefully thereafter to evaluate the future viability of local manufacture.