The impact of the Motor Industry Development Programme (MIDP) on the export strategies of the South African light motor vehicle manufacturers (1995-2008)

Abstract

Role-players in the South African automotive industry have responded positively to the Motor Industry Development Programme (MIDP) policy regime. Since 1995, South African light motor vehicle manufacturers (original equipment manufacturers – OEMs) have become fully integrated into the global networks of their foreign parent companies. As South Africa‟s leading manufacturing sector, the increasing importance of the automotive sector is reflected in its exports, investments and contribution to the country‟s gross domestic product. The objective of this study was to analyse the impact of the MIDP on the export strategies of the South African light motor vehicle manufacturers (1995–2008). The main findings of the research are that, since 1995, the MIDP has been the primary factor impacting on the export strategies of South African OEMs. Without the programme, the industry would not have been able to cope with global competition. It is important to note that without the MIDP there would have been no significant growth in exports from South Africa. The research found that the country‟s trade arrangements with the EU and the USA have enhanced the impact of the MIDP. It was also found that, given South Africa‟s distance to foreign markets, the most important constraint when accessing these markets is the cost of logistics. In addition, the most important determinant of foreign-market pricing when setting the export price, aligned with the influence of the OEM parent companies, is costs relating to manufacturing, transportation and marketing. The role played by the MIDP in sourcing decisions is the most important factor that has contributed to an increase in light vehicle exports. Furthermore, the perceived level of influence when determining new export destinations would seem to be higher for the US-based and the Japanese-based OEMs than the European-based OEMs.

The new Automotive Production Development Programme (APDP) (to be introduced in 2013), which aims to double vehicle production to 1,2 million units by 2020, will reflect a quantum leap in terms of processes, technologies and the scale on which the domestic industry currently operates. In order for the South African automotive industry to achieve both its and government‟s objectives it will require priority attention.