South Korean car manufacturer Hyundai is investing R110m ($146m) in a new factory in Gauteng, South Africa to assemble light commercial vehicles; the branch will be fully operational after its launch at the beginning of September next year.
The facility will build 500 to 600 delivery vans each month, initially from semi-knockdown (SKD) kits imported from Korea. Based on sales the performance the company will increase capacity at the same time as increasing local content in a shift toward full production.
Fully built-up trucks imported into South Africa are subject to a 20% duty, whereas SKD kits can be imported without any duties being applied.
The South African market is set to end the year flat compared to 2013 because of the impact of labour strikes and slowing economic growth.
Although the Korean parent company has stated in the past that it is more cost-effective to supply Africa from existing car plants Hyundai’s managing director Alan Ross said the establishment of the new plant will serve as a statement from Hyundai that it is committed to the South African market.
Hyundai, generally considered the third strongest company in the South African new-car market, behind Volkswagen and Toyota, is also in conversation with the East London Industrial Development Zone (IDZ) about the potential for building cars at a multi-brand assembly plant. French carmaker Peugeot Citroën is reported to be involved in plans at the East London IDZ. The idea for a multi-brand site surfaced four years ago after the government announced the 2013-20 automotive production and development programme, which decreed that assembly plants must build at least 50,000 vehicles a year to access production incentives.
The South African automotive market, while well established, is set to face some strong competition from competing BRIC economies. A report by international business consultancies PwC and KPMG earlier this year said South Africa’s motor industry was expected to expand, but it went on to explain that it would soon be overshadowed by the likes of Brazil, Russia, China and India, markets set to build 45% of the world’s cars by 2020.
Reporting by Phoebe Jayes