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IN THE DRIVING SEAT ... Billy Rautenbach, from rally driver to managing director
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Hyundai plant revving up to make new inroads in SA
A R250-million investment will end the backstabbing in the local motor industry, writes DON ROBERTSON
Construction of a R250-million plant is on schedule and initial production of the Hyundai Accent on a completely knocked down (CKD) basis will begin in February, with full production reached by April. Production of the Elantra and Sonata models will follow. The new facility will eventually replace the current semi-knocked down (SKD) plant, which is also in Gaborone. When HMD entered the market in 1993 with SKD assembly, local manufacturers complained bitterly that, because the company was paying only 21% import duty, it was able to offer models at extremely attractive prices with accessories such as radio/tapes, electric windows and air conditioning fitted as standard items. SA car makers opposed the imposition of a new distributor, which made big inroads into the market, without any significant investment. SKD production involves the fitting of items such as engines, tyres and headlights to an already built up car, thus cutting assembly costs. The vehicles were imported through Maputo in Mozambique as a complete car, stripped down to comply with the then SKD requirements and exported to Botswana where they were re-assembled. The vehicles were then exported to SA with no further duties as Botswana is part of the Common Customs Union. The introduction of the Motor Industry Development Programme in September 1995 altered the regulations regarding SKD and HMD was given a four-year concession in which to comply with local rules. The company will beat this concession by over a year. Managing director Billy Rautenbach says the decision to continue operations in Botswana was prompted by the low company tax rate, support offered by the government and the strength of the local currency which reduces risks when importing components. HMD, a member of the Wheels for Africa group, has contributed 30% to the cost of the plant with the Botswana Development Corporation and commercial banks providing the rest. In the past, HMD has refused to release monthly sales figures through the National Association of Automobile Manufacturers of SA (Naamsa) as other manufacturers do. From February, HMD will join Naamsa and release its sales volumes. This year HMD will produce 20 000 cars and the recently introduced bakkie through its SKD plant. Next year production of the Accent, Elantra and Sonata models will reach 30 000 units a year with an initial local content of about 20%. Imports of components from SA to the plant will be worth about R200-million a year in the early stages, but will increase. It is planned to introduce a second shift in November next year which will double output. About 80% of the vehicles will be imported to SA with the rest sold to neighbouring states. Rautenbach says that by complying with MIDP regulations, HMD will also benefit from other perks such as the small-vehicle incentive which reduces duties on cars costing less than R40 000 at the wholesale level as well as export duty rebates on these vehicles. This year, the company will pay between R150-R200-million in import duties on its SKD imports, but with the expected export duty rebates, the figure will shrink considerably, says Rautenbach The 35 000mē plant will be one of the most modern in southern Africa, making use of the latest technology. The use of robotics on the assembly line has been kept to a minimum in an effort to create jobs. It is expected that the plant will employ 1 100 people and about R15-million has been allocated for training.
Also in the R3-billion a year Wheels for Africa group is the SKD assembly of Volvo trucks and buses. From January, the company has the franchise to supply the rest of Africa, increasing production by 500 units to 1 500.
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