Recent and future investments in the automotive sector will be key in fueling the growth and production of tyres in the country. By Yogender Malik
South Africa is the largest producer and consumer of tyres in Africa by a wide margin. A number of key automotive producers have headed to South Africa in recent years, providing many opportunities for domestic tyre producers. On the other end of the spectrum, Chinese imports have been a thorny issue for the domestic industry.
OVERVIEW OF THE SOUTH AFRICA TYRE INDUSTRY
South Africa is the undisputed market leader in Africa in tyre production and consumption. Catered by four tyre producers – Bridgestone South Africa (Pty) Ltd., Continental Tyre South Africa (Pty) Ltd., Goodyear South Africa (Pty) Ltd., and Sumitomo Rubber South Africa (Pty) Ltd. – the country has an installed capacity of more than 8 million units on a yearly basis.
A noticeable feature of the South African tyre industry is the very high sales of replacement tyres in comparison to OEM sales. In 2022, replacement demand formed about 72% of the total sales for domestic tyre producers. Data for tyre sales and production for the year 2023 is not yet available, but the performance of the tyre industry in 2023 was far from satisfactory as the country’s economy registered a growth of a mere 0.6%.
Economic growth in the current and next year is also expected to be muted. In February 2024, South Africa’s National Treasury forecasts in its budget review of 2024 that GDP growth will reach only 1.3% in 2024 and 1.6% in 2025. This is a more optimistic projection than the outlook for South Africa by global organizations such as the International Monetary Fund (IMF), which is expecting 0.9% in 2024 and 1.3% in 2025.
The government is focusing on developing the automotive industry in a major way. Currently, South Africa produces more than half a million automobiles annually of all types.
Table 1: Tire production in South Africa over the years. Source: South African Tyre Manufacturers Conference (SATMC), the industry body representing the four tyre-producing companies in South Africa.
Table 2: Tire imports and exports from South Africa over the years. Source: South Africa Tyre Manufacturing Council.
Cars built under the license of foreign brands are the mainstay. The country aims to produce 1% of the world’s cars, or 1.4 million vehicles annually, according to the South African Automotive Masterplan (SAAM) 2021–35. Currently, BMW, Ford, India’s automotive major Mahindra, Mercedes, Nissan, Toyota, Volkswagen, and Volvo have their production/assembly plants in the country.
There have been a number of ambitious announcements by South Africa-based automotive producers, which are expected to act as major demand drivers for the domestic tyre industry. For example, in April 2024, German auto major Volkswagen announced a R4 billion (approx. $218,855,000) investment in its Kariega plant to increase the installed capacity. Beijing Automobile International Corporation (BAIC) has announced an investment of R11 billion (approx. $601,852,000) in an automotive production plant in the Coega SEZ with an installed capacity of 100,000 units. This is a joint venture between China’s state-owned company, BAIC, and South Africa’s Industrial Development Corporation (IDC), which holds a 35% share.
Recent and future investments in the automotive sector will be key in fueling the growth and production of tyres in South Africa in the short and medium term. According to the U.S. Department of Commerce, South Africa’s automobile market was estimated at $35.15 billion in 2022, with exports reaching $13.1 billion.
IMPORTS ARE A CAUSE OF CONCERN FOR THE DOMESTIC TYRE INDUSTRY
Tyre imports in South Africa have grown steadily over the years. In 2022, imported tyres amounted to more than 50% of the domestic market. In particular, imports from China have surged disproportionately during the last 10 years. In 2022, South Africa imported $710 million worth of tyres. China, the United States, Japan, Thailand, and Germany were the five largest importers of tyres in the country in 2022.
Huge imports have also discouraged domestic producers from expanding. In fact, Bridgestone South Africa was forced to close one of its production plants in 2020.
ANTI-DUMPING DUTIES ON TYRE IMPORTS FROM CHINA
In a much-needed respite for the domestic tyre producers in South Africa, the International Trade Administration Commission of South Africa (ITAC) imposed definitive anti-dumping duties on imports of passenger car, truck, and bus tyres from China in July 2023. Ranging from 7.18% to 43.60%, anti-dumping duties will remain in place until July 2028.
SATMC had petitioned the ITAC for the imposition of anti-dumping duties against imports from China in late 2021 and received provisional relief for six months in February 2022.
On the negative side, South African tyre producers have increased the price of tyres five times since the anti-dumping investigations started in early 2022. Thrice it was during the investigation period and twice after the announcement of anti-dumping duties.
Credit: tirereview.com