New Opportunities as South Africa Motor Industry Expands

South Africa’s Automotive industry has recorded a strong performance as the effects of COVID-19 on overall economy continue to weaken with some of the original equipment manufacturers (OEMs) announcing new capital investments in expansion and modernisation of their operations, a likely trigger to increased consumption of performing and environmentally friendly coatings.

The Automotive Business Council (Naamsa) has released its quarterly review of automotive industry business conditions highlighting new market trends that point to increase in sales, aggregate capital expenditure by OEMs and overall vehicle production in South Africa, a perfect growth opportunity for the coatings players.

Naamsa says in its Q3, 2022 report South Africa’s automotive market posted a strong performance in new vehicle sales that increased by 16.9% compared to the corresponding quarter in 2021 and 17.6% compared to this year’s second quarter.

The performance Naamsa said “should be seen in the context of the impact of the adverse economic disruptions that occurred during the third quarter 2021 and the recovery from the impact of the severe flooding in KwaZulu-Natal in the previous quarter 2022.”

Furthermore, the new energy vehicle sales by 13 industry brands increased by 29.1% for the 3rd quarter this year from 738 units in the second quarter to 953 units.

The aggregate capital expenditure by the major vehicle manufacturers in 2021 recorded its second highest level on record at ZAR 8.8 billion (US$ 507 million).

“South African vehicle production during the third quarter 2022 reflected a substantial increase of 49.2% compared to the corresponding quarter 2021 when vehicle production was negatively affected by the cyberattack on Transnet’s operations as well as the adverse economic disruptions in the country at the time,” Naamsa’s quarterly report says.

Among South Africa’s automotive OEMs that ramped up their investment in recent times is Ford Motor Company, which made history when it invested more than US$1 billion to upgrade its manufacturing operations at the Silverton Assembly Plant, “the largest investment in Ford’s 97-year history in South Africa and one of the largest ever in the country’s automotive industry.”

Ford says the upgrades to its South African facility “will increase the annual production capacity of Ford Rangers from 168,000 to 200,000, a step needed to meet both domestic demand and export needs in over 100 global markets.”

“This investment will further modernize our South African operations, helping them play an even more important role in the turnaround and growth of our global automotive operations,” said Dianne Craig, president, Ford’s International Markets Group in March 2022.

The project roped in leading automotive coatings manufacturers, PPG Industries, that won a contract for the installation of an electrocoat line, a highly automated coating process that enables painting large amounts of surface area at a slightly lower cost.

PPG, which earlier this year announced divestment from certain business activities in Senegal, Ivory Coast, Cameroon, Gabon and Algeria to Océinde, an industrial group based in Réunion, France, installed the new technologies and equipment and will be operating and maintaining the electrocoat lines “that are instrumental in the company’s plans to expand on-site production of the new Ranger pick-up truck.”

“We can design, engineer and integrate a plan for a customer,” said Rodolfo Ramirez, PPG’s global general manager, Coatings Services.

“Then deliver it as a turnkey solution, or operate it for them, as is the case with Ford Motor Company of South Africa,” he said.

PPG is operating Ford’s in-house coating line after it successfully completed providing the engineering solutions, including equipment design and installation.

PPG has been growing its share of Africa’s automotive coatings market recently with the South Africa contract by Ford adding to the company’s August 2021 unveiling of an automotive sealants’ production start-up in Tangier, Morocco.

The plant, which PPG said is the first automotive coatings production facility in Africa, is at the initial phase supplying materials for Renault Group’s Dacia brand vehicles that are produced in Tangier and Casablanca.

“This facility’s start-up is an important step in providing local supply for automotive original equipment (OEM) vehicle manufacturers in Morocco,” said Roald Johannsen, PPG vice president, automotive coatings, Europe, Middle East and Africa.

“The country is already one of the largest and fastest-growing vehicle producers in Africa. Vehicle output is projected to increase significantly, with two more production facilities expected to be added by 2030,” he said.

Morocco and South Africa are significant producers and exporters of vehicles and components in Africa.

At the South Africa automotive plant, Ford is using low temperatures due to the introduction of PPG’s 6th generation lead-free Cationic epoxy electrocoat, POWERCRON® 6200HE.

The technology, PPG says, “cures at 15-20° C lower metal temperatures than the previous fourth and fifth generation electrocoat products, while also helping to reduce VOC emissions.”

Furthermore, PPG did introduce low-temperature chemicals for the degreasing tanks, such as PPG ULTRAX 94D, “a liquid alkaline cleaner developed for use in low-temperature cleaning.”

The future of Africa’s automotive market, especially in markets such as South Africa, Nigeria, Kenya and Morocco looks bright, at least based on growth projections by market analysts.

In a report ‘The African Continental Free Trade Area and the Automotive Value Chain’ prepared in support of the trade and investment in Africa programme with financing from the UK Foreign, Commonwealth and Development Office (FCDO), Africa’s automotive industry is valued at US$ 30.44 billion and projected to grow to US$ 42.06 billion by 2027.

Although the report observes the continent currently has low automotive vehicle ownership rates as well as low levels of production, “multinational vehicle manufacturers are beginning to set up production plants across the continent and consumer spending has been steadily increasing suggesting there is untapped demand within the continent.”

With such optimistic outlook of the continent’s automotive industry,  the medium to long term growth opportunities for coatings manufacturers could be quite phenomenal.