Standard Bank People’s Wheels Awards 2014 Automotive Breakfast


Standardbank People Wheels Awards

Panellists (from left to right): Leslie Ramsoomar, Vice-President, Sales and Operations, Renault South Africa; Philip Michaux, CEO, Automotive Retail and Car Rental, Imperial Group; Stanley Anderson, Marketing Director, Hyundai Automotive SA and Sydney Soundy, Head of Standard Bank Vehicle and Asset Finance

Innovation Required to Combat Pressure from Labour Unrest and Flat Growth Prospects

When four leaders from South Africa’s automotive sector gathered in a panel discussion in Johannesburg this morning, October 3, topics of contention were diverse. Hosted by Standard Bank and The Future Group at the Michelangelo Hotel, and chaired by Jeremy Maggs, the event formed part of the build-up to the announcement of the Standard Bank People’s Wheels Awards in November.

Labour unrest in the automotive sector opened the discussion. Leslie Ramsoomar, Renault South Africa’s Vice President for Sales and Operations, had the following warning for industry guests: “We’ve lost more than a month’s production, and it represents about 30% of manufacturing in South Africa. This country is always competing for production, and when we have strikes lasting for as long as this it doesn’t bode well for foreign investment.”

According to Ramsoomar, it is important to note that the impact of the strikes extend far beyond drops in production. As an example, he referred to Renault’s partnership with BMW in South Africa, and the knock-on problems of BMW losing production. This results in them not transporting cars to Maputo for export, and Renault therefore doesn’t have access to carriers to import Duster SUVs into Johannesburg.

Sydney Soundy, Head of Standard Bank Vehicle and Asset Finance, stressed that the automotive industry would need to budget for ongoing labour unrest. “The withdrawal of labour will always be a factor that employees use when bargaining for better wages,” he said. “I think the industry needs to gets its alignment right in terms of negotiations so that they all happen at the same time – otherwise if the manufacturers’ strike happens first, and the component manufacturers’ second, you tend to elongate the strikes as we have seen in the current situation.”

For Philip Michaux, CEO of IMPERIAL Group’s Automotive Retail and Car Rental, strikes are a way of life in terms of their impact on the dealer network, with dealers normally stocking up from a components point of view. “The problem comes in when we end up as we are with a lack of parts supply, and that’s got a huge knock-on effect and where I think the reputational risk of our industry is on a threshold,” said Michaux. “There are service plans out there in which critical deadlines have to be met, and OEMS don’t seem to have too much sympathy with the fact that you are contending with these sorts of problems to maintain CSI levels.”

Following from a probing question by Jeremy Maggs on whether there was a correlation between prolonged industrial action and pricing, Michaux agreed that there was. “If you look at the local manufacturing – take products like the Polo Vivo and light commercial half-ton bakkies that are produced locally – when that supply runs out, we feel it,” he explained. “You’ve got 65% of your business volumes happening in that entry-level market segment, and a sizeable chunk of that is locally produced. We’re getting to the point that if there’s no resolution soon, it’s going to have dire effects on the business.”

Dire Effects of Labour Unrest

When Maggs questioned how ‘dire effects’ were defined, Michaux elaborated: “One has to take whatever actions you see necessary. You have to look after key staff, put contingency plans into place to effectively advance commissions … the knock-on effect is dramatic, and I think we’re getting to that point where we have to hopefully get resolution this week.”

Stanley Anderson, Hyundai Automotive SA’s Marketing Director, lifted the ominous mood with appreciative laughter from the floor with his opening comment: “I’d like to start off by saying that we’ve got stock: we always enjoy upgrading other brands’ customers into Hyundais.”

On a more serious note, Anderson noted: “The industrial action that we’ve had throughout the year is one of the major causes for the rand depreciating to the extent it has. That obviously has a huge impact on our cost structures, and vehicles get more expensive for the customer: a minimum of 2% a quarter, so it’s 8-12% for the year – which we’ve seen this year, and it’s going to continue next year if the rand doesn’t strengthen.” According to Anderson, this will strengthen the current trend of cash-strapped customers ‘buying-down’ – a problem for the automotive industry, as the entry-level segment does not hold the most significant profits for vehicle manufacturers and importers.

Ramsoomar added: “In order for us to improve value to the customer we have to work on efficiencies: manufacturing, logistics and transport factors all play a role in the price of the vehicle.

“I don’t think industrial action will go away – it’s here to stay in fits and starts, so we need to stock up. As OEMs and retailers at the moment we’re already squeezed very tight, and the only way to look for improving efficiencies is to squeeze our suppliers even more. At the end of the day it’s all going to boil down to Government creating an easier environment.”

The discussion then shifted through a number of core issues in the South African automotive industry, including current aftersales satisfaction levels amongst motorists; the related importance of communicating transparently with customers; the role that apprentice programmes play in making the automotive aftersales sector more attractive to would-be workshop technicians and the dangers of unsecured lending.

Panellists concluded by agreeing that South African automotive sales growth expectations for 2014 remain fairly flat in the 0 to 3% region, with the mini-SUV segment – populated by the likes of the new Ford Ecosport and Renault Duster – expected to buck that trend due to their growing attractiveness in the market.