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How the Motor Industry Contributes to South Africa’s Economy

Published on: 21 April 2015

Many of us drive our vehicles to and from work every day, and often embark on long holiday road trips from one point of South Africa to another. However, do you ever think of how your vehicle purchase contributes to the local economy? If you haven’t thought about it before, every cent that goes into the purchase, running and maintenance of your vehicle is somehow fed back into the economy.

From fuel costs to car insurance premiums, the motor industry has many sectors that funnel into the economy as a whole. A percentage of all vehicle fees and expenses are pushed back into the economy, which ultimately ensures that the cost of running your vehicle remains affordable. However, as important as these many components are, the vehicle manufacturing industry is the forerunner of the GDP sector juggernauts.

The South African GDP is comprised of eight sectors, namely:

  • Manufacturing
  • Mining
  • Agriculture
  • Communications
  • Tourism
  • Wholesale and retail trade
  • Finance and business services
  • Investment incentives

The motor manufacturing and export industry falls under the umbrella sector of ‘Manufacturing’ that also includes Agro-processing, Automotive, Chemicals, Information and communications technology, Metals and textiles, Clothing and footwear.

Developed in 1768, the first steam-powered automobile was the first step towards hassle-free travel and, for the most part, a wealth of economic growth. Since the invention of the motor vehicle, many countries have experienced a major rise in their Gross Domestic Product (GDP).

When looking at South Africa, the motor industry is one of the most important sectors, with many international automobile manufacturers who have set up base to manufacture, source components and assemble vehicles for exportation.  These include BMW, Ford, Volkswagen, Daimler-Chrysler and Toyota. Regarded as one of the world’s strongest hubs for the motor industry, South Africa’s motor sector makes up 12% of the country’s exports. In 2013, the manufacturing industry contributed a hearty 15.2% to South Africa’s GDP, emphasising it as one of the most important contributing sectors.

In the same year, South Africa introduced the Automotive Production Development Programme (APDP), designed to increase the number of cars manufactured in South Africa. The goal is to reach a number of 1.2 million vehicles per annum by 2020. This initiative also aims to increase industry employment rates – in the third quarter of 2013, employment figures rose by 441 jobs. Not only does this benefit local communities, it also contributes to the growth of the South African economy. In the same quarter, new car sales also rose by 125 189 units, which was 6.4% more than that of 2012.

South Africa’s vehicles are mainly exported to Europe, with 66 929 vehicles transported to car dealerships in Europe in 2012. Despite its success, the local motor industry is not immune to the effects of global recessions – in 2007 and 2008, the South African market experienced a 12.7% drop in global vehicle sales. However, the first quarter of 2015 shows a rise in vehicle sales. The total sales for February 2015 were 52 336 units, while March 2015 brought in 55 449.

Now that you’re up to speed with how the motor industry contributes to South Africa’s economy, you’re more aware of the intricacies of your vehicle purchase. If you’re about to buy a new car or have just purchased a new family vehicle, the time is right to invest in affordable insurance. Contact MiWaytoday for more information.  

Want to know more about the Motor Industry Development Program? Click here.