| Summary: | The South African automobile manufacturing industry has grown since 1920 from an import and
assembly industry to an import-substitute industry. From the inception, the automobile
manufacturing industry developed under the careful monitoring of the Government to obtain the
objectives of the economy of the country. Until 1960, all automobile manufacturers imported
completely knocked down sets from abroad to assemble vehicles. These excessive imports drained
the South African foreign reserves. By 1961, the South African Government had introduced local
content programmes to stop / reduce importations in order to save foreign currency and develop the
industry into a self-sufficient manufacturing industry. Each phase of the local content programme
(six in total) had both advantages and disadvantage but contributed significantly to the growth of the
industry.
Existing manufacturers received significant protection from both new manufacturers and new-model
entry into the market by means of high tariff barriers. New competition in the form of new
manufacturers or imported products was relatively small with little risk for existing manufacturers.
The country's automobile manufacturers were growing and during this period reported profits. By
1990 the globalisation process had accelerated more than ever before. Restructural changes took
place in most manufacturing industries due to the globalisation process. Most countries have to a
large extent been feeling the influence of globalisation in the manufacturing sectors since the early
1990s. Many changes took place with regard to technology, production methods, labour utilisation
and marketing of the manufacturing sectors due to the globalisation process. Since 1994, the
Uruguay Round Agreement and the Marrakech Agreement were established under the World Trade
Organisation (WTO) that governs world trade. Under these agreements all countries are forced to
free up their markets through tariff reduction on imports. South Africa had to reduce its tariff on
imported goods and vehicles according to the Uruguay Round Agreement, as the country is one of
the signatories to this agreement. According to WTO obligations, a comprehensive tariff reduction
was introduced on the automobile manufacturing industry through the implementation of the Motor
Industry Development Programme (MIDP) in September 1995 in South Africa. This proved to be a
turning point, with South Africa becoming increasingly integrated into the global economy. The
South African automobile manufacturing industry is currently one of the largest industries that have
embraced the realities of globalisation.
ill
A large number of transnational corporations (TNCs) and multinational corporations are entering the
domestic and regional markets with highly innovative, quality and low-priced vehicles without any
barriers. The trade liberalisation process has increased competition and imports, creating high
pressure and influence on the performance of automobile manufacturers in South Africa in terms of
production volume, marketing, employment level and profits. Global competitors have eroded the
market share, while domestic sales for vehicles have declined due to imported small, affordable and
sophisticated car models. The total accumulated net profits of all seven manufacturers in the country
have declined significantly after the introduction of trade liberalisation in 1995.
The above factors motivated the investigation of the influence of globalisation on the overall
performance of automobile manufacturers in South Africa. Based on a comprehensive literature
review and empirical analysis, the following conclusions were reached.
The majority of automobile manufacturers have sufficient internal strengths and resources to face
global competitors. The majority of automobile manufacturers cannot offer low-priced vehicles to
customers compared with global competitors in the liberalised marketplace. This has a seriously
negative impact currently, keeping the industry far behind from the competitive position. Lack of
automation in production, lack of investment to introduce computerised and advanced technology in
the production process, poor production volume, inability to reach economies of scale, high
production costs and lack of teamwork in production are factors that hamper automobile
manufacturers in South Africa. These manufacturers are unable to increase their sales in the
domestic market to reduce production costs, as low-priced imported vehicles have eroded the
domestic market. At the same time, current global market trends in terms of over-capacity, small
and low-priced and differentiated models with sophisticated technology have significant negative
effects on the performance of automobile manufacturers in South Africa. All these trends will affect
the investment, production volume, market share and profits of local manufacturers and severely
threaten their survival over the long term.
A quality product at a lower cost is an important weapon to overcome these problems and meet all
the above threats in the marketplace. Finally, a competitive advantage umbrella model consisting of
the most important aspects is given where the automobile manufacturer has to concentrate
intensively and immediately on improving their competitive position to overcome the negative
influence of globalisation in future. === Thesis (Ph.D. (Business Management))--North-West University, Potchefstroom Campus, 2004.
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