Report highlights strength of SA’s HCV export market

A report released in November 2023 by Johannesburg-based research and advisory consultancy Birguid has highlighted factors driving growth in the SA heavy commercial vehicle (HCV) export market.

The report, “SA Heavy Commercial Vehicle Market: Executive Summary”, specifically examines industry growth, market dynamics, current trends, and industry prospects for the HCV export market.

According to naamsa | The Automotive Business Council, the HCV market was “the top-performing market from a production and sales standpoint in 2022, indicating improved business and industrial activity”. The Birguid report notes that this was driven largely by CV exports, which increased by 11.6% year-on-year in 2022, to R66.2 billion.

The report, however, forecast modest growth of 3.3% for 2023, “as major export markets implement cost-cutting measures to mitigate the impact of global economic uncertainties”. These include “rising inflation, sluggish economic growth, supply chain disruptions, fluctuating exchange rates, and the anticipated shift towards electric vehicles (EVs)” in the EU and US by 2030.

Increased new vehicle production in SA was supported by burgeoning exports, with increased demand for newer model vehicles, including HCVs. Key export markets for South Africa are mostly situated in Europe – Belgium (28.8%), UK (16.8%), Spain (9.7%), and Germany (9.2%) – and neighbouring SADC countries (a combined 15.4%). European demand, meanwhile, was fuelled by “the re-export of assembled vehicles to global OEMs with assembly plants across SA”, says the report.

Export market revenue is forecast to grow at a compound annual growth rate (CAGR) of 6.4%, with important drivers including the affordability of locally assembled CVs, growing demand for new models and technologies, trade agreements focused on increasing HCV exports, increasing demand for vehicles from the e-commerce sector, and increased and mechanised agricultural, mining, and construction activity.

Economic conditions may also favour exports. “The global economy is expected to remain weak in 2024, but inflation is likely to gradually decrease, and rate cuts may be on the cards in the second half of the year which would support vehicle exports,” says naamsa.

However, future challenges include increased price competition from Asian CV brands, supply chain disruptions and subsequent shipping and port delays, increasing input costs due to depreciations in the rand, production difficulties related to increased power outages, and the introduction of vehicle emissions regulations within key export markets.

The report offers some strategic recommendations for bolstering HCV exports from 2024 to 2029. “CV manufacturers can gain a competitive edge in export markets by prioritising innovation… (including) advanced driving assistance systems (autonomous driving and driver monitoring), route optimisation, vehicle tracking, integration of artificial intelligence, and overall automation,” advises Birguid. “Focusing on fuel-efficiency, the transition to vehicle electrification, and reducing emissions are key innovations to be implemented to improve market success.

“End-user markets are transitioning more towards sustainable products,” it continues. “EU countries conceded to more stringent CO₂ emissions targets for HCVs, requiring new CVs to reduce emissions by 90% by 2040. In addition, new CVs sold in the EU will be required to have 45% less CO₂ emissions by 2030 and 65% by 2035.”

Furthermore, naamsa notes that the New-Energy Vehicle White Paper released in December by the Department of Trade, Industry and Competition (DTIC), “signals the government’s commitment to the widespread adoption of electric vehicles and other eco-friendly modes of transport”.

Finally, Birguid stresses the importance of maintaining affordability, strengthening customer relations, and dealing with a shortage of raw materials and substantial related price increases, which will likely impact HCV production and the export market.