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Chinese cars crash SA market
Move over cheap imports of Chinese textiles and clothing, they’re a drop in the ocean compared with what awaits for the motor car industry.

Chris Buchanan
Posted: Thu, 14 Sep 2006 08:00 | © Moneyweb Holdings Limited, 1997-2006

This time next year the spat between the clothing retailers and the government over Chinese imports will be forgotten. The big fuss, says CEO of Emerging Market Focus, Martyn Davies, will be the number of extremely cheap cars coming into South Africa from China.

Davies reckons that it will revolutionise the motor industry and happen a lot sooner than we think.

“By the fourth quarter of this year we will see seven marques of cars from China coming to South Africa that will be landed at half the price of a bass line VW or Toyota”, says Davies. “With cars come the automotive component elements of the supply chain”, and Davies believes this will have a huge impact on automotive component manufacturing in South Africa.

In the early nineties semi-knock-down Hyundai models were entering the South African market via Botswana along with promises of lower prices. In reality prices remained the same but the cars, although a bit tacky in materials and manufacture, offered value for money in terms of a higher specification.

More recently Daihatsu, Kia and Tata have begun to service the lower end of the market with inexpensive imported models at a threshold of about R70 000. Now we can get used to names like Cherry and Geely at this end of the market.

Davies says the Chinese car imports, like the clothing, will still be far cheaper than those from other countries even after the addition of duties, shipping, forwarding and clearing costs.

The reason says Davies is that the Chinese are becoming rampant in the manufacturing sector and are monopolising the manufacturing value chain.

“South Africa hasn’t learned that protectionism undermines competition”, says Davies and that the Motor Industry Development Programme (MIDP), although successful in creating a local vehicle manufacturing sector, has made it vulnerable to cheap imports.

On the question of quality, Davies agrees that the models we will see on our roads are not likely to earn a five star NCAP safety rating, “but these models will be aimed at the emerging market and like current bass line models, safety is not a strong point”.

Insofar as South African industry losing out to cheap imports from China across a number of products, Davies says we need to get more competitive and that we have to lose this hostility between government and business.

“We forget that we’re on the same side and you wouldn’t think so judging by the comments being levelled between clothing retailers and the government”, says Davies.

This story first appeared in Moneyweb Business in the Citizen
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