South Africa’s Component Manufacturing Landscape:

Challenging the Past to improve the future.

The OEM Perspective

Theunis RootmanChairman: OEM Council

2014-10-14

Agenda

• Reflection – What has history shown us

• Our Focus: – Create the Base– Seek Opportunities– Make it Happen

• Conclusion

A) Reflection

Delivery instability Poor

Quality High Cost

Current Performance level eroding base for future model sourcing

Ideal Performance

PE

RF

OR

MA

NC

E

Time

Reduce RiskImprove Stability

Manufacturing cost up to 40% higher than Competing Countries

• Industrial Development

• High Inflation linked with Unstable and Depreciating Rand

• Low levels of Deep Localisation

Australia vs South Africa

Competitiveness

Localisation – Economies of Scale

Collaboration

A) Reflection

Many Similarities

B) Our Focus

Create the Base

CollaborationSeek Opportunities

CompetitivenessMake it Happen

Localisation

1) Create the Base: Collaboration

• OEM Collaboration • Commodity Rationalization/Clustering

Analysis of Industry Capacity Review of commodity outlook

Group/Cluster Commodities

Define & Align Strategies with APDP and Economical

viability

Industrial Policy Support

4

Study potential projects/Commodities

Agreement with “Parents”

1

3

2

2) Seek Opportunities: Competitiveness

Manufacturing Improvements

1. Resource Development• Skill

Development

• Skill Retention

• Mindset

2. Supply Chain

• Visualisation

• Risk Identification

• CSR

3. Commonisation

• Process• Tools• Jigs

4. Localisation• Engineeri

ng Changes

• Level2, Materials, Cons

• Benefit, Evaluation, Risk

Mind-set Change

2) Seek Opportunities: Competitiveness

3) Make it Happen: LocalizationC

ost M

erit

Development Lead-time

High

LowHigh

Risk

Bus

ines

s C

ase

Development

Risk

1. High Forex Exposure

2. Evaluation

Deeper Localisation

Sub-tiers - Suppliers Drive

Level 1 Parts – OEM Drive

Electrical / Electronic

Chassis and Drive-train

Body

19%

15%

23%

10%

• Axles• Differentials• Drive shafts• Brakes

• Harnesses• Starter motors• Alternators• Wiper systems• HVAC

• Cockpit• Seats• Door panels• Carpets

• Bonnets• Bootlids• Side frames• Doors 6%

5%

3%

7%

XX%: % of total material cost YY%: True local material plus value add as % of total material costNote: %’s indicative only

• Glass• Paint• Bumpers• Mirrors

Exterior

Interior

33% 14%

3) Make it Happen: Localization

Opportunities - especially lower levels

11

3) Make it Happen: Localization

Using Existing Areas as Priority

C) Conclusion

Why should we do it?

Unemployment: National Average = 24.9%33.2%

29.8% 29.4%28.4%

23.9% 23.7% 23.3% 22.5%

19.6%

0%

5%

10%

15%

20%

25%

30%

35%

SA Population by Age: 2012

Sustainable Business

Sustainable Future

Competitors 1

3

2

SAThai

India

Thank You