The medium and heavy commercial vehicle market in South Africa
(gross vehicle weight [GVW] >6 metric tons) is still resilient
in the face of ongoing supply chain constraints, an inconducive
macroeconomic environment and structural challenges that have
extended into 2023. According to S&P Global Mobility forecasts,
South African-assembled trucks contributed more than 24,000 units
to continental production in 2022, a gain of 15% year over year
from 2021 and enough to rank the country among the top 20 medium
and heavy commercial vehicle assemblers globally.

Despite 2022’s performance, South Africa cannot rest on its
laurels. The African Continental Free Trade Area agreement,
consisting of 54 African countries including South Africa, is
anticipated to attract local truck assembly in other African
countries. South Africa needs to urgently solve its internal
structural problems to maintain its position; otherwise, countries
in the continent will profit from its weakness and take over
current projected truck volumes. Aided by favorable automotive
policies and regulations in various African countries, European and
Asian truck original equipment manufacturers might refocus their
assembly plans toward Egypt and Kenya.

With measures being taken to establish a single and tariff-free
market, unified “rules of origin” for the automotive industry are
being finalized. Key sectors identified due to their capacity to
meet local production demand include the automotive industry and
the transportation and logistics sectors. As trade between African
countries expands, these developments will be beneficial for the
continent’s truck assembly industry, especially as most
intra-African exports are transported by road freight
transportation.

It is further anticipated that the free trade agreement will
increase commercial road freight transportation. The World Economic
Forum is already expecting that this will result in annual demand
of close to 2 million trucks by 2023. This would generate potential
opportunities for truck OEMs to expand completely knocked down
assembly and expand operations to other African countries, for
example, Ghana.

During the pandemic, sales and assembly in South Africa were
very low. This has now led to pent-up demand from the pandemic
years, or unmet demand, in the transportation sector today. As a
result, the outlook for truck assembly remains favorable, at least
for the short term. This is occurring during persistent low
economic growth, electricity shortages, rising interest rates and
high fuel prices.

S&P Global Mobility analysts anticipate that the top three
truck OEMs — Isuzu, Daimler Truck and Traton — will
assemble more than 4,000 units each in 2023 and that in total, more
than 25,000 trucks will be assembled in the country. The main
assembly hubs in South Africa are located in Eastern Cape, Gauteng
and Kwazulu-Natal.

On the African continent, next in line in truck assembly are
Egypt and Kenya. Egypt will likely keep its annual production below
5,000 trucks in 2023. The Kenyan government, however, approved
regulations limiting the import of used vehicles in 2022, thus
limiting substitutes, in some cases, for new locally assembled
vehicles. On top of the current forecast volume (4,000 to 5,000
trucks), the Kenyan government plans to increase locally assembled
trucks to more than 10,000 units annually. This volume is for
export within the free trade area and not just dedicated for local
Kenyan demand.

In addition to South Africa, Egypt and Kenya, S&P Global
Mobility offers insights and forecasts for a few other African
countries. These include Algeria and Nigeria.

Based on the S&P Global Mobility Medium & Heavy
Commercial Vehicle Forecast for Middle East/Africa, there is no
expected dynamic shift from the current trend for truck assembly in
South Africa. The improvement of supply chains and ongoing
replacement of older trucks will continue to play a crucial role in
supporting the truck assembly industry, to a greater extent as the
country addresses its industrial structural challenges. However,
ongoing market conditions originating from persistent electricity
supply shortages, rising interest rates and low growth could
restrain this. Still, S&P Global Mobility analysts expect the
industry to continue with its growth trajectory over the remaining
forecast period, reaching up to 33,000 units in 2030.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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• Source: http://www.spglobal.com/mobility/en/research-analysis/south-africas-truck-assembler-position-will-be-challenged-over.html