Leading South African car firms are looking for partners in the UAE so they can expand their businesses to the Gulf market by setting up manufacturing facilities here, says a leading industry figure.
"South African automobile companies and spare part producers are looking for investment opportunities in the UAE and GCC markets," said Norman Lamprecht, Executive Manager of the National Association of Automobile Manufacturers of South Africa, an association of 10 vehicle makers and hundreds of accessory firms.
"Several South African auto companies have been looking at setting up production facilities in the region and negotiations are going on. As the information is sensitive I cannot disclose details of the companies engaged in the talks.
"For the first time South Africa decided to have a full-fledged country pavilion at the Automechanica Middle East show in Dubai earlier this month.
"We used to have only a negligible presence there."
A South African mini sports car introduced in the UAE for the first time during Automechanica was taken up by a UAE customer who signed a dealership agreement to market it in the GCC. The Lolette Dune Buggy is designed for fun driving on sand dunes and costs $15,000 (Dh55,000).
It is based on the Volkswagen Beetle chassis and running gear and comes in standard or short wheelbase models. The car is made by Volksspares, whose Export Manager Baverley Katic said: "The Buggy is built to explore rough terrain just like a four-wheel-drive off-road vehicle, but at a much lower price. It was the main attraction at the South African pavilion during the Automechanica exhibition.
"On the first day a leading UAE businessman purchased the car and agreed to sign an exclusive dealership agreement to market it in the UAE and GCC markets.
"We cannot disclose details of the deal now but the car will be available in the UAE for the first time.
"The buggies are available worldwide and can be ordered in the UAE from our new distributor. It can be purchased as a full kit for local assembly."
Another South African company – Hannibal Safari Equipment Company, which specialises in making four-wheel-drive accessories - is serious about entering the UAE market.
Hannibal's Jacques Willing said the accessories were not at present available in the UAE but the company was planning to launch them here. He added: "These products for all the major 4x4 brands would have a good market in the UAE and GCC where the desert tents and accessories would be in great demand. Our business options include a local facility to make these products."
Shakira Motan, Economic Consul at the South African Consulate General, said the participation of eight companies and leading industry associations from his country in the Automechanica exhibition was an indication of the growing interest in the UAE and GCC market.
The South African car sector is attracting a number of global companies that are looking for a cheaper manufacturing base as part of their African expansion plans, he added. The South African government wants to increase production to one million vehicles per year.
Globally, increased costs for energy and commodities such as steel and plastic have forced manufacturers to push up prices – causing a decline in vehicle sales in 2007.
Companies that are looking for cheaper manufacturing locations view South Africa as a viable option because it has a good infrastructure of auto companies and 400 spare parts manufacturers in addition to free trade agreements with both Europe and the US.
Lamprecht said car purchasing decisions would be influenced by rising oil prices and cost-conscious African consumers are looking for fuel-efficient new cars instead of depending on uneconomical used cars.
Toyota is about to double its production capacity in South Africa from 120,000 to 220,000 units per year. Accordian Investment, the Tata Group company in South Africa, is investigating the possibility of setting up a car manufacturing facility.
Tata recently acquired the Jaguar and Land Rover premium brands from Ford and the Tata Indica small car is already popular in Africa.
Lamprecht said BMW, Mercedes-Benz, Fiat, Ford, General Motors, Nissan, Toyota and Volkswagen as well as medium and heavy commercial vehicle manufacturers like the Tata and Mahindra and Mahindra of India are expanding their vehicle manufacturing capacity in South Africa.
They are attracted by relatively lower costs of production. But most vehicles manufactured in South Africa currently cater to the right-hand-drive market and cannot be exported to the GCC.
"Due to the increased price of petrol and diesel consumers now prefer small cars like the Indica, which is quite popular in South Africa," said Lamprecht. "The Tata Group of India is investigating the possibility of setting up a medium sized car manufacturing facility in South Africa. The Nano, the cheapest car from Tata, is not suitable for the African market.
"South Africa produces about 80 per cent of the new vehicles sold in Africa.
"Eight major global automobile companies manufacture cars, both light and heavy vehicles in South Africa with a local content of 60 per cent.
"The number of cars produced has almost doubled from 2002 to 2006 to 700,000, but last year there was a decline of five per cent due to high diesel price.
"Seventy per cent of automobile exports from South Africa go to Europe and America due to free trade agreements."