Auto Options With S. Africa

Auto Options With S. Africa
Auto Options With S. Africa

South Africa's President Jacob Zuma has visited numerous sites across the country in recent days, apart from meeting Iran's political leaders in the process.

"The time is ripe for us to consolidate our trade and investment ties.  I must underline that the enthusiasm I’m seeing is encouraging. It shows the passion of business from both countries that we are ready to do business," Zuma said in a meeting with his Iranian counterpart, Hassan Rouhani, according to the South African Broadcasting Corporation.

"We want business to flourish between South Africa and Iran. This is our moment."

Accompanying Zuma is a delegation of over 100 business delegates from different sectors. As part of the increasingly warming relations, South Africa and Iran have agreed to increase non-oil trade and investment to $1 billion by 2020 and over $8 billion in oil-related trade.

But as many people may already be aware, South Africa's potential for trade with Iran goes beyond the limited scope people have seen so far. Up until now, mining and telecommunications have been two key areas where South African companies have earned a living from Iran, but the country also has a burgeoning automotive industry and its proximity to Iran, and East Africa's ancient historical trading relations with the country are a cause to explore further.

According South Africa's main business portal, "The country's automotive industry is a global, turbocharged engine for the manufacture and export of vehicles and components."

Interesting words, indeed, but what can Iranian companies do with a country that assembles and has no brand to talk of.

Automotive Cooperation

Many of the major multinational firms use South Africa to source components and assemble vehicles for the local and international markets.

The automotive sector is one of South Africa’s most important in terms of earnings, contributing at least 6% to the country’s gross domestic product and accounting for almost 12% of South Africa's manufacturing exports, making it a crucial cog in that country's economy.

In 2014, 630,000 vehicles were produced in the country. The country hopes to grow vehicle numbers to over 1.2 million a year in the next few years.

The South African government believes that this area holds great potentials for growth and has supported efforts since 1994.

Several companies are registered in the country, with famous brands such as BMW, Ford  with Mazda, General Motors, Mercedes Benz, Nissan, Renault, Toyota and Volkswagen all producing cars in the country.

In terms of transportation, the country's production is well placed on the Eastern Cape, so access to the seas is viable and also one further inland at Gauteng.

In terms of the spending power of their people, South Africans and Iran are both defined as middle-income economies, according to the World Bank.

So having South African car companies team up with Iran would offer the Iranian car buyer a decent lineup. That is, compared with Eastern Europe-derived cars being offered by companies currently.

According to in January 2015, the  South African new car market is off to a struggling start in 2016 with sales down 7% in January to 48,615 registrations and down 8% in February to 48,149, pulling the year-to-date total down 8% after two months at 96,708 units.

The most popular brand in that market remains Toyota with 22.4% growth, in second place is Volkswagen with 17.9, followed by Ford ZA with 13.4%.  

Ford is still persona non grata in Iran, but the other two leaders in the market can enter with their low-price budget vehicles.

Volkswagen's reasonably-priced Polo Vivo currently sells in that market for R163,200 ($11,600), based on the previous European model. The car, if produced in Iran with South African parts, could be a viable option for the South African subsidiary, as it also would suit Iranian car buyers.

Toyota's African subsidiary also produces a range of vehicles for people on tighter budgets, the Etios family with four different variants is priced at R152,000 ($11,000) for the basic model that looks like a hatchback.

Interestingly, one of the cheapest vehicles in that market is China's Geely GC2, not too dissimilar from Toyota's old Aygo. The car costs a low R88,000 ($6,000). Why this car is not available in Iran yet is beyond belief.

Considering these vehicles for the Iranian market may be a boon to the South African car industry. And Iran's warming relations and support for Nelson Mandela, the late father of South African nation, years ago may start paying dividends today.