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Nissan works at keeping it local

26 March 2010

Nissan South Africa is helping its local parts suppliers to enter into technical cooperation agreements with overseas suppliers in order to remain globally competitive and, ultimately, to enhance the local content level of vehicles made in South Africa.

"It is not simply about sourcing with the lowest cost supplier, but about partnering with suppliers that share our vision of a sustainable and competitive auto industry and [original equipment manufacturer] supplier base in South Africa," Nissan SA purchasing general manager Stefan Haasbroek said in a statement this week, adding that such collaboration would ultimately enhance local content levels.

He said that the pressure on local suppliers was likely to increase as global suppliers found innovative ways to reduce costs, including those of logistics, while local raw material suppliers continued to apply "benchmarked" pricing - not to mention the impact of the electricity price hike.

Responding to challenges

However, Nissan South Africa said it was partnering with local suppliers to respond to this challenge, including facilitating linkages between local and global parts suppliers.

In addition to this, benchmarking of cost structures allows for the identification of focus areas to reduce cost, made possible by the power of the Renault Nissan Purchasing Organisation – the alliance partnership between the two automotive manufacturers.

"In this way we work with suppliers to become globally competitive, with the aim of ensuring sustainability of the local industry," Haasbroek said.

Another challenge for local suppliers is the advantage that some global suppliers have in countries with a high total industry volume, which allows for competitive costs structures and improved efficiencies.

"So the local supplier base has challenges in terms of model complexities and short production runs due to - comparatively speaking - low volumes in South Africa," Haasbroek said. "However, this can be overcome by being innovative, flexible and resilient."

Increasing local content

There is a relationship between the level of local content and the specific vehicle project: "A project with a relatively short model life and/or relatively low volumes will not attract high levels of local content," Haasbroek said.

"Conversely, a project with higher volumes and longer remaining model life provides more opportunity to pay back the investment of localising."

For this reason, local content on the Hardbody range, a Nissan SA mainstay, has significantly higher local content than some other vehicles, coming in at almost 60%, and Haasbroek said the company was aiming to increase local content in the vehicle by an additional 7%.

Nissan South Africa's localisation strategy is in alignment with the objectives of the Automotive Production and Development Programme (APDP), effective from 2013 onwards, which will offer incentives to manufacturers who produce in excess of 50 000 vehicles.

"In order to increase production volume - a Nissan target going forward to meet APDP requirements - we are driving hard to increase local content to above an average of 60% on key models while maintaining globally competitive cost structures," Haasbroek said.

SAinfo reporter