Punting a new model for auto industry

20 October 2009

The East London Industrial Development Zone (ELIDZ) has launched a new investment model, under which a common facility will assemble various products for different vehicle manufacturers, in a bid to improve the competitiveness of the local automotive industry.

Speaking at South African Automotive Week in Port Elizabeth earlier this month, the ELIDZ's Tembela Zweni said it was no secret that the automotive industry worldwide had been hit by the global economic downturn, together with outdated practices and increased competition.

"Where the cost of production continues to increase, it is becoming more and more difficult to motivate for the monolithic facilities that have become the norm in the industry," Zweni said.

"The capital outlays required to establish such facilities remains enormous and prohibitive, and in an environment that is both under constant pressure and is in a state of continuous flux, this investment falls into the high-risk category."

Multi-OEM model

The Multi-OEM model revisits the historical success of many of the established European, American and even Japanese brands, where a common facility was employed to produce products for different original equipment manufacturers (OEMs).

The fundamental principle behind the model is shared facilities, the use of common infrastructure, and collective efficiencies. The model presents a significant value alternative to the single-OEM production that has become the norm.

"It is our belief that in order for the industry to survive the current conditions and to be sustainable in the new economic landscape, it is necessary to revise conventional models of production to achieve leaner operations, greater efficiencies and cost savings.

"The multi-OEM model has evolved as a result of this belief. The model represents an opportunity not only for the South African automotive industry and economy as a whole, but for the wider global automotive industry," Zweni said.

Collaborative effort needed

The model requires the collaborative efforts of a number of role players, with the ELIDZ taking on the responsibility of providing a shared infrastructure and development platform.

The organisation will also provide a framework for integrating the multiple partners required for the model, as well as support and facilitation mechanisms for funding and development.

For their part, the OEM partners will provide the investment and technical resources required in the specification of the assembly requirements.

"Another key partner that is required to make this model work is an outsource assembly company, to provide the umbrella structure necessary for the overall management of the solution," Zweni said.

"The assembly company [will function] as the model operator, running the full facility on behalf of the OEM companies, and coordinating the efforts of both the production service providers as well as the logistics service providers and suppliers."

SAinfo reporter