Mercedes-Benz SA to start hybrid production, premium market to face headwinds

Mercedes-Benz South Africa (MBSA) was ramping up to start production of the C350e plug-in hybrid at the company’s Eastern Cape plant, said MBSA CEO and executive director manufacturing Arno van der Merwe on Thursday.

Speaking in East London, Van der Merwe said the C-Class hybrid ⎯ most likely the first hybrid to be produced in a South African plant – would be a big step in “developing MBSA’s technical assembly capability”.

The C350e would be available in the local market towards the end of the year. It would also be exported from East London.

MBSA last year produced 106 700 vehicles. The C-Class made up 102 200 of this number and trucks and buses 4 500 units.

This was a massive jump from the 54 400 units assembled in 2014, made up of 48 100 C-Class models and 6 300 trucks and buses.

C-Class exports reached around 93 500 units in 2015, to more than 80 countries, up from the 33 688 units exported in 2014, when the plant was still ramping up production of the new C-Class.

MBSA production and export numbers both reached record highs in 2015, said Van der Merwe.

He said the East London plant benefited from an investment of R500-million in 2015, in an effort to increase production capacity by 25%. This added to the R5-billion investment made from 2011 to 2015 to produce the new C-Class in South Africa.

The increase in exports, the fulfilment of a long-term strategy, provided MBSA with a hedge, “to a degree”, against a fluctuating rand, noted Van der Merwe.

He added that every company in South Africa would like “some form of predictability and stability” when it came to currency movements, as “dramatic fluctuations in short periods were difficult to manage and forecast”.

However, he believed that the weak rand also provided some opportunities for South Africa in terms of exports, which should also flow through to other industries “in time”.

He confirmed that MBSA was looking to acquire some land adjacent to its facility in East London, as part of a strategic review of the plant’s layout.

He noted, however, that MBSA was not set to increase plant capacity again anytime soon.

APDP
Government and the local automotive industry were in talks to extend government’s Automotive Production and Development Programme (APDP) to 2035, said Van der Merwe.

Government’s support programme was currently scheduled to come to an end in 2020.

Van der Merwe said an extension of the APDP would provide “stability and investment security” to the South African automotive industry.

PREMIUM MARKET
Van der Merwe said there were “tougher times ahead” for South Africa and the local automotive industry.

He said it was important to have “a mid- to long-term view of the future” when deciding how to deal with South Africa’s current political, economic and social challenges.

“If you run a business always considering events on a week-by-week basis . . . you will find yourself running from one side to the other.”

He said MBSA, the local arm of the German Daimler group, remained committed to South Africa.

“We run a good business here and we are satisfied with that business.”

However, he noted that it was also important “to create a future” that could be trusted by investors.

In light of the current tough economic environment and an industry forecast that the new-vehicle market would decrease by around 10% in 2016, Van der Merwe believed the South Africa’s premium car market would experience “significant pressure” this year.

He hoped for MBSA’s car sales to be flat compared with 2015, “with some pressure”.

“There are some headwinds. The premium segment will have a tough year.”

MBSA new-car sales reached 24 608 units in South Africa in 2015, compared with 28 370 units in 2014.

New model launches that would aid MBSA in its effort to retain sales this year would be the new Smart, C-Class Coupé, GLS, C-Class cabriolet, S-Class cabriolet and new E-Class.