The 2018 SA Festival of Motoring: supercars prove to be a popular investment

Motoring enthusiasts were spoilt for choice at the biggest national motor show of the year

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Motoring enthusiasts were spoilt for choice at the biggest national motor show of the year—the SA Festival of Motoring—which took place at the historic Kyalami Racing Circuit recently, showcasing the cream of the luxury and performance motoring industry

This motoring extravaganza brings together over 65 000 car lovers, with a representation of over 30 auto brands at the event. Everything from the newest sports cars to vintage supercars, as well as the best in 4x4s, was on display.

Visitors also had the opportunity to witness these prestigious luxury motor cars show what they’re made of in action, with a few lucky show-goers even having the chance to get their adrenaline pumping with a spin around the track.

According to the 2018 edition of the leading wealth intelligence company New World Wealth’s South African Wealth Report, the best-selling luxury car brand sold in South Africa in 2017 was the Porsche. Next up was Ferrari, followed by Bentley, Rolls-Royce, Aston Martin, Lamborghini and then McLaren.

Christelle Colman, the Managing Director of Elite Risk Acceptances, says it’s at events like these that many enthusiasts decide to take their passion to the next level and enter the world of supercar investing.

“This kind of event is a great opportunity for wealthy South Africans who are considering investing in supercars to experience the various brands and find out, first hand from the manufacturers, what features are best-suited to their preferences,” she says.

SUVs were also very popular among high-net-worth South Africans, with the Porsche, once again, leading the pack in the category. “Driving a new Porsche Cayenne Turbo off the shop floor will set you back a cool R1.5-million,” says Colman.

She adds that owning luxury vehicles is a very personal thing. “For some, it’s a labour of love building a collection while for others, it’s more about the sheer enjoyment of the asset—this type of investor wants to lavish in the fine attention to detail that goes into manufacturing every single one of these cars.

“Then there’s the investor who is always on the lookout for the next hot alternative investment. Whatever your reason for owning a luxury car, it should always be treated with care and you should make sure that it is properly insured. Unlike fine jewellery or art, you can’t lock your supercar up in a safe—that’s the role of insurance,” she explains.

Gareth Crossley, Director at Crossley & Webb motoring investment specialists in Cape Town, says there are many factors for first-time supercar buyers to consider. “Maintaining these cars to an optimal standard to ensure the value of your investment is not unnecessarily compromised is very important.

“Whether you own one supercar or 10, whether you drive it or leave it parked in a garage; you have to ensure that you are taking care of your car if you want to get a decent return on your investment—and when you’re paying in excess of R1 million for a car, it’s an investment even if you’re purchasing your supercar for no reason other than pure pleasure!” he says.

The government and motor industry are close to a master plan

Meanwhile, the Department of Trade and Industry (dti) and the motor industry are now close to finalising the South African Automotive Masterplan, which will come into effect in January 2021 and run until 2035. This was the message given by Lionel October, the Director General (DG) of the dti, addressing delegates at the NAAMSA Automotive Conference, which was also held at Kyalami, and formed part of the SA Festival of Motoring.

October, who has been the DG at the dti since 2011, said that the dti and the industry were ”99% there” in getting agreement on the Automotive Masterplan, which is due to replace the Automotive Production and Development Programme. He stressed the importance of the automotive industry as a player in the South African economy, where it formed half of the annual manufacturing input. He said that increasing industrialisation through more local content and higher production volumes were important components of the Masterplan.

”Higher production volumes result in economies of scale and improve an industry’s competitiveness, which impacts on its ability to localise components, with 60% local content being a Masterplan target,” explained October. ”It is, therefore, very important that we hit the point where we are producing more than a million vehicles a year in South Africa, rather than the current level of about 600 000,” October explained.

Kirby confident

Andrew Kirby, the chairman of the National Association of Automobile Manufacturers of South Africa (NAAMSA) and the President and CEO of Toyota South Africa Motors, says he is confident that the local motor industry will overcome its major challenges and that the industry will grow substantially into the future.

Kirby said that in his view, there were five main challenges facing the South African automotive industry:

  • Responding to market changes,
  • Optimising regional integration,
  • Establishing infrastructure as an enabler,
  • Achieving global competitiveness,
  • Developing an inclusive value chain.

He said that the South African motor industry is undergoing its biggest disruption since the introduction of the Motor Industry Development Programme (MIDP) in 1995, when the country exported only 11 000 vehicles and imported 20 000, to the situation today where it is projected that production this year will total 609 000 vehicles and exports will total 340 000 units.

Kirby added that the market was changing fundamentally, driven by rapid technological developments in vehicles and the growth in digital media applications, which were affecting customer behaviour as well as the overall automotive business environment, both wholesale and retail.

”Increasing exports into other African countries is a vital part of growing production volumes,” explained Kirby. ”Increasing motorisation on the continent through a growing middle class is a key, which could lead to the African market expanding from the current 1.2-million new cars and commercial vehicles to 2 million vehicles in five to 10 years. However, a big obstacle to new vehicle sales growth is that many countries in Africa permit the importation of thousands of used vehicles. Fortunately, there are moves to curb this trend in the interests of growing the motor industry in several African countries,” he explained.

When discussing the infrastructural challenges faced by the local industry, Kirby said that one of the most important was the introduction of cleaner fuels, which will permit the importation of cleaner burning and more fuel-efficient engines. Most African countries still permit fuels to be sold, which only meet requirements for Euro 2 or 3 standards, at a time when many countries in Europe already require engines to meet Euro 5 or 6 standards. Paved roads are another aspect of infrastructure that requires urgent attention when growing the vehicle market in South Africa, according to Kirby. He explained that only 21% of roads in South Africa are paved, amounting to 154 000km with a further 140 000km of roads in the planning stage, but few new roads being built.

He added that ports and the rail network are other infrastructural aspects requiring attention if the South African motor industry is to become globally competitive and if it is to produce a million or more vehicles a year. Kirby was also adamant about the need for making the motor industry far more inclusive through empowerment and training initiatives in both downstream and upstream operations.

”Despite the many challenges we face, there is an air of optimism among all members of the South African motor industry regarding the aspirational vision of the upcoming Automotive Masterplan as the path to the future,” he said.

Many impressive statistics came out of the presentation by Econometrix’s Jeffrey Dinham on the economic and socio-economic impact of the South African automotive industry. For instance, he extrapolated the industry’s contribution to GDP as 7.7% with direct and indirect impact (R277 billion) amounting to 7.1% and the extra 0.6% coming from the induced impact of motor industry employees’ spend, underlining the importance of the automotive sector to the overall economy.

Dinham added that the motor industry was the third biggest spender in South Africa after the government and construction, while direct and indirect employment was estimated at 468 000 people.

He said that the automotive industry is currently the fifth largest exporting sector in South Africa, with exports valued at R271 billion, which equates to a 16.2% share. The value of built-up vehicles exported amounted to R118 billion in 2017, while catalytic converters continue to make a big contribution to the total automotive exports as they account for 10% of the global demand.

The economist also revealed that the automotive industry makes a significant contribution to corporate social investment in South Africa, with the seven OEMs spending 2.4-billion on CSI projects over the past three years. The importance of growing automotive export markets into Africa and building up the continent’s motor industry was reinforced by Mike Whitfield, the vice-chairman of the African Association of Automotive Manufacturers (AAAM) and the Managing Director of Nissan SA, as well as in presentations by Dr Alec Erwin and Dr Martyn Davies—experts on the subject.

The overall message from the Conference is that the South African motor industry is on the cusp of another growth spurt at a time when the global automotive environment is undergoing its biggest upheaval in more than 100 years.

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