APDP Administration System Quarterly Newsletter Vol. 1 Issue 2 Q1, 2013 Supply Chain MVA Statistics
2013 Q2
Contents Introduction: Establishing the base APDP supply chain facts….. Updated Q1, 2013 Supply Chain MVA Statistics……....…………… Critical APDP considerations….……………………………………….
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Introduction: Establishing the base APDP supply chain facts Thank you for reading the second issue of the APDP Quarterly Newsletter, the content of which is derived almost exclusively from the APDP Administration System (AAS). The AAS has been developed for five South African based OEMs (Ford, General Motors, Nissan, Toyota, and Volkswagen) to administer the Production Incentive component of the APDP through each of their local supply chains. Apart from the functional benefit of the system (it is designed to enable the effective management of Form C1 and SMD worksheets through each OEM supply chain on a quarterly basis), the AAS has the added major industry benefit of being able to calculate and monitor critical Production Incentive aggregates from one quarter to the next. It is this capability that led to the decision to produce a Quarterly APDP Newsletter for AAS users, and other critical stakeholders in the South African automotive industry. The purpose of the Newsletter is therefore clear: To provide credible, accurate information on the impact of the APDP on the development of the automotive component manufacturing supply chain feeding into the South African vehicle assembly industry.
Newsletter structure As stated in the first Newsletter the APDP Quarterly Newsletter will follow a consistent structure. The first page will comprise a highlights article that captures a major data trend, whilst the 2nd and 3rd pages will focus on unpacking the statistics emerging from the AAS on a quarterly basis. The final page will then conclude the Newsletter by reflecting on a critical issue of relevance to automotive firms participating in the APDP. It is important to note that the first quarterly Newsletter (Vol. 1 Issue 1) compiled by BMAIS did not have data from all five of the participating OEMs. This is because two OEMs only started using the AAS in the 2nd quarter of 2013 (for Quarter 1 submission). As such, it is only now that the AAS has a full dataset for all five OEMs. As a result, BMAIS has decided to present the complete 1st quarter 2013 dataset in this, the second APDP Quarterly Newsletter. The Newsletter consequently does not analyse Quarter 1 to Quarter 2 trends, as only one quarter of full PI information for all five OEMs has been captured on the AAS to date. The fact that we can present the full base profile of automotive component manufacturers that supply the five OEMs using the AAS for the 1st quarter of 2013 is however a major progression on the data presented in the 1st Newsletter. The data presented in this Newsletter will be used as the foundation for all future APDP quarterly trend analysis. The 1st quarter findings are again analysed through a number of lenses or filters, ranging from location and firm size (employment and sales), to ownership, and the automotive component sub-sector in which firms operate. The statistics presented should prove invaluable to the South African automotive industry in tracking evolving supply chain performance under the APDP. Although the information presented has a few limitations, it contains valuable information on the supply chain base feeding into South African vehicle assemblers over the 1st quarter of 2013, thereby strengthening the industry’s understanding of the impact of the APDP on its development.
For any questions or queries relating to this Newsletter please contact Graham Barrett, General Manager of BMAIS, at graham.barrett@bmais.co.za
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Q1, 2013 Supply Chain MVA Statistics Total supply chain MVA Total supply chain MVA for the five OEMs that used the AAS in Q1, 2013, equated to an estimated R 1 668 454 969. This figure will (a) increase when, as it is hoped it will, the APDP Administration System becomes the industry accepted system by which suppliers submit their documents, and (b) become more accurate as automotive component manufacturers using the AAS become more disciplined in listing their quantities supplied to OEMs. As before, BMAIS had to extrapolate manufacturer MVA figures using the data from the 70% of worksheets that did have product quantities recorded. The submission of quantities is not required by the OEMs as they use their production quantities in APDP claims. It is however critical to the calculation of accurate industry statistics at an aggregated level. Based on the estimated R1.67 billion Q1 MVA across the supply chains of the five OEMs, their extrapolated annual supply chain MVA for 2013 is R6.67 billion. Supply chain employment (2013 Q1 base): 15,754 – based on employment to MVA ratio of 1:R423,630
Employment contribution: Based on the employment to MVA ratio of members of the South African Automotive Benchmarking Club, which is 1 job for R423,630 of MVA, the AAS data estimates the supply chain employment contribution of the five OEMs (in relation to automotive component manufacturers using the AAS) at 15,754 people.
MVA by location So where is this MVA of R1.67 billion for Q1 2013 being created? Which provinces dominate? As revealed in the adjacent figure, the breakdown for the five OEMs is interesting, revealing that 36.3% of MVA was generated in the greater Gauteng area (i.e. including parts of the North West province), 33.3% in KwaZulu-Natal, 29.6% in the Eastern Cape and 0.9% in the Western Cape. The breakdown now reflects the full sourcing locations of the five OEMs that used the AAS in Q1, 2013 and this has revealed some surprising results, most notably the comparatively large portion of MVA recorded for KZN. Going forward, the ability to analyse MVA shifts from one quarter to the next by component manufacturer location (which the AAS disaggregates at a regional sub-division level), will be invaluable to understanding the impact of the APDP at a regional (even local), as opposed to only a national level.
MVA by ownership Consistent with the findings presented in the first Newsletter it would appear as if multinational owned suppliers dominate the creation of value addition within the OEM supply chains. A full 70% of MVA generated on the AAS can be attributed to 100% or majority multinational owned component manufacturers and only 30% to majority or 100% South African owned firms.
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Q1, 2013 Supply Chain MVA Statistics MVA by firm-size It is clear that large automotive manufacturers dominate the generation of MVA within the five OEMs’ supply chains. As highlighted in the adjacent figure, 41.9% of Q1 MVA was generated by firms with annual sales in excess of R500 million, with a further 23.8% from firms with sales of more than R250 million. In stark contrast, the level of MVA generated by very small firms (annual sales of less than R10 million, was only 5.1% of total MVA generated, with small firms (annual sales of R10 million to R100 million) contributing a further 15.0%. Medium sized firms (annual sales from R100 million to R250 million) made up the balance with a contribution of 14.2%. Interestingly, the contribution by this last category of medium size firms has increased the most, and at the expense of the larger firms, now that we have a complete 2013 Q1 data set. The same general trend is evident when presenting MVA generation based on firm-size derived from employment levels. Most supply chain MVA (77.8%) is generated by firms with 201 to 1,000 employees, and only 2.8% from firms with less than 50 employees. The percentage breakdowns here have remained fairly constant when compared to the incomplete figures presented in the first Newsletter.
MVA by automotive component sub-sector It is important to note that as a result of feedback on the first Newsletter it was decided to drop the JIT Assemblers category and to incorporate the suppliers in this category into the other nine categories. This will hopefully provide more specific industry information than using a broad category such as JIT Assemblers. Dropping the JIT Assemblers category reveals that the most important source of supply chain MVA for OEMs is now discrete components (contributing 18.5%), followed by automotive trim (16.4%). These two sub-sectors generated 34.9% (R582 million) of total supply chain MVA for the quarter. The components sector comprises the manufacture of components such as filters, brake pads, clutches, windscreens, etc. Other important MVA contributors were: Metal forming and pressing – 14.8% Foundries and forges – 13.9% Catalytic converters – 10.5% Plastic moulding – 9.5% The tyre and rubber sub-sector contributes the least MVA, contributing only 3.4% of total supply chain MVA.
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Critical APDP considerations AAS data lessons Although we now have the full 2013 Q1 data set for five OEMs, and the suppliers to those OEMs, making use of the APDP Administration System, the AAS has not yet been fully utilised by the vehicle assemblers and all of their automotive suppliers. Additionally, the information supplied by the automotive suppliers needs to be improved, particularly in terms of the actual quantities supplied. The AAS does not capture value addition within the vehicle assemblers themselves, but it does capture both MVA and SVA within each of the participating OEMs’ supply chains; and with all five of the OEMs now using the system in the 1st quarter of 2013, some rudimentary analysis can be completed on the level of PI generated from the different types of automotive component manufacturing sub-sectors within the OEM supply chains. The results of this analysis are captured in the adjacent figure, which reveals the following: Foundries and forges generated the highest PI levels as a per cent of sales (7.8%, with 7.4% generated from MVA and 0.4% from SVA) Excluding the other category (7.4%), which contains a wide variety of firms, plastic moulded products generated the 2nd highest level of PI at 7.2% of sales (all derived from MVA) Metal forming/pressing generated the 3rd highest level of PI at 7.2% (6.6% from MVA and 0.6% from SVA) The above three categories generated greater PI benefits for the OEMs than the average for all automotive component firms using the AAS in the 1st quarter of 2013. The average was 6.6%, with this comprising 6.4% from MVA and 0.2% from SVA. Sub-sectors below the average included automotive trim, catalytic converters, and components, with the two lowest PI levels observed for catalytic converters and components. This first quarter of APDP Administration System data gives us a taste of the type of valuable industry information we will be able to provide from the system. As the dataset grows we will begin to answer in-depth questions on the impact of the APDP. The following points should be noted: Accurate OEM supply chain MVA can only be provided when all suppliers using the AAS provide all the information requested of them on the worksheets. The most important information missing on many worksheets is the actual quantity supplied by the supplier in the previous quarter. Over time the AAS dataset will grow and become more accurate and this will allow us to extrapolate the total industry MVA by sector by using the AAS captured MVA and applying this MVA percentage to the value of automotive component exports and other sales by sector in South Africa. The MVA reported for the first quarter is largely the MVA of the Tier 1 suppliers to the OEMs (i.e. it does not contain a significant portion of ‘rolled up’ MVA from lower tier suppliers). This is because the programme is new and documents were generally obtained from the Tier 1 level only. We can expect that as the programme matures and the industry is able to reach deeper into the supply chain for SMDs, the MVA figure reported will increase rapidly initially and then start to level off as it comes closer to representing the full MVA in the supply chain. When this point is reached we will be able to calculate the value of, and trend the growth in, MVA over the full depth of the OEM supply chain.
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