From BusinessDayLive.

South Korean car manufacturer Hyundai is preparing to build vehicles in South Africa.

The Seoul-based company’s local representative has confirmed it will assemble light delivery vehicles  in Gauteng from next year and may manufacture cars in South Africa at a later stage.

Despite not officially releasing sales figures, Hyundai is generally considered a strong third in the South African new-car market, behind Volkswagen and Toyota. It is also a growing presence in many African countries, notably Angola, where it is market leader.

The Korean parent company has repeatedly said there is no need to build in Africa and that it is more cost-effective to supply the continent from existing car plants. Besides Korea, Hyundai has operations in North America, India, the Czech Republic, Pakistan, China and Turkey.

Hyundai SA Managing Director Alan Ross confirmed that his company was establishing a Benoni factory to build 500 to
600 delivery vans a month, mainly from imported kits.

Assembly is due to begin next January. If the venture is a success, the company will progressively increase local content.

Ross said Korean officials had also visited the East London Industrial Development Zone (IDZ) to discuss the possibility of cars being built at a proposed multi-brand assembly plant.

The IDZ — home to 16 component makers servicing Mercedes-Benz’s East London assembly plant — floated the multi-brand idea four years ago, after the government announced the 2013-20 automotive production and development program, under which assembly plants must build at least 50,000 vehicles a year to access production incentives.

IDZ executive manager Tembela Zweni said the organisation hoped to attract three or four companies to collectively build about 80,000 vehicles, and wanted assembly to begin within the next year or two.

Although it is not certain Hyundai will sign up to this plan, Ross said: “It’s possible. Hyundai has been to see them.”

Other companies targeted by the IDZ include French car maker Peugeot Citroen. Local Managing Director Francis Harnie said, “The East London IDZ can be an opportunity for the future.”

In his budget vote speech to the National Council of Provinces last month, Trade and Industry Minister Rob Davies said the East London IDZ’s support for original equipment manufacturers had attracted seven new investors as part of industrial clustering in the automotive sector.

“To date, this IDZ has been able to attract about 1.7 billion rand worth of investment while creating over 1,700 jobs,” Mr Davies said.

In July, Chinese company First Automobile Works opened an assembly plant at the Coega IDZ. The estimated 600-million-rand investment will initially target the production of 5,000 trucks and light and passenger vehicles.

A report earlier this year by international business consultancies PwC and KPMG said while South Africa’s motor industry was expected to expand, it would be overshadowed in the near future by activities in other emerging countries.

The balance of power is shifting irrevocably in the global motor industry, with four emerging BRICS countries — Brazil, Russia, India and China — set to build 45 percent of the world’s cars by 2020, the report said.

Africa has more than a billion consumers desperate to raise their standard of living. But unlike China, with its single government and clear industrialization purpose, the continent is fragmented and lacks any economic coherence.

PwC and KPMG said these barriers might be why Chinese and Indian motor companies were downgrading their investment commitment to South Africa, after initially trumpeting it as the gateway to Africa.

According to KPMG’s Global Automotive Executive Survey, “South Africa has lost its position as the third-most important (emerging) market for ambitious BRICS auto makers, replaced by Russia and Brazil.”

Read more at BusinessDayLive.