The South African automobile manufacturing industry has grown since 1920 from an import andassembly industry to an import-substitute industry. From the inception, the automobilemanufacturing industry developed under the careful monitoring of the Government to obtain theobjectives of the economy of the country. Until 1960, all automobile manufacturers importedcompletely knocked down sets from abroad to assemble vehicles. These excessive imports drainedthe South African foreign reserves. By 1961, the South African Government had introduced localcontent programmes to stop / reduce importations in order to save foreign currency and develop theindustry into a self-sufficient manufacturing industry. Each phase of the local content programme(six in total) had both advantages and disadvantage but contributed significantly to the growth of theindustry.Existing manufacturers received significant protection from both new manufacturers and new-modelentry into the market by means of high tariff barriers. New competition in the form of newmanufacturers or imported products was relatively small with little risk for existing manufacturers.The country's automobile manufacturers were growing and during this period reported profits. By1990 the globalisation process had accelerated more than ever before. Restructural changes tookplace in most manufacturing industries due to the globalisation process. Most countries have to alarge extent been feeling the influence of globalisation in the manufacturing sectors since the early1990s. Many changes took place with regard to technology, production methods, labour utilisationand marketing of the manufacturing sectors due to the globalisation process. Since 1994, theUruguay Round Agreement and the Marrakech Agreement were established under the World TradeOrganisation (WTO) that governs world trade. Under these agreements all countries are forced tofree up their markets through tariff reduction on imports. South Africa had to reduce its tariff onimported goods and vehicles according to the Uruguay Round Agreement, as the country is one ofthe signatories to this agreement. According to WTO obligations, a comprehensive tariff reductionwas introduced on the automobile manufacturing industry through the implementation of the MotorIndustry Development Programme (MIDP) in September 1995 in South Africa. This proved to be aturning point, with South Africa becoming increasingly integrated into the global economy. TheSouth African automobile manufacturing industry is currently one of the largest industries that haveembraced the realities of globalisation.illA large number of transnational corporations (TNCs) and multinational corporations are entering thedomestic and regional markets with highly innovative, quality and low-priced vehicles without anybarriers. The trade liberalisation process has increased competition and imports, creating highpressure and influence on the performance of automobile manufacturers in South Africa in terms ofproduction volume, marketing, employment level and profits. Global competitors have eroded themarket share, while domestic sales for vehicles have declined due to imported small, affordable andsophisticated car models. The total accumulated net profits of all seven manufacturers in the countryhave declined significantly after the introduction of trade liberalisation in 1995.The above factors motivated the investigation of the influence of globalisation on the overallperformance of automobile manufacturers in South Africa. Based on a comprehensive literaturereview and empirical analysis, the following conclusions were reached.The majority of automobile manufacturers have sufficient internal strengths and resources to faceglobal competitors. The majority of automobile manufacturers cannot offer low-priced vehicles tocustomers compared with global competitors in the liberalised marketplace. This has a seriouslynegative impact currently, keeping the industry far behind from the competitive position. Lack ofautomation in production, lack of investment to introduce computerised and advanced technology inthe production process, poor production volume, inability to reach economies of scale, highproduction costs and lack of teamwork in production are factors that hamper automobilemanufacturers in South Africa. These manufacturers are unable to increase their sales in thedomestic market to reduce production costs, as low-priced imported vehicles have eroded thedomestic market. At the same time, current global market trends in terms of over-capacity, smalland low-priced and differentiated models with sophisticated technology have significant negativeeffects on the performance of automobile manufacturers in South Africa. All these trends will affectthe investment, production volume, market share and profits of local manufacturers and severelythreaten their survival over the long term.A quality product at a lower cost is an important weapon to overcome these problems and meet allthe above threats in the marketplace. Finally, a competitive advantage umbrella model consisting ofthe most important aspects is given where the automobile manufacturer has to concentrateintensively and immediately on improving their competitive position to overcome the negativeinfluence of globalisation in future.
