M.Com. / The objective of this study was to compose an effective exchange rate index for the motor- and related industries in Soutb Africa to be used for the forecasting of new motorcar prices. The situation in South Africa, where a lot of components used in the production of motorcars are imported, exposes the industry to exchange rate risk. The government introduced measures like Phase VI of the local content program and a 100 percent Ad Valorem import duty on new motorcars to protect local manufacturers. Although these measures limits exchange rate exposure, the motor industry is still affected by exchange rate changes. An effective exchange rate index was compiled by allocating weights to a currency index according to it's contnbution to imports by the local motor industry. The private consumer of motorcars can use the index to determine when he must purchase a new vehicle to avoid price increases. Corporate consumers of motor vehicles can use the index to help with the management of their vehicle fleet. The index can also be used by motorcar manufacturers and importers of components to manage their exchange rate risk. Individual motorcar manufacturers can test the effectiveness of their strategies to manage exchange rate risk by comparing it to the index as the effective exchange rate index was compiled for the industry as a whole. The exposure of a manufacturer with an effective strategy will be less than that of the index. A manufacturer will have to look at alternative strategies to managing exchange rate risk if his exposure to exchange rate risk is greater than that of the index. Regression analysis was used with the exchange rate index as the independent variable to forecast prices of new motorcars. A high degree of correlation was found when the forecasted prices were compared with the actual prices of new motorcars. The conclusion was reached that the effective exchange rate index could be of great value to the private- and corporate consumer of new motor vehicles as well as manufacturers of motorcars and importers of components.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uj/uj:11974 |
| Date | 05 August 2014 |
| Source Sets | South African National ETD Portal |
| Detected Language | English |
| Type | Thesis |
| Rights | University of Johannesburg |
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