Abstract
M.A. (Economics)
The high soaring motor vehicle prices put the accessibility of a new motor vehicle out of reach of the average South African consumer. The South African motor vehicle and related industry was protected to a point where it became virtually a monopoly. or a very small oligopoly. Curtailing costs and keeping prices low wasn't a priority and the consumer had to pay the price. The brunt of custom duties, excise taxes and high tariffs were paid by the consumer. in order to keep an inefficient local motor vehicle industry alive. When the General Agreement on Tariff and Trade (GATT) takes effect in 1995. the South African .motor vehicle and related industry will start losing its protective base. This is good news for the consumer. but bad news for the South African motor vehicle and related industry. which wouldn't be ready for international competition in time. It is therefore of the utmost importance that the industry will start curtailing costs wherever possible. The sharp and continuous increases in motor vehicle prices indicate that the industry isn't cost effectively organized. This causes the South African motor vehicle and related industry to be internationally uncompetitive. The general impression is that the South African motor vehicle industry's input mix is wrong. This study investigated the level of optimalization of the capital and labour input base in the South African motor vehicle industry, to ascertain where the problem lies. It was revealed that the South African labour force is too unproductive and production costs could be curtailed if thousands of workers are retrenched and more capital is employed. This study also made a contribution to the theory of production. Equations were developed which
can determine the optimal input ratio; the optimal amounts that should be allocated to capital and labour inputs, respectively, if a specific budget outlay is available; and what the optimal values of the capital and inputs should be to deliver a desired output, for example the market demand. A unique method to determine and quantify capital and labour productivity, and especially the decline in labour productivity were developed. The possible gains that could be made if the total cost outlay were optimally allocated between the factors of production, and the cost savings that could be made if the
market demand was met by an optimal input combination, were also shown.