Persistent trade fragmentation, continuing closures and the influx of cheap imports are creating a perfect storm imperilling South Africa’s automotive sector, which will require flexible solutions to overcome.
This was the scenario presented to MPs in the portfolio committee for trade, industry and competition by the automotive industry this week. MPs heard a raft of solutions, including increasing local content production, anti-dumping measures, and broadening South Africa’s trade networks to respond to the global trade ructions.
Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers, said domestic policy and market shortcomings, along with global changes, have rendered South Africa’s automotive sector masterplan and its targets unlikely to be achieved.
“The South African automotive sector is facing deindustrialisation and has failed to meet the South African Automotive Masterplan targets across all priority key performance indicators, in some cases performing below baseline… Urgent and decisive intervention is needed to prevent further decline in the manufacturing value chain.”
His remarks come after the passage of the African Growth and Opportunity Act (Agoa) in the US, although the jury is out on whether South Africa’s place in the act is secure, as fears abound that US President Donald Trump could exclude South Africa from participating by way of executive order.
The EU’s carbon border adjustment mechanism (CBAM), which adds a tax on carbon-intensive exports destined for the bloc, put even more pressure on the local sector. Moothilal said while the US was not the largest destination for South African auto exports, it certainly wasn’t irrelevant.
“Two years ago, total vehicles and components exported into the US were probably around R27bn. Five per cent moved in the localisation rate in South Africa, meaning that those bought in South Africa are modelled to be about R30bn.”
He said the auto sector could replace the entire vehicle and component exports going to the US by just moving the sector from 39% to 44% local content production, which is below what the sector currently has as a target.
“The consumer purchasing power that comes from the number of jobs created in the manufacturing value base or value chain should give some sense of where you can create new consumers for the kind of products that are produced.”
Moothilal said while the South African Automotive Masterplan targeted 784,504 new vehicle sales against a baseline of 617,749, the sector reached 597,014. It targeted a 48% target of local content but has not moved past the 2015 base of 39%.
Tshetlhe Litheko, chief policy officer of the Automotive Business Council (Naamsa), said the CBAM policy presented a unique set of challenges for local manufacturers of vehicles and components.
“Those aluminium and steel products will affect our component manufacturers and components that are manufactured locally [that are going] into the EU. So, that would have inflationary pressure on components that are aluminium-based and steel-based that form part of what we export to the EU.”
He said the most significant reform the region would have to consider was how to use policy to slow down the importation of second-hand vehicles and ensure that end-of-life vehicle policies become a reality in the region.
“We are, perhaps, the only country in the region that outright does not support the importation of second-hand vehicles, but even countries that are in our region, like Namibia and Botswana and so forth… import these vehicles.
“Now, how do you evaluate value in a market where new vehicles exist, with 90% of vehicles that are second-hand vehicles? It’s hard for you to have that asset fully valued in that particular market for you to appreciate the value of your investment.”
He said other African markets are trying to get a return on their production.
“For instance, the same volume of vehicles that we are sending to the US is equal to what we are sending to a country like Algeria. And... to reopen those trade negotiations for us to send those fully built units to Algeria, Algeria should also believe that their ability to produce vehicles will be supported by movement to South Africa.”
Irvin Jim, general secretary of the National Union of Metalworkers of South Africa (Numsa), said the government had to act to preserve jobs in the sector by restricting imports from producers such as China and India, as well as banning the importation of tyres from other markets altogether.
“In the face of Donald Trump… having imposed 30% tariffs against South Africa and the automotive industry being under siege from imports and so many jobs already lost through retrenchments, it is our submission that it is about time that the government, led by department of trade, industry & competition, must take stock of the value of trade that benefits South Africa, especially the automotive industry… and take measures that protect the South African automotive sector.”
Peter van Binsbergen, the CEO of BMW Group South Africa and Sub-Saharan Africa, does not agree with Jim’s proposal on banning tyre imports, saying the demand for tyres in South Africa was more in the aftermarket, where car parks are looking to replace tyres rather than the original equipment manufacturers putting tyres on new vehicles.
“I don’t agree with it… You know how we import cars, right? They roll onto a ship, and they roll off the ship on the site, so they literally drive on [and] drive off. How would you do that without tyres? You couldn’t possibly send all the imported tyres back. That wouldn’t be efficient. And to scrap them here in South Africa wouldn’t be environmentally friendly either.”
Jim said Numsa was deeply troubled by the fact that organised labour in the sector was not adequately consulted when Chery took over Nissan’s Rosslyn plant.
“The imbalance of imports into our local market, which must be addressed, is better explained by the fact that in 2018, both China’s and India’s imports were less than 1%. In 2025, both China and India’s imports increased to approximately 26%.”
Sunday Times
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