South Africa's automotive industry is facing a perfect storm of challenges, threatening jobs and the very future of local manufacturing. A surge in imported vehicles, coupled with lower-than-expected domestic sales, is putting immense pressure on local carmakers. The industry is now pleading with the government to take urgent action to protect it.
Import Duties Under Scrutiny
Motor companies are lobbying the government to increase import duties on new cars and bakkies from the current 25% to a hefty 30%. They argue this is necessary to level the playing field and prevent a flood of cheaper imports from undercutting local manufacturers. Furthermore, they are seeking adjustments to the Automotive Production and Development Programme (APDP) to allow them to use incentive payments to reduce their own prices, making them more competitive.
Job Losses and Closures Mount
The situation is already dire. Trade Minister Parks Tau revealed that over the past two years, the sector has witnessed a staggering 12 company closures and the loss of over 4,000 jobs. This is attributed to low domestic sales, the influx of imports, and persistently low levels of local content in vehicle production.
Domestic sales of locally produced cars reached 515,850 last year, significantly below the South Africa Automotive Masterplan 2035 target of 784,509. Adding to the woes, a significant 64% of vehicles sold in South Africa are imports. Localisation, measured by local assembly, labour, and components, remains stagnant at 39%, far from the desired 60% target.
US Tariffs Exacerbate Problems
The imposition of tariffs by the United States has further complicated matters, impacting South Africa's R28.7 billion ($1.64 billion) automotive exports. With approximately 115,000 people directly employed in the South African automotive industry, and over 80,000 in component manufacturing, these tariffs pose a significant threat to employment.
The South African government has submitted a revised trade deal offer to Washington in an attempt to lower the 30% tariff imposed by the US. An incentive scheme for local manufacturing is also being considered to help the industry navigate these turbulent times. Whether these measures will be enough to stem the tide remains to be seen.