There are life and death decisions that government must make about our vehicle industry, one of the most important parts of our industrial base. It is facing a bleak future as cheap imports flood the market.
BMW Group South Africa CEO Peter van Binsbergen said last week that today one in three vehicles sold is produced locally. Twenty-five years ago, over 80% were locally produced.
Local production has stagnated below pre-Covid levels of 640 000 units per year. Even those still produced locally are seeing declining proportions of local content, with the National Association of Automotive Component and Allied Manufacturers (Naacam) reporting it has fallen about 1.1 percentage points per year for the last 25 years.
The component sector is particularly hard hit. Naacam reports that 13 component manufacturers have closed in the last three years, with more closures expected this year. This destruction of manufacturing capacity represents not just direct job losses, but the erosion of skills and supply chain capabilities that took decades to build.
Our main export market, Europe, is rapidly evolving to embrace new-energy vehicles. South Africa is still poorly positioned to serve that demand, with policy uncertainty and slow implementation of the new-energy vehicle roadmap delaying investment in local NEV production.
Meanwhile, the industry faces a flood of cheap Chinese imports. Chinese models now account for 22% of all vehicle imports, sold at prices that undercut local manufacturers, enabled by substantial subsidies for manufacturing in China.
Sophisticated policy reponses
Government has begun considering tariff tools to address this problem, but no decisions have been made. Current tariffs of 25% on imported fully manufactured vehicles could be doubled and still comply with WTO rules. However, local manufacturers have pointed out that blunt tariff increases could damage them, as they support local manufacturing of some models while importing others to complete their product ranges. The challenge requires more sophisticated policy responses than simple across-the-board tariff increases.
The geopolitical context complicates matters. With the US turning against the global trading system, building relationships with alternative markets has never been more important. China is a critical trading partner and a potential source of investment. But we must be laser-focused on what matters: our own economy and its ability to employ people. That is the single test for policy decisions.
Read: BMW South Africa warns EV policy paralysis is stalling investment
Chinese market access must serve those core objectives, not undermine them. We should support Chinese manufacturers to develop production in South Africa, such as Chery’s acquisition of Nissan’s Rosslyn manufacturing facilities, which preserves manufacturing capacity and jobs while potentially expanding export production.
In parliament last week, deputy minister of trade, industry & competition Zuko Godlimpi showed welcome focus on the issues, noting it is critical to “tactically defend” the employment capability of the industry while it gears up to produce NEVs competitively. Business and labour are aligned on this objective, with union leaders also noting last week the importance of protecting jobs from unfair competition.
Now we need urgent action. Government must finalise new energy vehicle policy to allow local manufacturers to transition production capabilities. Tariff policy must be refined to protect local manufacturing while avoiding damage to local assemblers. Anti-dumping measures should be deployed where Chinese vehicles are being sold below cost. Most importantly, these decisions cannot wait for factory closures to force action.
Read: Chinese car makers flood South Africa while factories lag
The motor industry development strategy must position South Africa as an export-led, globally competitive manufacturing hub, and policy must support that outcome immediately. We cannot afford to lose more component manufacturers or see assembly plants shut down while government deliberates.
- Busi Mavuso is CEO of Business Leadership South Africa
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