As guest of honour at Volkswagen Group Africa’s (VWGA’s) recent 75th birthday bash in the Eastern Cape, Cyril Ramaphosa found a unique way to express his thanks: he said he didn’t want to be there.
In his keynote speech, the president admitted his immediate reaction to being invited was to say no. He had more important things to do. “I was not going to come,” he told assembled guests.
Ramaphosa was persuaded to change his mind by ANC secretary-general Fikile Mbalula, who reminded him of the motor industry’s importance to the economy. It would look bad if the president turned down the invitation; Mbalula “insisted” that Ramaphosa attend.
If only all automotive-related political decisions were so emphatic for an industry that contributes 5.2% to GDP, 23.8% of national manufacturing output and 15.6% of export values. That’s on top of the combined 110,000 jobs offered by the sector, and 500,000 total employment dependent on the motor industry.
Instead, vehicle and components manufacturers say thousands of jobs have been lost because of policy indecision, and thousands more are on the line; many plants are operating at a fraction of capacity.
If anything, Ramaphosa’s indifference is indicative of the government’s broader approach to the sector and the state it is in — a state of “crisis”, says Paul O’Flaherty, CEO of the Metair automotive components group.
“Do we want this industry to survive?” he asks. “We really are at a point where this question must be asked.”
As O’Flaherty sees it, South Africa must choose between two futures for its motor industry: let it die, as Australia did; or enable it to fly, like Morocco.
The growing market dominance of budget-priced vehicle imports, primarily from China and India, is forcing local producers, known as original equipment manufacturers (OEMs), to cut production. This has a domino effect on the components suppliers that provide parts to local assembly lines. Smaller orders make it harder for local companies to compete with global suppliers enjoying lower unit costs.
The good news is that a growing number of importers are showing that they are willing to manufacture in South Africa. Chery, which bought the former Nissan plant this year, is the latest to commit. But several more will need to follow suit if the government is to meet its goal of doubling the industry’s size by 2035.
Unlocking localisation
Renai Moothilal, CEO of the National Association of Automotive Component & Allied Manufacturers (Naacam), points out that local content — the proportion of local value addition in the vehicle manufacturing process — has shrunk since the second edition of the government-led automotive production & development programme (APDP) was announced in 2018. Then, the share was 43%; now, it’s 38%. OEMs imported about R151bn of components for their new-vehicle assembly lines in 2025.
The aim of the APDP and its accompanying South African Automotive Masterplan is for 60% local content by 2035. By now, according to the timetable, it should be 48%. “The fact that it is stuck at 38% is not acceptable and represents an approximate R50bn shortfall in local economic activity and in job opportunities,” says Moothilal.
Suppliers are also missing out on an opportunity to supply the local aftermarket with parts for vehicle repairs and embellishments. The 2026 Automotive Trade Manual reports that in 2025, R101.8bn of aftermarket parts were imported.
Importing is part of any automotive market, particularly for vehicle models not produced locally, says Moothilal, but South African companies could supply much of the R101.8bn aftermarket demand “if industrial policy was more direct in wanting to unlock localisation”.
The import figure could breach R150bn by the end of the decade, says a report by the government-linked Localisation Support Fund (LSF). It says automotive policy affecting components companies has historically sidelined the aftermarket.
“It is large, growing and underanalysed,” it says. “Limited component-level data has constrained localisation decisions, resulting in a significant missed opportunity.”
LSF highlights lead-acid batteries, spark plugs, brake parts, oil filters, automotive glass, floor coverings, air filters and gaskets among goods ripe for aftermarket localisation. Replacement glass windscreens from China and Malaysia were recently hit with tariff penalties after accusations of dumping. LSF says windscreens are among imported aftermarket goods that often fail to meet local quality standards.
It says: “Weak enforcement of quality standards allows noncompliant imports to compete [in South Africa]. This reduces the ability of local producers to compete on a level playing field.”
It would help further, says O’Flaherty, if the government lived up to its promise that all levels of government, as well as state-owned entities, should buy South African-made vehicles rather than imports. The same should hold true for homegrown aftermarket parts.
These are all obstacles to growth for a sector whose economic importance is generally underestimated. OEMs may provide the glossy finished product but it is suppliers that deliver the estimated 30,000 parts that make up each vehicle. That complexity is mirrored in the fact that while South Africa’s OEMs employ about 30,000 people directly, suppliers have about 80,000.
The latter are generally the first to feel unfavourable market forces. Moothilal says his sector has shed almost 8,000 jobs in the past three years. That equates to about 10% of the total workforce. Up to 15 factories have closed. And a recent Naacam survey found that 63% of respondents had either reduced employment or were considering further reductions.
Moothilal observes: “The concern is not only the immediate employment number. Once a manufacturing operation closes, South Africa loses tooling, engineering capability, skills, supplier relationships and industrial know-how that, once gone, have little chance of being reintroduced.”
Metair, for example, has closed a brake manufacturing factory and plastics mouldings plant, says O’Flaherty, and is “looking at reducing the footprint of our battery manufacturing plant to rightsize to the market”.
From a peak of 13,900 employees in local manufacturing operations in 2022, the group’s workforce now numbers 11,200. “We may have to downsize further,” he adds. “It’s very frustrating to see policy decisions not being made.”
No-one is feeling this pain more than local manufacturers of catalytic converters, the platinum-based gizmos that reduce toxic exhaust emissions from petrol and diesel engines. South Africa is a global producer, but export demand is plummeting as many of the world’s major markets turn to new-energy vehicles (NEVs).
In 2021, converters accounted for more than 50% of the value of South African components exports. By 2025, this was down to 26%. This has led to a steady decline in the overall value of components exports, from R70.3bn in 2022 to R61.2bn in 2025.
A report by Naacam and the International Labour Organisation (ILO) suggests that in a worst-case scenario, a catalytic meltdown could cost more than 30,000 direct and indirect jobs by 2035 — down from 37,300 to 6,800.
However, the report states that continued use of catalytic converters in the aftermarket and in hybrid-electric vehicles, particularly in African and other markets where NEV adoption is slower, may extend employment opportunities.
Moothilal says: “The extraordinary skills, knowledge, manufacturing infrastructure and global customer relationships developed through that industry should become a platform for diversification into adjacent technologies, including fuel-cell applications and green hydrogen-linked NEVs, particularly in commercial mining vehicle usage.”
Government steps in
All this is happening at a time when the local new-vehicle market is at its strongest for many years. Industry association Naamsa reports that in the first eight months of 2026, sales of new cars and commercial vehicles totalled 382,671. That was 12.5% more than at the same stage last year. Car sales were up 13.5%, light commercial vehicles (bakkies and minibus taxis) 10.2%, medium trucks 5.7%, heavy trucks 15.1% and extra-heavies 11.1%.
Most car sales, however, are imports. August’s 10 top-selling brands included Suzuki, Hyundai, Chery, Great Wall Motors, Jetour and Kia. Even sales of the four local “intruders” — Toyota, VWGA, Ford and Isuzu — included foreign-made products.
It’s estimated that imports account for more than 70% of new-car sales. In 2025, South Africa imported 219,976 vehicles from India and 91,326 from China.
“The rapid expansion of Chinese and other newer vehicle brands has intensified competition, broadened consumer choice and introduced more competitively priced vehicles across several segments,” says financier WesBank.
That’s great for consumers, say motor industry executives, but what about us? The APDP, first introduced in 2013 then renewed in 2021, is meant to cushion the industry.
Instead of doubling the size of the industry by 2035, as intended, the APDP is helping to shrink it. Employment is dwindling, as is the proportion of local components in South Africa-made vehicles. Production volumes — below pre-Covid levels — are barely moving.
The industry is desperate for a lifeline and the government says it will offer one. It is engaged in talks with industry and labour to repair the misfiring APDP.
Moothilal says the review “is considering the broader competitiveness and sustainability of the industry, including vehicle production levels and investment, localisation and transformation, employment, new market entrants, the effectiveness of existing policy support and incentives, and South Africa’s transition into NEV and associated value chains”.
Trade, industry & competition minister Parks Tau was reported recently as saying he expects the programme review to finish this month. When that will translate into policy change is not clear. Toyota South Africa Motors president Andrew Kirby has said enactment could take up to a year.
A spokesperson for Tau’s department of trade, industry & competition (DTIC), told the FM this week that draft proposals will be presented to an oversight committee on October 6, then recommendations forwarded to the minister. Thereafter, “it can be expected that implementation will follow, starting in a few months”.
Industry figures say that’s too long, and that APDP flaws should have been fixed long ago. They say it may already be too late to undo some damage. In between the 2018 announcement and 2021 introduction of the updated programme — sometimes referred to as APDP2 — Covid irrevocably changed the playing field before local economic stagnation and international events made things even more unstable.
Programme defects and unintended consequences quickly became apparent, but the government has eschewed hasty action and stuck to its original plan for a review in 2026.
There is nothing wrong with the APDP in principle, says VWGA MD Martina Biene, who will take up a new position in Europe on October 1 as board member for sales and marketing at VW group car brand Skoda.
“The problem is not lack of policy but lack of adaptability,” she says. “We are frightened to change things when they are obviously not working.”
Imports’ growing share of the market has led to calls for increased tariff protection. Chinese brands, in particular, have been accused of taking advantage of extensive production stimuli in their domestic factories to undercut the prices of locally made cars and bakkies. Some critics believe South African authorities are slow to respond for fear of offending this country’s biggest Brics partner, particularly when China is opening its market to a range of South African goods.
The DTIC spokesperson admits government is concerned at rising import levels, “especially on the trade balance, local content and employment levels”. The policy review could include “trade remedies ... aimed at reversing the trend of imports and supporting local manufacture”.
Other policy issues also need resolution. The ad valorem tax, unchanged for more than 30 years, penalises South Africa-made cheap cars as luxury goods. Only a handful of new cars are priced below the R200,000 “luxury” threshold.
Then there are production rebate certificates (PRCs), incentives that allow local OEMs to reduce tariffs on imported vehicles and components. The only way to use excess PRCs, annually worth billions of rand, is to sell them to independent importers at a discount, so they can reduce their already advantageous prices. OEMs want to use them in-house to cut their own costs. O’Flaherty says PRC trading should be allowed only between OEMs.
There are also questions about the effectiveness of APDP incentives intended to encourage full-scale vehicle manufacture, known as completely-knocked-down (CKD). This involves building vehicles from the ground up, with a significant proportion of local components. Some of these incentives, however, have made their way into the assembly of imported vehicle kits, or semi-knocked down (SKD) manufacture.
O’Flaherty calls this a policy “loophole” that needs to be plugged quickly.
Ramaphosa, who assured a motor industry conference two years ago that he would encourage the government to act promptly on the industry’s needs, told VWGA that its continued presence in South Africa and latest R4bn investment in a new car range were a “vote of confidence in South Africa”. He used the same words previously to describe investments by Ford, Nissan, BMW and Toyota, among others.
He trotted out other staples. The government wants to create a predictable automotive policy to encourage new investors, one that will “meet the needs of the industry”. It wants South Africans to buy cars manufactured here, as part of a broader desire “to build factories and make things for South Africa”.
The reality is quite different. Locals are flocking to buy imports and South Africa’s overall manufacturing base is shrinking.
Ramaphosa declared: “Policy [today] will determine where vehicles will be built 10 years from now.” Of the tens of billions of rand ploughed into local manufacture by vehicle and components companies in recent years, he said: “We don’t take these investments for granted.”
Some might beg to differ. There has been an assumption among some in the government that foreign companies are too financially embedded here to consider leaving. If only it were so. When converted into dollars, euros and yen, some rand investment values are modest by global standards.
Naamsa’s latest quarterly report shows that between 2019 and 2025, OEMs invested R52bn in their production operations. In 2026, Toyota has completed a R10.4bn investment in its new Hilux bakkie range and VWGA R4bn in a new SUV. In euros, those values are €2.8bn, €532m and €215m respectively.
The assumption of permanence also ignores experience. General Motors disinvested from South Africa in 2017, 104 years after it distributed its first vehicles here and 91 years after it began vehicle assembly in Gqeberha. In 2026, Nissan has ended 60 years of local manufacture by selling its Tshwane assembly plant to Chinese company Chery.
Mercedes-Benz of South Africa’s Eastern Cape plant is operating well below capacity because of reduced global demand for its C-Class car range, made worse by import duties in its main US export market. Ford Southern Africa, which has spent more than R20bn on its local Ranger pick-up and engine plants in recent years, is among other vehicle manufacturers to be producing below expectations.
Metair spent R1.3bn on upgrading an automotive springs factory to meet projected demand growth from an OEM, only to see demand actually diminish, says O’Flaherty. Its factory is now running at 66% capacity.
Machina non grata
O’Flaherty says South Africa must decide whether it is serious about retaining its motor industry: does it want to follow the automotive example of Australia or Morocco? The Canberra government, whose former motor industry policy was the model for South Africa’s post-apartheid strategy, gave up on its own industry in 2017 in the face of growing international competition. Ford, General Motors, Toyota and Nissan all disinvested in the absence of encouragement to remain.
Morocco’s industry, on the other hand, has blossomed. As recently as five years ago, vehicle production in the North African country was a fraction of South Africa’s. Today, it’s almost double. In 2025, South Africa produced 618,077 cars and commercial vehicles. Morocco’s output was well over 1-million.
Of course, Morocco has advantages. Only a short boat ride across the Mediterranean from Spain, it is effectively an extension of the European motor industry. More than 90% of production is exported.
Morocco has also splashed out on generous manufacturing and localisation incentives. In particular, it has attracted billions of euros in incentives to attract manufacturers — including Chinese — of NEVs, mainly electric-powered.
South Africa, which has led efforts to create a pan-African motor industry and new-vehicle market to reduce dependency on other markets, is also a significant EU supplier; more than half of vehicles made here end up in the EU and the UK.
The difference is that most of them are powered by diesel and petrol internal combustion engines (ICE), which will become machina non grata from 2035, when UK and EU legislation will bar the sale of new ICE vehicles. Some other world markets will do likewise.
VWGA is the local industry’s biggest vehicle exporter. In 2025, it exported 119,771 Polos, mainly to the UK and EU. The company’s Kariega plant currently has no plans for NEVs and will halt Polo production in 2034, but hopes that by switching its export focus to the rest of Africa with vehicles designed for the continent’s driving conditions, it will compensate for the loss of existing export volumes.
This won’t happen immediately, if at all. So VWGA and other South African companies in the same boat may see production volumes drop. So will their components suppliers.
Despite knowing about the foreign ICE cut-off date for many years, the government has yet to devise a comprehensive NEV policy. In 2013 Rob Davies, trade & industry minister at the time, promised to hasten the sale and manufacture of NEVs through “demand stimulation, public education, investment support and an accommodative regulatory framework”. His successor, Ebrahim Patel, introduced a White Paper in 2023.
Some incentives are available but not enough to give a clear picture of government thinking. A limited number of hybrid-electric vehicles — using a mix of ICE and new technology — are made here but, despite growing consumer demand, a strategic direction has still to emerge.
The Naacam/ILO study bemoans the fact that, in addition to a lack of clarity on NEV manufacturing incentives, the government has shown little interest in encouraging consumers to buy these vehicles. In most countries where NEV sales have flourished, cash refunds and tax benefits have got the ball (or wheels) rolling.
The study says: “To enhance affordability and encourage adoption, it is important to consider demand-side incentives that can reduce the total cost of ownership.”
A haphazard NEV transition, it says, could cost another 8,200 direct jobs by 2035. An orderly one could create about 3,370 in components like high-voltage wire harnesses, thermal management systems and hydrogen fuel cells.
Hanging in
Notwithstanding all this uncertainty, automotive companies have signalled their desire to remain in South Africa. However, they say the government must protect them against unfair import competition and provide a long-term, stable policy environment. In other words, they want the government to stop talking about policy intervention and actually do something.
It’s not about keeping new brands out, they insist, but about fairness. Local products can’t compete on price with imports that are heavily subsidised in their countries of origin. Companies that have invested billions of rand in South African infrastructure and employ thousands of people should not be sacrificed to uncommitted newcomers.
Ford has built vehicles here for over a century. “We will continue to invest, to build and to employ,” says Ford Africa president Neale Hill. “Equally, we will continue to support the need for policy and regulatory conditions that allow local manufacturers to compete fairly against those who simply import vehicles into this market."
He adds that APDP changes must ensure that companies that invest capital, create jobs and build local skills are not placed at a structural disadvantage to those not sharing the same commitment to the country.
“This is not about protectionism for its own sake,” he says. “It is about ensuring that the enormous investments already made in this country, and the investments still to come, are not undermined by uneven operating realities.”
Thomas Schäfer, former MD of VWGA and now global CEO of the VW car brand, concurs. “Cars built here compete against a rising tide of imports,” he says. “Our request is a very simple one: the same rules for everyone. South Africa has the talent and the heritage and the location [to attract investment]. Give it the certainty it needs and VW will keep exporting and manufacturing here. We are ready to do so for generations.”
Chinese companies are starting to share this sentiment. Truck market leader FAW has an Eastern Cape assembly plant in the Coega special economic zone near Gqeberha. One of its neighbours is car and pick-up producer BAIC — though the future scale of what was meant to be China’s showpiece assembly plant in South Africa is still unclear. Full-scale CKD production is well behind schedule and the plant has been bedevilled this year by a prolonged labour dispute over wages.
There appears to be a much clearer vision for Nissan’s former plant. The Chery group includes several brands and officials say Jaecoo, Jetour and Chery vehicles — both ICE and NEV — are being considered for manufacture. Production is planned to start in the second half of 2027, en route to a first-phase annual capacity of 50,000.
In the long term, the group says products are likely to include cars, bakkies and agricultural machinery. Chery hopes local content in its vehicles will reach 40% by 2028, through a combination of local components suppliers and Chinese companies encouraged to invest in South Africa. Chery has not said what it paid for the Nissan plant — only that it eventually expects to spend “hundreds of millions of dollars” on its local operation.
Metair’s O’Flaherty says: “We have visited the Chery factory and had constructive discussions. Our manufacturing companies are facilitating visits for Chery.”
Conrad Groenewald, local COO of Great Wall Motors, which includes the Haval car brand, recently confessed in an interview that his company had also bid for the Nissan plant in its pursuit of a South African manufacturing base.
There is strong interest among Chinese businesses in investing in Africa, says Lauren Patlansky, head of China/Africa business at business advisory group HLB CBS. “Politically stable markets are particularly attractive, while mining, renewable energy, automotive manufacturing and large engineering, procurement and construction projects are drawing considerable attention.”
She adds: “Increasing localisation requirements and the commercial advantages of having an established regional presence are encouraging more businesses to consider local partnerships, operating bases and manufacturing opportunities.”
Besides an established motor industry with the potential to become the gateway into the rest of Sub-Saharan Africa, South Africa also has deep reserves of minerals for NEV battery manufacture — a business that the Chinese government has prioritised in recent years.
Indian motor company Mahindra, which has a long-standing Durban SKD assembly plant, is working with the Industrial Development Corporation on the feasibility of upgrading to CKD.
Unlike some OEMs, which would like SKD plants stripped of all APDP benefits, Moothilal says they have a role to play in developing the South African motor industry.
Rather than bet billions of rand on full-scale manufacture, investors can use SKD to test the market before upgrading to CKD. However, there must be a firm timeline. “Two or three years is plenty of leeway,” he says. In Thailand, companies that don’t upgrade in time or disinvest have to repay incentives.
Despite all the obstacles, Moothilal remains a cautious optimist. He says: “I’m still positive that in the long term there is no sector better ready to unlock the South African manufacturing sector.”
South African suppliers are globally competitive in terms of quality. The only thing holding them back is lack of scale, he says.
“We should not judge the industry’s progress only by the number of vehicles assembled or exported. The fundamental question is how much South African value is contained in those vehicles, how many competitive suppliers sit behind each assembly plant, how much technology and investment is being anchored locally, and how many sustainable manufacturing jobs the industry hosts.
“South Africa already has an industrial foundation. The need now is to deepen it, while positioning the supplier base for the technologies that will define the next generation of mobility.”
