INDUSTRIALISATION: Long battle for SA carmakers to reach top of the pile again

Local car manufacturers like Ford have been raising legitimate concerns over the disruptive surge of aggressively priced Chinese imports. They argue that Chinese brands benefit from massive subsidies that depress the cost of capital, materials and energy in their home market, allowing them to execute aggressive global pricing strategies, while manufacturers in South Africa must absorb the cascading costs of failing infrastructure.The legacy guys have a point. Chery expanded its footprint to claim Nissan’s old factory in Rosslyn, Pretoria West, promising just enough local content (40%) to benefit from both Chinese and South African tax incentives. GWM, in turn, has negotiated a historic co-manufacturing agreement with Mercedes-Benz to use excess capacity at its East London plant. GWM will be able to bypass the steep 50,000-unit volume threshold required to access solo manufacturing incentives under the Automotive Production and Development Programme (APDP2) and speed up its already rapid market penetration.Esther Buthelezi, Ford’s executive director of government affairs and transformation in southern Africa, said she understands that the government is driving investment, “but this must not be done at the expense of securing the investments that have already been made, or we face the very real risk of a leaky bucket”.She also called for a fairer regulatory environment to close the gap between domestic manufacturers and pure traders: “We are actively engaged in discussions around this, including the future structures of programmes like the APDP2 and a more balanced and equal playing field that addresses the gap between companies that make cars here or those who simply import them.”View from the glass houseButhelezi’s critique sounds a bit rich coming from a manufacturer like Ford, which operates in a protected, state-supported environment. Ford’s R15.8-billion investment was secured through a massive state intervention: the Tshwane Automotive Special Economic Zone.She admits that the zone transformed the Silverton area into a “plug-and-play automotive city”. It physically consolidates the supply chain by housing tier 1 and tier 2 suppliers directly adjacent to Ford’s assembly plant in Silverton, Pretoria East, which she explains has “drastically reduced logistics costs, minimised transit delays and enabled Ford to scale its annual production capacity to 200,000 units”.Illustrative image: Nissan’s Rosslyn plant in Pretoria (Photo: Nissan Global) | Chery Tiggo (Source: chery.co.za) | Lepas L8 (Source: lepasinternational.com) | Omoda C5 (Source: omoda.co.za) | Jetour Dashing (Source: jetour.co.za) | Jaecoo J7 (Source: jaecoo.co.za) | Exeed RX (Source: exeedinternational.com) The zone has attracted substantial private supplier investment, created more than 3,400 permanent manufacturing jobs and directed R1.7-billion in procurement to local SMEs. But it is a microeconomic intervention that merely insulates Ford from South Africa’s systemic infrastructural failures. The tax breaks, stable municipal power and sequencing yards do not give Ford an unfair global advantage; they simply restore its operational baseline to a level of global competitiveness by offsetting domestic inefficiencies.The zone does not neutralise the macro-geopolitical advantages of national-level subsidies enjoyed by Chinese brands or close the structural APDP loopholes. So, Ford’s warning that SA is competing in a zero-sum game for global capital allocation is justified.A former championThe South African automotive manufacturing sector remains a vital cornerstone of the economy, contributing 5.2% to GDP (3.3% from manufacturing and 1.9% from retail), accounting for 23.8% of domestic manufacturing output and supporting about 113,000 to 115,000 direct manufacturing jobs. In 2025, vehicle and component exports hit a record R291-billion (representing 15.6% of South Africa’s total exports). Domestic production increased marginally – 2.9% – to 618,077 units. Despite these record export figures, the industry is at a critical crossroads and faces severe, systemic deindustrialisation.Under the South African Automotive Masterplan (SAAM 2035), the industry set ambitious targets to double value-chain employment to 224,000 jobs, increase vehicle production to 1.4 million units (1% of global output) and raise local content to 60%. But employment has stagnated, production is far below the required trajectory and average local content has regressed to 39%.The National Union of Metalworkers of South Africa (Numsa) has raised the alarm over a “job loss bloodbath” in the sector. To ­salvage the industry, it has proposed highly interventionist measures:1. Strict import quotas and higher tariffs: Forcing foreign brands that sell vehicles in South Africa to establish local assembly plants and raise import duties.2. APDP2 restructuring: Condition and lock all state incentives directly to achieving the 60% localisation target.3. Procurement enforcement: Immediate implementation of public regulations under the Public Procurement Act to mandate local vehicle purchases for state fleets.4. Retrenchment moratorium and subsidies: A formal moratorium on retrenchments, coupled with training lay-off schemes that provide monthly stipends of R30,000 per worker, funded through Sector Education and Training Authorities and the Unemployment Insurance Fund.Irvin Jim, general secretary of Numsa, addresses members of the union during a conference at the Cape Town International Convention Centre on 27 July 2022. (Photo: Xabiso Mkhabela) Numsa general secretary Irvin Jim’s assertion that a 5% increase in localisation would inject more than R30-billion into the domestic component value chain has been widely parroted, but its rhetoric around the import surge contains a glaring factual fallacy. A study of import data reveals that India has been a dominant source of imported vehicles for South Africa for over a decade, specialising in popular, entry-level vehicles such as the Toyotas, Suzukis and Volkswagens that dominate local sales.By the end of 2024, India accounted for 57% of South Africa’s imported passenger cars and light commercial vehicles, with China following at 17%. Numsa general secretary Irvin Jim’s claim that Indian imports were “less than 1% in 2018” is a severe understatement of historical trade realities, showing a failure to distinguish between the recent rapid rise of Chinese brands and the long-standing, structural dominance of Indian manufacturing imports in the lower-end domestic market.Another shot at the titleMorocco displaced South Africa at the top of the African Development Bank’s Africa Industrialisation Index in 2025. It produced about 1,000,000 vehicles in 2025, compared with South Africa’s output of roughly 597,000 units. Its advantage? Morocco sits on the doorstep of Europe and holds free trade agreements with both the EU and the US.As the West imposes massive protectionist tariffs on Chinese electric vehicles – the EU slapped duties of up to 45% and the US implemented 100% tariffs – Morocco remains exempt. Chinese manufacturers are relocating their industrial footprint to Morocco to bypass these tariffs, using it as a zero-duty gateway to Europe.South Africa is swinging back with the launch of the Industrial Development Strategy 2026, explicitly reorienting industrial policy around decarbonisation, diversification and digitalisation. The Department of Trade, Industry and Competition is reforming the APDP2 to shift duty credits to reward manufacturing over assembly. It is also reviewing ad valorem taxes on vehicles to heavily favour domestic completely-­knocked-down production over cheap semi-knocked-down imports.But the saving grace may be the African Continental Free Trade Agreement. By partnering with the African Association of Automotive Manufacturers, South Africa championed the rules of origin approved in February 2026. This milestone establishes that vehicles traded duty-free across Africa must contain at least 40% regional content. This framework allows South African original equipment manufacturers to aggregate demand across the continent, helping them bypass the domestic volume bottleneck.The road back to the top will be hard, but somehow local carmakers have to find a way to coexist with new market entrants and make South Africa the factory of choice for the continent. DMThis story first appeared in our weekly DM168 newspaper, available countrywide for R35.