Will he or won’t he? The South African motor industry was this week still waiting to learn the potential effects of US President Donald Trump’s global automotive trade war. With more than 10% of South Africa’s automotive exports going to the US, the industry is at considerable risk.
Trapped between a struggling domestic market, uncertain export demand, dramatic (and enormously costly) technology changes and an often hostile local policy environment, the industry can ill afford to lose its preferential access to such an important trade partner.
Last week, Trump declared that the US would impose a 25% tariff on imported cars and components from this week. Like most of his pronouncements, it was designed for impact and was short on detail. At time of writing on Tuesday, it was still not clear if the decision would override the African Growth & Opportunity Act (Agoa), which allows certain goods produced in Africa, including South African automotive products, to enter the US duty-free.
Minister of trade, industry & competition Parks Tau fears the worst, but the government is waiting for confirmation.
“It is expected that the tariffs on automobiles and automobile parts will also apply to imports of these products from Agoa beneficiary countries, including South Africa,” Tau says. He adds that the car tariffs are due for implementation this week and the components tariffs early next month.
Mikel Mabasa, CEO of the vehicle manufacturers and importers association Naamsa, said on Tuesday that the future status of the Agoa benefits is still unclear but “we should have a better understanding before the end of the week”.
Renai Moothilal, CEO of the National Association of Automotive Component & Allied Manufacturers, says that even if the Agoa advantage is withdrawn, some South African exporters of components are likely to get a temporary respite. US customers may need several months to find alternative, domestic suppliers for parts — some of them for electric vehicles (EVs) — that they import from South Africa.
I think some contracts may be honoured in the short term while American companies tool up
— Renai Moothilal
“It takes time to get alternative manufacturing in place,” Moothilal says. “I think some contracts may be honoured in the short term while American companies tool up.”
Nevertheless, there is no hiding the dangers. Two-thirds of vehicles made in South Africa are exported to more than 100 countries and territories. Most, though, go to a handful of major markets: the UK, EU, US and Japan. In many cases, they are facilitated by trade deals that allow goods to land duty-free.
These are among the incentives for multinational motor companies to invest in South Africa. Any sign that duty-free benefits are in danger will cause nervous twitches in overseas boardrooms — the last thing South Africa needs when its halfhearted EV incentive policy is already giving some investors pause and leading to predictions of reduced foreign auto investment.
The country’s crumbling transport infrastructure — ports, railways and roads — and its unreliable electricity provision are also causing companies to question their level of commitment.
Then there’s the government’s flagship automotive production and development programme, which some local vehicle manufacturers say provides importers with competitive advantages. They want the programme adjusted to protect manufacturing investment.
None of this matters much to Trump. He is more interested in what he considers best for the US. He hopes his “America first” strategy will encourage US and foreign automakers to invest more in US plants. He has expressed frustration that the US has a yawning automotive trade deficit with many countries.
In theory, that could work in South Africa’s favour, which is marginally the junior trade partner between the two — though this is unlikely to outweigh Trump’s personal antipathy towards the ANC.
In 2023, the last year for which complete figures are available, R27.9bn of automotive goods were shipped from South Africa to the US (up from R24.1bn the previous year), compared with shipments worth R28.8bn in the opposite direction — a R900m advantage to the US.
Combined, the two-way trade total of R56.7bn made the US South Africa’s second-biggest automotive trade partner. Germany, represented in South Africa by Volkswagen, BMW and Mercedes-Benz, was the runaway leader with R161.1bn; South Africa exported R83.1bn and imported R78bn.
According to Naamsa’s 2024 Automotive Trade Manual, South Africa’s global automotive exports in 2023 were worth R270.9bn, against imports of R249.7bn.
Agoa makes our product cost-effective in the US. We can’t make up the 20% volume loss elsewhere
— Peter van Binsbergen
In value terms, cars accounted for R20bn of the exports to the US, and components the rest. Of the latter, catalytic converters, which clean petrol and diesel exhaust emissions, accounted for R4.1bn, followed by engine parts (R1.3bn) and tyres (R594m). In the other direction, components accounted for R11.8bn of shipments, cars for R3.1bn and engine parts for R799m.
The value of component exports to the US was lower than in 2022, when they were worth R8.8bn. Volumes of vehicle exports to the US were also down in 2023 at 19,590, against 20,566 units in 2022. But both years were well ahead of the figures for 2020 (8,584) and 2021 (6,821).
The US is a major market for BMW South Africa and the X3 range it launched late last year. The company’s assembly plant in Rosslyn, Tshwane, is the only one in the world to make plug-in hybrid versions, alongside petrol and diesel models. The plant has an annual production capacity of about 77,000, which it will approach this year. CEO Peter van Binsbergen expects to produce up to 75,000 cars, of which about 20% — or 15,000 — will go to the US.
“Agoa makes our product cost-effective in the US,” he says. If BMW South Africa were to lose that market, “we can’t make up the 20% volume loss elsewhere”. Mercedes-Benz South Africa is among other companies exporting to the US, though CEO Andreas Brand says its exposure to that market, through the C-Class range, is much lower than it used to be.
A few weeks ago, when Trump’s anti-South Africa rhetoric first suggested that exclusion from Agoa might be on the cards, Van Binsbergen observed: “A lot of what Trump says is sabre-rattling to put fear into his opponents to get results. It’s talk.”
A lot of countries hope that is the case — not least Canada and Mexico, whose motor industries are closely intertwined with that of their neighbour, through the US-Mexico-Canada Agreement. The Automotive Trade Manual says the agreement, which came into force in July 2020, “is regarded as the most comprehensive and highest-standard trade agreement ever negotiated”.
Trump, who says he wants to annex Canada and do more to keep Mexican immigrants out of the US, does not agree. He resents the fact that motor companies, particularly US ones, have investments in those countries and wants these — and the jobs they create — to be relocated to the US. The only concession for Canada and Mexico is that their car parts are initially excluded from the 25% import penalty.
China, the EU, Japan, Thailand and anyone else with motor industries selling to the US are also in Trump’s sights.
Driving his agenda is the fact that last year the US imported about 8-million cars worth some $240bn, representing half of all cars sold in the US. Mexico is the top foreign supplier, followed by South Korea, Japan, Canada and Germany. Many of these imports are US brands, built overseas to take advantage of lower production costs.
By forcing US and foreign companies to manufacture in the US, Trump argues he can create hundreds of thousands of jobs and reindustrialise the economy. It’s no accident that he declared April 2 — when some tariffs were to come into effect — “liberation day”.
South Africa, notwithstanding Trump’s personal distaste for it, is collateral damage in a wider trade war.
Naamsa, in its trade manual, describes Agoa as “the bedrock of trade relations between the US and Sub-Saharan Africa”. However, it adds that in view of the global shift towards zero-emission vehicles, an overhaul of US economic policy towards the region is needed.
South Africa and its neighbours, it says, are home to “rich mineral resources” used in the manufacture of lithium batteries. China is the dominant partner in several African countries, exporting raw minerals for processing overseas. South African government officials say these minerals should be beneficiated locally and have suggested that the US might like to be a partner in this.
But Trump’s behaviour towards other countries, notably Ukraine, where he is demanding US access to its minerals, suggests he is not the “partnership” type.
His 25% tariff plans have drawn widespread condemnation from other countries and mixed reaction in the US. Critics say the tariffs will push up prices for US consumers, create shortages of many models and force vehicle assembly plants to suspend or reduce production because of component shortages.
In the short to medium term, say some, these actions will hurt the working-class Americans that Trump says he is trying to help.
Will this deter him? When it was pointed out this week that almost all low-cost cars sold in the US are made in other countries, and that poorer Americans would be worst hit, Trump said he “couldn’t care less” if carmakers raise prices.
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