A brand-new Mercedes-Benz, straight off the production line, for under R200,000? Count me in. A small American or Japanese sedan for less than R20,000? I’ll take two. But be quick about it because the local manufacturers are all about to collapse or disinvest.
We’re undertaking a major clearout at home and I’ve just discovered a boxful of newspaper and magazine cuttings dating back to the mid-1980s, when I started writing about the South African motor industry. They make both encouraging and dispiriting reading: the former because the industry has developed so much over the years, and the latter because the same underlying battles are being fought over and over again. Only the battlefields are different.
In those early, protectionism-focused days of international sanctions, South Africa boasted some of the world’s heaviest cars — courtesy of a policy that rewarded manufacturers for the weight of local components. If the incentive to use an extra half-ton of South African-made steel was worth more than the additional cost of manufacture, why wouldn’t you?
So what if the vehicle was unwieldy? It’s not as if there was much competition. “New” car models were often a generation or two behind those on sale overseas. Imports were a rarity — hardly surprising, when duties on new cars could exceed 100%. Most multinational motor companies distanced themselves from South African firms building their brands. Those with South African holdings were urged to disinvest. Some did.
All this started to change with phase six of the local content programme, followed by the post-apartheid motor industry development programme (MIDP) of 1995, which made local content value, not weight, the determining factor for incentives. It also encouraged exports of vehicles and components, a strategy intensified in the 2013 automotive production and development programme (APDP) and its updated version, launched in 2021 and due to run to 2035.
It helped that, in the mid-1980s, a US dollar would cost you less than R2. On the downside, interest rates were in the high teens
As my long-lost cuttings box has shown me, the South African motor industry in 2023 has little in common with its forebear of nearly 40 years ago. Prices, for a start. The ones mentioned in the opening paragraph were real. Salaries may have been much lower, but cars were more affordable for the target market, which was predominantly white. Black customers were of more interest to used-car dealers.
It helped that, in the mid-1980s, a US dollar would cost you less than R2. On the downside, interest rates were in the high teens. I’ve no record of my first car but when I bought my house in 1985, the interest rate was 18.25%.
Unlike today, when motor companies press cost of ownership (including insurance, maintenance and fuel consumption) as the main determinant of motoring value, in the 1980s and 1990s it was all about purchase price. Can you imagine motor companies today undercutting one another by R5 — yes, five rand — on new cars? In 1996, when the Nissan-built Fiat Uno went on sale for R34,990, Ford responded by reducing the Ford Tracer and Mazda Midge to R34,985. And it worked — though it did little for profitability.
In those pre-export days, the country’s seven major manufacturers relied almost exclusively on local sales for their revenue — unlike today, when nearly two-thirds of total industry production is exported. Every price discount was a nail in profits.
Consequently, it was routinely argued that the market was too small for so many manufacturers — many of which produced a galaxy of models in small volumes. It did little for quality. Antiquated technology, manpower-intensive assembly lines and constant labour disputes were a recipe for lousy quality. “Friday” and “Monday” cars, when workers were impatient to leave for the weekend, or hungover after it, were a legitimate fear for vehicle buyers.
Peter Searle, who was MD of Volkswagen South Africa for 16 years, once admitted that sudden demand for extra production was a nightmare for quality.
It’s only since the MIDP that companies have transitioned to building fewer models in greater numbers — though even those numbers are mostly minuscule by global standards.
Still, that hasn’t stopped foreign companies from declaring their intention to invest in South African manufacture. They have included Peugeot, Geely, Hyundai, Chery, Honda, Volvo, Land Rover and Daihatsu. In many cases, these declarations were never serious, merely attempts to persuade local customers the brands were committed to the South Africna market. As a rule of thumb, the more vocal the protestations, the weaker the commitment.
As the post-apartheid market opened to competition, dozens of brands from around the world tried to muscle in. They included some that thought South African motorists were so desperate for personal transport that they would buy any rubbish.
In some cases they were right. Take Dacia. These days the Renault-owned Romanian brand makes thoroughly good vehicles. But have you ever wondered why some sold under the Dacia nameplate in Europe, like the Duster, are Renaults here? One reason is that when the Dacia brand was in South Africa in the late 20th century, before the Renault takeover, it was a byword for trash. For some South African motorists, the memory still lingers.
At least motor companies now speak with a (mostly) united voice. Their modus operandi used to be to publicly stab one another in the back
Some things don’t change. One of my earliest cuttings, from 1985, is about a policy dispute between vehicle manufacturers and the government. Every stage of automotive policy before and since has been coloured by an underlying layer of mistrust between the two sides. Sometimes, it has taken threats of disinvestment by multinationals to push the government into decision-making.
At least motor companies now speak with a (mostly) united voice. Their modus operandi used to be to publicly stab one another in the back. Companies would agree a joint industry policy position through Naamsa, then individually disagree with it as soon as it was presented to government officials, who suddenly found themselves facing eight very different proposals.
That unity is now evident in the industry’s latest policy dispute with the government, over the future of new-energy vehicles (NEV), mainly electric, in South Africa. Almost all vehicles built in South Africa use petrol and diesel internal combustion engines (ICE), but over half are exported to countries that will ban the sale of ICE vehicles in the next few years.
The government should have published an NEV policy white paper in October 2021 but now hopes to do so next month. With billions of dollars and euros of investment on the line, some industry officials say it may already be too late to save some of it and that the future of the local industry is at stake.
It’s not as if no-one saw the crisis coming. In February 2010, an FM cover story on the global shift towards electric vehicles quoted a senior government official promising that “South Africa has no intention of being left behind”. At the time, government departments were shareholders in a company developing South Africa’s own electric car, the Joule — proof, apparently, that South African technology and innovation were the equal of anything in the world.
The project went belly-up not long afterwards. That wasn’t the only miscalculation. Experts, both within and outside government, reckoned Eskom would have enough off-peak spare capacity to recharge 8-million electric cars. As we all now know, it doesn’t have enough to power an electric razor.
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