On a sensible reading of multiple (often conflicting) data sources, South Africa’s vehicle and component manufacturing sector accounts for roughly a fifth of manufacturing output and about 5% of GDP, employing around 115,000 people. Grand ambitions abound. Yet a closer inspection under the bonnet reveals a stalled industry.
The sector’s governing vision, the South African Automotive Masterplan, promised a “globally competitive and transformed industry that actively contributes to the sustainable development of South Africa’s productive economy”. Targets included 1.4-million vehicles annually by 2035, 60% local content and 224,000 jobs.
On almost all counts, the programme is falling short. Production sits at around 600,000 units and local content has stagnated at between 38% and 42%, below even the interim 2025 target of 48.2%. Greg Maruszewski, a former MD of Volvo Cars South Africa, argues that the subsidy framework “appears primarily to reward foreign-owned vehicle producers rather than the domestic consumer”.
Globally competitive?
The industrial changes are on display during any drive in any South African town or city. Shopfitters are doing a roaring trade as old branding gives way to new. Between 2019 and 2024, Chinese-branded automakers grew their share from 2% to 9% of new light vehicle sales. If vehicles merely produced in China regardless of brand are included, the figure is higher still. BYD, which entered the South African market in 2023 with 13 outlets, hit its initial target of having about 35 dealerships in South Africa by the first quarter of 2026 and now aims to expand that network to between 60 and 70 by the end of the year.
African competition is also intensifying. Morocco overtook South Africa as the continent’s largest automaker in 2025. Of course, that country benefits from proximity to the EU. It has also fostered deep Renault and Stellantis integration. The kingdom laid the foundations for this success with its burgeoning Tanger Med port project and other logistics infrastructure.
To begin, much-vaunted fixes for congested ports need to take hold
Tit for tariff
Governments may reach for tariffs as the first line of defence for an industry ailing under global pressures. In South Africa, under the Automotive Production Development Programme, headline tariffs are 25% on vehicles and around 20% on components, partially offset by incentive schemes. Yet duties frequently raise costs for consumers without necessarily catalysing local supply chains.
Compounding the problem, trade policies that permit raw iron ore exports while allowing cheaper imported finished steel add to already heavy pressure on domestic smelting capacity. If local smelters fail, original equipment manufacturers (OEMs) will be pushed to import more steel — placing upward pressure on production costs and countering any benefits of tariff protection.
Restart your engines
This flooded engine can be restarted. To begin, much-vaunted fixes for congested ports need to take hold. No policy can overcome such fundamental fractures in supply chains.
Any strategy to rev up this industry must be anchored in real comparative advantage. South Africa has genuine strengths: platinum group metals critical to catalytic converters, an established light commercial vehicle export base and (at least for now) preferential market access under the African Growth & Opportunity Act and the EU-SADC Economic Partnership Agreement. Strategy should build from these assets, not from production volume targets. As Turkish American economist Dani Rodrik has argued, effective industrial policy identifies and amplifies existing productive capabilities rather than willing new ones into existence through subsidy.
A healthy industry also needs tariff coherence. The current structure taxes imported finished vehicles while punishing the upstream steel inputs that OEMs depend on. A supply chain audit — from raw minerals through steel to components — should identify these crossed purposes.
Policymakers will also do well to resist the protectionist temptation. Chinese automakers are highly efficient, injecting downward price pressure from their cut-throat home market onto global competitors, giving local consumers more choice. Local industry should synergise with overseas brands. Chinese OEMs bring capital, technology and global supply chain connections.
Thailand’s transformation into a substantial automotive exporter was built on this thinking. In its case, forces were combined chiefly with Japanese OEMs in the 1990s. It may be tempting to protect a local industry. But sometimes this protection doesn’t achieve its goal and has a damaging impact on the macroeconomy.
This speaks to a universal principle. Governments should treat affordability as an industrial policy goal. South Korean economist Ha-Joon Chang has argued that industrial policy should ultimately serve rising living standards, not particular groups. A more affordable domestic vehicle market expands car ownership and helps generate the scale that genuine competitiveness requires.
The Centre of African Management & Markets at Gibs conducts academic and practitioner research and provides strategic insight on African markets. Macleod is a founding member
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