Unfair foreign competition from subsidised imports and low-cost vehicle assembly are threatening the viability of the SA motor industry, says Toyota SA Motors CEO Andrew Kirby.
Without changes to automotive policy, localisation and job creation will stall and multinational motor companies will find it harder to justify investment in SA.
Even though Mikel Mabasa, CEO of vehicle manufacturers and importers association Naamsa, says three Chinese motor companies have shown interest in building vehicles in SA, Kirby says deindustrialisation of the automotive sector — and indeed of the SA economy in general — shows little sign of slowing.
Kirby and Mabasa made their comments at a Toyota conference on Thursday.
Kirby pointed out that since 2021, when government introduced the latest automotive production and development programme (APDP), which is designed to double industry production and employment by 2035, the average value of local content in SA-made vehicles had declined from 42% to 38%.
Though introduced in 2021, the APDP was finalised in 2018. In the five years from then until 2023, the local market share of SA-made vehicles fell from 46% to 43%. Over the same period, imports from India increased their share by 73% and from China by an astonishing 645%. Together, the two countries’ share rose from 18% to 37%.
We are not on a level playing field. The Chinese government is directly supporting production of vehicles and parts.
— Andrew Kirby
Toyota SA Motors CEO
Kirby said 2024 calculations were not complete but, given the sales growth of some brands and the arrival of several others, it was clear the Chinese share had grown further.
However, he said: “We are not on a level playing field. The Chinese government is directly supporting production of vehicles and parts.” This allowed companies to price their vehicles very competitively in markets like SA. “Chinese exports are disrupting markets all over the world,” said Kirby.
He said SA motor companies were also disadvantaged by local regulations. The APDP is supposed to incentivise full-scale vehicle manufacture in SA.
Some foreign companies, however, had set up local subsidiaries to import boxed vehicle kits requiring only limited assembly, without the need for local components or significant job creation. Despite the limited advantages to the SA economy, companies using this route could reduce their duty on imported vehicles from 25% to 5%.
Kirby said: “The more competition the better but you have to do it in a balanced way.”
He also encouraged government to accelerate its support for the production of electric vehicles (EVs). Government originally said support would be limited to fully-electric, plug-in vehicles known as battery-electric vehicles (BEVs).
Late last year, though, President Cyril Ramaphosa said this could be extended to hybrid vehicles using a combination of electric and petrol/diesel power. He also said government would consider offering consumer incentives to accelerate local EV demand.
Generally, motor companies manufacture vehicles in countries where there is significant local demand. In SA, the current market for BEVs is tiny.
Greg Cress, automotive specialist at the Accenture business consultancy, said that without consumer incentives, it would take until at least 2032 for BEVs’ share of the SA new-vehicle market to reach the “secure” point of 5%. With incentives, it could happen by 2029. The motor industry needs it to happen as soon as possible.
Two-thirds of SA-made vehicles are exported, most to the UK and EU, where the sale of new petrol and diesel vehicles will be banned — in the UK from 2030 and the EU from 2035. While the SA industry will continue to manufacture petrol and diesel vehicles for other markets where EV adoption is less immediate, it needs to urgently accelerate the transition to EV production. Kirby said: “We have to be aggressive.”
Electric power is not the only change facing motor companies. They are also confronted by a fundamental switch in consumer preferences, said Kirby. Sports utility vehicles (SUVs) and crossovers (cars with increased ground clearance and usually bigger cabins) now account for more than 50% of SA new-car sales. Consumers like the sense of security and flexibility offered by these vehicles.
In 2018, customers had 114 SUV and crossover model ranges to choose from. Today, the number is 166.
Traditional sedans and hatchbacks are losing market share but the biggest casualties are premium cars. Their segment’s aggregate share of the car market is 5.8% — a figure that Mercedes-Benz and BMW used to boast individually.
Premium cars are the main victims of the general buying-down to smaller, cheaper cars. In 2024, despite price inflation, Kirby said the average new-car deal value actually fell by 2.27% from a year earlier. Reflecting consumer indebtedness and the general state of the economy, banks rejected more than half of vehicle credit applications.
Price, though, isn’t the only driver of market trends. Kirby said traditional interest in acceleration and styling was being overtaken by technology. Consumers want social media integration, voice/gesture control, personalised screens and all the other features that keep them permanently connected to the outside world and the cloud. All this is taking place in a struggling market.
In 2024, new-vehicle sales declined by 3% from a year earlier, from 531,775 to 515,712. The drop would have been about 1% but for a collapse in the minibus taxi market. Many banks withdrew credit facilities from the taxi industry after gangs posing as taxi owners took delivery of hundreds of vehicles, then stopped paying and disappeared with them.
Toyota supplies almost all SA’s minibus taxis. Sales of 14,000 in 2023 plunged to 6,000 last year. Monthly production collapsed from 1,400 to 300. This had since recovered to 600 but because of lingering mistrust, the number was unlikely to exceed 800 in the near future.
On Thursday, Kirby forecast a 3.7% improvement in the new-vehicle market this year, to 535,000. If he’s right, that would once again fall short of the pre-Covid 2019 market of 536,612.
Mabasa predicted a similar number though, like Kirby, he believed there was scope for improvement. Much depended on the scale of interest rate cuts this year.
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