SA is considering expanding its flagship vehicle industry incentive scheme to shield the nearly R500bn backbone of the nation’s manufacturing sector from the fallout of US tariffs.
“What we’re currently considering is the possibility of expanding the automotive production programme to mitigate impact on the industry. Of course, we have to be cognisant of the impact on our fiscus,” trade, industry & competition minister Parks Tau said on radio station Power 98.7.
The automotive production and development programme, which has been instrumental in driving nearly R80bn in investment since 2011, offers manufacturers incentives to support production and localisation.
The government has doled out more than R20bn over the same period in incentives such as tax breaks to underpin the commercial logic of car factories for industry giants such Volkswagen, BMW, Toyota and Ford.
But the industrial merits of some of the factories were thrown into doubt last week after US President Donald Trump unleashed a volley of tariffs for all countries, including rates as high as 31% for imports ranging from vehicles to agricultural produce shipped from SA.
His administration justifies the new tariff rate with calculations suggesting SA imposes an effective 60% duty on American goods — maths Pretoria argues is wrong, saying its average tariff is 7.6%.
Tau did not go into detail on the support measures, saying his department is in the middle of modelling potential support packages for the sector and other industries to mitigate the fallout of the tariffs.
“When we look at the tariffs, you have to take into account where the bulk of your market is. Of course, we sell into the US, but they don’t constitute the bulk of where we’re selling our products to,” said Tau, who has been on the job for less than a year after making it into the executive July last year.
“We’re currently modelling what the potential package could be for the industry and also for other sectors so that we can buffer the impact on respective industries within the means of the country.”
The US was a destination for R35bn worth of vehicles in 2024, making it the sector’s third-largest export market. Until now, SA vehicles had entered the US duty-free under the African Growth & Opportunity Act.
The abrupt removal of these trade benefits has unsettled manufacturers and raised concern about the economic viability of local plants geared towards exports.
The sector accounts for more than 5% of SA’s R9-trillion GDP, employing 120,000 people and indirectly supporting tens of thousands more. It accounts for more than a fifth of SA manufacturing output.
Mike Mabasa, CEO of vehicle industry body group Naamsa, has warned that the costs associated with the tariffs cannot be absorbed by the manufacturers without harming competitiveness. Mabasa and his team plan to advocate for SA’s position in upcoming US trade discussions.
The Eastern Cape, home to automotive hubs such as Gqeberha, could face widespread economic disruption if production slows. The region relies on makers such as Volkswagen and Isuzu. BMW’s Rosslyn plant in Tshwane was partly designed to produce US-bound X3 models.
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