The government is almost ready to introduce changes to motor industry policy that will help the industry survive a “defining moment” in its existence, trade, industry & competition minister Parks Tau said on Wednesday.
The changes relate primarily to the local manufacture of electric vehicles (EVs) and their components. At this stage, they do not include duties on imported new vehicles, despite a rapidly growing view that their increasing dominance of the SA market threatens the local industry’s survival.
Speaking at the Gqeberha conference of the National Association of Automotive Component and Allied Manufacturers (Naacam), Tau referred only in passing to US import tariffs, which are costing the industry revenue and jobs, but said “urgent collaboration” was needed to protect the industry from multiple challenges.
Besides US tariffs and the local flood of imports, these include slowness in following the global transition to EVs, European carbon-tax penalties on imported automotive and other goods, a shrinking SA market, government’s failure to provide adequate rail and ports infrastructure, and an existing automotive policy that has failed to meet almost all its targets so far. Job creation, localisation, production and transformation are all well short of forecasts.
As an industry that contributes 5.2% to GDP and 22.6% of total SA industrial output, provides 115,000 jobs directly in vehicle and components manufacture and another 500,000 economywide, Tau said it was vital to protect its future.
BMW SA CEO Peter van Binsbergen told the conference that unless issues were addressed seriously and comprehensively, SA’s motor industry could go the same way as Australia’s, which collapsed a few years ago.
In the past two years alone, said Tau, 12 SA components companies had gone out of business and 4,000 jobs had been lost.
Employment & labour minister Nomakhosazana Meth told the conference that the potential end to local long-steel production by ArcelorMittal SA could also cost the industry dearly.
“If these closures proceed, we are looking at the loss of more than 3,500 direct jobs in the steel sector, with ripple effects across the automotive supply chain that could easily push total job losses above 13,000 in the short term,” Meth said.
“The cost of replacing this local supply with imports would be up to 25% higher, threatening local content requirements under the Automotive Production and Development Programme (APDP) and risking noncompliance with rules of origin in our trade agreements.”
The industry has been pressing government for years to introduce incentives for the local manufacture and sale of EVs. Tau said it was now on the point of doing so.
The 2021-35 APDP was designed with petrol and diesel internal combustion engines (ICE) mainly in mind.
The policy’s legislative framework has now been amended to include EVs and their components, which will benefit from investment incentives. In addition, a 150% capital allowance for investments in EV and hydrogen vehicle production will apply to buildings, plant and equipment brought into use between March 1 2026 and March 1 2036.
Tau said his department was also working with the department of mineral & petroleum resources to develop a strategy for the EV battery value chain, including minerals beneficiation, and was finalising curriculums and certification programmes to develop EV workplace skills.
A pilot programme for 100 students is due to start early next year.
Tau was one of several speakers to raise the issue of imported new vehicles. He said their 64% share of the market undermined production by local vehicle manufacturers.
A similar percentage of SA-made vehicles is exported, mainly to Europe, but speakers pointed out that export numbers alone don’t make local production viable. Most imports are from India, but Chinese brands are now making a concerted export assault on the SA market.
Michael Dunne, a motor industry analyst who spent more than 20 years in China, said Chinese government subsidies allowed carmakers there to produce vehicles 20%-30% cheaper than competitors. In SA, as elsewhere, this advantage allowed them to undercut prices of established brands.
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