Motor companies are pressing the government to increase the duty on imported new cars and bakkies from 25% to 30%.
Industry sources said they were also asking for changes to the Automotive Production and Development Programme (APDP) so they can use incentive payments to reduce their own prices.
The motor industry said it needed urgent action to protect it from the flood of imports, which account for 64% of SA new-vehicle sales.
The biggest increase is from China, where, analysts said, government subsidies allow vehicles to be manufactured 20%-30% cheaper than anywhere else.
The industry argues that without additional support its long-term survival is in doubt.
APDP production, employment, localisation and transformation targets are years behind schedule and probably unachievable. As it stands, insiders said, it lacks the required volume scale for long-term sustainability.
APDP production, employment, localisation and transformation targets are years behind schedule and probably unachievable. As it stands, insiders said, it lacks the required volume scale for long-term sustainability.
BMW SA CEO Peter van Binsbergen was one of several people to tell a motor industry conference this week that lack of decisive policy action could see it fail.
Mercedes-Benz SA has already reduced production volumes and there are questions about the continued local presence of Nissan SA.
Overall decline
While domestic new-vehicle sales in 2025 are likely to finally return to pre-Covid levels, this cannot disguise that the market has been in overall decline for many years. Industry-wide production is operating at less than 75% of capacity, propped up by export demand, which accounts for two-thirds of production.
Most vehicles built in SA are powered by the petrol and diesel internal combustion engine (ICE) but most export markets are demanding a switch to electric vehicles (EV) in the next decade.
More immediately, the US imposition of 30% tariffs on imported goods from SA has brought vehicle exports there to a virtual halt..
Toyota SA Motors CEO Andrew Kirby on Thursday told the conference, organised by the National Association of Automotive Component and Allied Manufacturers (Naacam), that SA could no longer allow its manufacturing base to diminish. The industry is a mainstay of the country’s overall manufacturing infrastructure, responsible for 22.6% of manufacturing output.
While China is the fastest-growing contributor to SA imports, the main source is India.
Many of these vehicles are brought in by SA manufacturers to supplement the limited range of products they build here.
A growing proportion of Toyotas and Volkswagens on SA roads, for example, come from India.
These vehicles would also be subject to the 30% increased import duty. APDP incentives however, can reduce this to zero. Local manufacturers earn incentives based on the volume and value of local production.
Their value is translated into import duty credits, allowing companies to reduce their duty liability. The more vehicles they build, the greater the value of the credits they earn.
Several of SA’s seven major manufacturers produce more than enough vehicles to cancel out their duties: they import all their vehicles duty free. The trouble is there is little they can do with excess duty credits, which in some cases run into billions of rand.
One of the few things they can do is sell these credits on the open market at a discount to independent importers, which can use them to reduce their own prices. In other words, local manufacturers help import competitors to undercut their prices.
A number of importers have said these credits are a core part of their pricing strategy.
Manufacturers have asked trade, industry & competition minister Parks Tau to adjust APDP rules so their excess credits can be absorbed directly into their business operations, thereby reducing overall costs and pricing pressures.
One suggestion is that some of the excess could directly reduce prices, by cancelling out ad valorem taxes. Ad valorem is among several taxes, which account for more than 40% of the price of new vehicles sold in SA.
Under the APDP, SA vehicle production is supposed to hit 1.2-million by 2035. This year, however, it will be lucky to reach 600,000. The growing number of imports will make any growth problematic.
Van Binsbergen said manufacturers alone would not achieve necessary production growth and SA had to find more manufacturers to invest.
American industry analyst Michael Dunne cast doubts on claims that three Chinese manufacturers are interested in doing so.
He told the conference that China’s priority is to export vehicles, not build them elsewhere. It has said it plans to export 6.2-million in 2025 alone.
Dunne pointed out that China had unused annual manufacturing capacity for almost 15-million vehicles.
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