A perfect storm of inflationary pressures, slow wage growth, and a dwindling middle class, has left manufacturers of high-end vehicles in South Africa vulnerable to cheaper and improving cars from China.
This is according to South African auto sector experts, who have called for government intervention and a deepening of investment in electric vehicle production capacity to assist South African-based manufacturers.
Automotive Business Council (Naamsa) chief policy officer Tshetlhe Litheko said the country continued to face an “affordability crisis” with rising prices, a shrinking middle class and stagnant wages.
“The affordability and inflationary environment is a factor. Since Covid, the world has been fighting the inflation crisis. The challenge was artificially managed in China and in Germany. China created a market where their cars are slightly cheaper than anywhere else in the world,” said Litheko.
According to Naamsa, South Africa’s total domestic vehicle sales for the year ended in October reached 425,806, 4.65% down from 446,587 in the same period last year. Total exports over the same period fell 23.14% from 329,864 in 2023 to 253,535 this year.
Domestic vehicle production for the year ended in September fell 17% from 460,387 in 2023 to 381,910 this year. Total imports for the same period fell 1.66% from 229,980 in 2023 to 226,165 this year.
Of the top five manufacturers of passenger and light-commercial vehicles, Toyota produced 11,562 vehicles for the local market and 4,824 for export. Volkswagen produced 6,272 for the local market and 2,015 for export. Mercedes Benz produced 407 for the local market and 7,700 for export. Ford produced 2,956 for the local market and 4,477 for export. Suzuki produced 6,006 vehicles for the local market and 15 for export.
Between October last year and September this year, South Africa exported 240,141 vehicles to Europe, 31,601 to North America, 27,900 to Asia, 24,567 to the rest of Africa, 11,887 to Australasia, and a combined 4,493 to Central and South America.
Challenging legacy brands
At home and around the world, Chinese carmakers have been challenging legacy brands, not only in the entry-level market but even high-end brands such as Land Rover, against which they are pitting the YangWang U8, with BYD taking on BMW, and the Nio versus Mercedes Benz. They are even going after ultra-luxurious brands such as Rolls Royce with their Hongqi L5.
Compounding the challenge, Litheko said, was the fact that Chinese vehicles have improved vastly in quality and design, and can compete with some established brands in the high-level vehicle brackets, while selling at the price point of lower-level vehicles. “When credit becomes readily available it’s going to become a challenge because their cars are not bad cars, and consumers will start to think maybe shelling out a few extra thousand for a make from one of the established brands is not necessarily worth it,” he said.
According to Naamsa, in the category of entry-level to mid-range vehicles, the VW Polo Vivo was top in sales with 35,934 units sold between 2023 and 2024 — but Chinese competitors, Chery Pro7 and Haval H6, are gaining momentum in this price range.
“Let’s take the [BYD] Seal, which is our first appreciation of an electric car, and the closest we will get to Tesla. That car is a top-range BEV [battery electric vehicle]. If you compare it to the [BMW] iX, (which) comes in at R1.7m-R1.6m and the EQE Mercedes at R2.2m, the Seal comes in at R1m. That is an incredible price difference between the two. The government will still get their tax and consumers still get good vehicles,” said Litheko.
South Africa can accelerate the adoption of electric and hybrid vehicles, he said, to achieve price parity with Chinese imports by leveraging vehicle export rebates to offset the duty of imports, and using revenue from those mechanisms to support the local sector.
Chery South Africa GM Jay Jay Botes said the company reported record-breaking October sales of 1,831 vehicles, a 33.7% increase compared to 2023. It ranks in the top 10 among all new vehicle sales as the fifth best-performing original equipment manufacturer (OEM) in the passenger car market.
“Chery SA’s sales performance reflects the strong market demand for our versatile SUV line-up. With consistent growth across key model lines and strategic expansions, such as our entry into the LCV segment, we’re well-positioned to meet the evolving needs of SA consumers,” said Botes.
National Automobile Dealers’ Association chair Brandon Cohen said the premium market is likely to present more challenges for Chinese brands to penetrate to the same extent as they have in the entry-level and volume brand sectors.
He said most buyers were purchasing vehicles in the sub-R300,000 range, where Chinese brands offer strong perceived value at an accessible price point, while consumers were still grappling with years of high inflation, interest rates and fuel costs. “It will likely be some time before the market fully rebounds and grows. During this period, we expect to see many new entrants from China, and potentially India as well, which will impact market share,” said Cohen.
Mercedes-Benz South Africa GM of corporate affairs Thato Mntambo said its local operations were continuing as normal, and Mercedes Benz remained agile in adjusting and adapting in response to the evolving demands of customers.
BMW Group South Africa head of communications Angela Konert said the group would leverage productive exclusivity at its Rosslyn Plant, exclusively producing the new BMW X3 for global markets, reflecting its strategic importance within the group’s production network.
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