Policy uncertainty and slow reform are placing South Africa’s automotive industry at risk, with long-term investment decisions increasingly under pressure, according to BMW South Africa CEO Peter van Binsbergen.
Speaking to Business Day on the sidelines of a BMW media engagement at the company’s headquarters in Midrand on Wednesday and after parliamentary briefings this week, Van Binsbergen said the automotive masterplan (SAAM 2035) was built on economic assumptions that have not materialised, while delayed policy adjustments are eroding investor confidence.
“When the master plan was created, we had very different assumptions for South Africa’s economy and trajectory ahead. So we expected a much stronger domestic market, which hasn’t come, as we expected it,” he said.
That the domestic market has not grown as projected has fundamentally changed the outlook for local production.
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South Africa aimed to significantly increase vehicle production, localisation and employment under SAAM 2035. Instead, locally produced vehicles now account for only about one in three cars sold domestically, down from two in three previously.
Van Binsbergen said this decline in local market share undermines economies of scale that are critical for sustaining manufacturing and supplier networks.
Volume and efficiency are the backbone of local production, he said. When imports replace locally produced vehicles, that scale is eroded and localisation becomes harder to justify.
You need the right policy, and you need policy certainty. At the moment, there is a lot of uncertainty, and that affects confidence.
— Peter van Binsbergen, BMW South Africa CEO
Policy certainty is essential for carmakers, which typically invest in cycles of seven to 14 years. Uncertainty around incentives, tariffs and the future regulatory framework made it increasingly difficult to justify fresh investment.
“You need the right policy, and you need policy certainty. At the moment, there is a lot of uncertainty, and that affects confidence,” he said.
While BMW has invested more than R17bn in its Rosslyn plant since the mid-1990s and recently committed R4.2bn to electrify the facility for plug-in hybrid production, Van Binsbergen warned that future investments across the sector would depend on whether South Africa could restore a compelling business case for manufacturing.
Slow reforms a key concern
A key concern for the industry is the slow pace of reform to the Automotive Production and Development Programme (APDP). Van Binsbergen said the current framework no longer sufficiently offsets the cost disadvantages of operating far from major global markets and dealing with local logistics constraints.
He also called for the closure of loopholes that allow semi-knockdown (SKD) assembly operations to avoid duties without creating meaningful manufacturing jobs.
Currently, BMW employs 95,500 people both directly and indirectly.
Van Binsbergen said the industry is not calling for punitive tariff hikes on imported vehicles but for a “fine-tuning” of policy levers to level the playing field and make local manufacturing more attractive. He warned that blunt instruments, such as sharply higher import duties, could have unintended consequences for affordability.
Transition to EVs faces hurdles
Another area of uncertainty is South Africa’s transition to new-energy vehicles (NEVs). Van Binsbergen said delays in finalising NEV policy are leaving manufacturers without clarity as they plan future model allocations, particularly given South Africa’s heavy reliance on exports to Europe.
“If Europe switches faster to electric vehicles and we export most of our cars there, then we have a problem. That makes planning very difficult.”
Despite the challenges, Van Binsbergen said it is “not too late” to correct course. South Africa needs to act with urgency to restore confidence, grow the domestic market and attract more manufacturers.
“We only have seven OEMs [original equipment manufacturers] producing in South Africa. We need more brands to come here, bring their suppliers, create jobs and restart the virtuous cycle of growth,” he said.
“The clock is ticking. Speed will determine whether the automotive master plan succeeds or fails.”
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