Relying solely on tariffs to stem the flow of cheap Chinese car imports would deprive South Africa of the competition it needs to develop a truly competitive automotive sector at home, said FNB and WesBank senior economist Thanda Sithole.
In a recent note, Sithole joined a growing chorus of criticism against the government’s proposed tariff on Chinese vehicle imports, arguing that they are a “Band-Aid” solution to a deeper deindustrialisation crisis.
“Import duties are a blunt instrument, and blunt instruments often create as many problems as they solve,” said Sithole.
The comments come as the South African government is weighing up steep tariffs — possibly as high as 50% — on Chinese car imports as it moves to protect the local vehicle industry.
Central to the discussion has been the ballooning trade deficit between South Africa and its Brics partners, and the stagnation of local car production and car component manufacturing.
A near five-fold increase in Chinese imports since 2020 has contributed to 13 company closures and more than 4,000 job losses in the local sector over the past three years. Against this backdrop, trade, industry and competition deputy minister Zuko Godlimpi said in January that antidumping duties were almost inevitable given the industry’s dire straits.
According to Sithole, however, tariffs risk covering up deeper inefficiencies in South Africa’s car industry, delaying the progress the sector needs. He called for a broader regulatory overhaul to intervene in the structural constraints.
Car-buying landscape
At the heart of South Africa’s lack of competitiveness in automotives are structural constraints, including:
- logistics inefficiencies;
- port bottlenecks;
- electricity supplies; and
- administrative costs.
“A more credible policy approach would be one that preserves the consumer benefits of competition while strengthening the domestic industry’s ability to compete,” he said.
“That includes reassessing whether existing industrial support frameworks remain fit for purpose, deepening localisation where economically viable, improving infrastructure and logistics performance, and ensuring the domestic sector is positioned for future product and technology shifts, including the gradual transition in vehicle platforms and propulsion systems.”
Import duties would also raise costs for consumers of Chinese cars, most of whom already face financial strain.
There is a reason Chinese brands have exploded in popularity in recent years, with recent industry data suggesting that Chinese brands accounted for more than 9% of total new passenger vehicle sales in 2024. Chery’s year-on-year sales growth alone breached 80% at some points in 2023 and 2024.
Brands such as Chery, Haval and BAIC have offered lower- to middle-income earners a more affordable and reliable alternative to traditional second-hand cars, completely reshaping the car-buying landscape, said Sithole.
Business Day
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