As the world races toward electrification and digital disruption, South Africa’s vehicle sector teeters on the edge of reinvention or irrelevance.
The Automotive Production & Development Programme (APDP), once hailed as a blueprint for emerging-market industrial policy, has delivered R76bn in investments since 2013, bolstered seven original equipment manufacturers (OEMs), empowered more than 500 suppliers, and propelled exports to 155 countries.
Yet with manufacturing’s GDP share eroding, localisation stagnating and new energy vehicle (NEV) adoption trailing global pacesetters, the APDP’s incentives must urgently evolve.
This isn’t mere policy tinkering; it’s a strategic imperative for boardrooms and policymakers alike. In a landscape reshaped by software-defined vehicles, circular economies and stringent environmental, social & governance (ESG) mandates, South Africa risks de-industrialisation of its vehicle sector, like Australia, unless incentives pivot to foster competitiveness, localisation and a seamless NEV transition.
Drawing lessons from the APDP’s journey and global exemplars, the sector can unlock inclusive growth, but only through bold, integrated reforms. The APDP’s track record offers valuable insights, tempered by hard realities. Its progression from volume-driven subsidies to value addition — via APDP2 and the Automotive Investment Scheme (AIS) — has championed transformation, spatial equity and job creation beyond metros.
The South African Automotive Masterplan 2035 underscores government resolve, yet administrative complexities and rigid processes have bred frustration. Industry voices at forums such as the Naacam 2025 Show and South African Auto Week 2025 decry “analysis paralysis”, in which logistics chokepoints, soaring energy costs and policy silos stifle agility.
The South African Automotive Masterplan 2035 underscores government resolve, yet administrative complexities and rigid processes have bred frustration.
Global best practices illuminate the path forward. The US Inflation Reduction Act’s tax credits for electric vehicle (EV) production and batteries, Europe’s emissions mandates paired with subsidies, and China’s ecosystem-wide incentives have turbocharged NEV localisation.
South Africa’s APDP2 matches in ambition but falters in execution: NEV support remains fragmented, hybrids are sidelined from tax breaks and consumer incentives are nonexistent. Without bridging these gaps, the sector courts export market erosion and talent flight.
Enter the African Continental Free Trade Area (AfCFTA), a potent multiplier for regional value chains that could amplify APDP incentives.
Africa’s vehicle demand is uncertain but was recently estimated at more than 5-million cars and 300,000 commercial vehicles yearly. The continent remains import dependent at more than 4-million, mainly secondhand vehicles from the East. South Africa and Morocco dominate exports, and Egypt could be a serious contender.
AfCFTA’s tariff reductions, harmonised standards and nascent Auto Pact promise scale, aggregating demand to viably localise assembly and components such as batteries or wiring harnesses using Africa’s critical minerals as a competitive advantage.
South Africa, with its OEM stronghold, can lead by exporting components to hubs in Nigeria, Kenya or Egypt, fostering specialisation based on comparative advantages. Yet barriers loom — infrastructure deficits, regulatory fragmentation and skills shortages. Incentives must integrate AfCFTA levers: enforcing the recently agreed 40% regional content via rules of origin, investing in logistics corridors and piloting cross-border NEV supply chains.
South Africa, with its OEM stronghold, can lead by exporting components to hubs in Nigeria, Kenya or Egypt, fostering specialisation based on comparative advantages.
This isn’t altruism; it’s shrewd business. Regional clusters could slash costs, attract foreign direct investment and buffer against global volatility, turning South Africa from a lone exporter into a continental anchor. We need to start thinking of localisation in an African, not just South African, context.
To drive transformation, incentives must shift from volume to value. First, expand NEV coverage to embrace battery electric vehicles (BEVs), fuel-cell vehicles (FCVs) and hybrids, blending producer subsidies with consumer rebates to ignite demand. Yes, customer demand does need to be ignited. Infrastructure demands equal urgency: co-ordinated grid upgrades, charging networks and renewable tie-ins to mitigate energy woes.
Digitisation (software integration and predictive maintenance) warrants targeted grants, offsetting upfront costs while capturing premiums in premium markets. Localisation enforcement is non-negotiable: tighten semi-knocked-down (SKD) import curbs and used-vehicle age limits to protect nascent suppliers, while AIS evolves to prioritise black, youth, and women-owned enterprises in NEV chains.
The current less than 40% localisation achievement needs a radical rethink. The aftermarket manufacturing industry must be brought closer to the centre of localisation targets. Currently localisation targets are only for the OEM value chain. Stakeholders must align for delivery.
Government should streamline administration via digital platforms and clear key performance indicators, such as investment inflows, localisation rates, NEV uptake and transformation metrics, with annual transparency reports.
An Automotive Delivery Council akin to Egypt’s Supreme model could wield decision rights, cutting red tape and fast-tracking reforms. We need faster decision-making in a rapidly changing world.
Industry — OEMs, suppliers, and the aftermarket value chain — should aggregate demand for critical inputs, form joint ventures for regional expansion, and invest in skills hubs for EV tech. Labour and communities gain from inclusive upskilling, ensuring the transition creates jobs, not casualties.
Policy certainty
Investors eye ESG opportunities but demand policy certainty; incentives tied to sustainability benchmarks could lure capital, enhancing market access amid EU and other carbon border taxes.
The risks are stark: stalled NEVs invite de-industrialisation, job losses and AfCFTA underutilisation. Weak localisation floods markets with cheap imports, eroding domestic capacity. In the current environment, we are exporting 60% of locally manufactured vehicles, which creates an imbalance in the APDP2. Yet opportunities abound.
AfCFTA scale could diversify exports, ESG leadership secures premiums, and digital efficiencies boost margins. Companies prioritising these shifts report outsized financial returns, per transformation studies, which is proof that sustainability pays.
South Africa’s vehicle fate hinges on reimagining the APDP as a dynamic engine for competitiveness. This demands agility: domestic sourcing rebuilds resilience, innovation in materials and design offsets costs, and stakeholder ecosystems drive execution.
The sustainability imperative is unequivocal — laggards face managed decline; pioneers claim global relevance. For policymakers, CEOs and investors, the crossroads demands decisive action. Evolve incentives now, integrate AfCFTA, and champion localisation, including the aftermarket, to propel inclusive growth.
In doing so, South Africa will do more than survive the NEV era — it’ll lead Africa’s vehicle renaissance.
• Newman is a partner at EY SA.
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