We often prefer the comfort of familiar myths or established beliefs, especially when faced with complexity. Nowhere is this more apparent than in South Africa’s more than century-old automotive sector.
In his 1998 novel Infinite Riches, Ben Okri considers the complications of an African village undergoing turbulent change. “Each moment offered us clarity and liberation”, he wrote, “but we settled for the comforting shapes of legends, no matter how monstrous or useless.”
That tormentingly apt insight from this fictional account describes how some have made sense of the crisis confronting the South African automotive sector, shrouding it in monstrous and analytically vacuous myths and legends.
It is commonly understood that while 2025 saw bumper sales of vehicles domestically, this boom was associated with job losses and plant closures across the value chain, sped up no doubt by rapidly growing volumes of imports as a share of domestic demand.
But more lies under the bonnet of these observations. There are a few trade-related explanations for why the market share of these Asian producers has rapidly grown in ways that should justifiably cause some alarm and calls for policy reform.
Asian brands’ overproduction
The first is that domestic developments in the home markets of these Asian brands ― characterised by capacity expansion, shortening model turnover cycles, cut-throat price competition and the reorganisation of global production networks of even legacy brands ― have all meant that there are often more cars produced in these countries than households can reasonably buy.
While “involution” in China is well known and has been accompanied by demand improvement measures such as loan subsidies for households and insurance rebates, the Indian case is worth some mention.
There is a growing recognition within the government that these credits, while a necessary measure in the incentive package to attract domestic assembly, require urgent reform and regulation.
Take for instance Maruti Suzuki. This Indian manufacturer of entry-level Japanese brands recently unveiled a $3.9bn plant in Gujarat. The plant, which comes online in 2029, is set to add capacity of up to 1-million vehicles a year. To place this in perspective, Maruti sold 1.8-million vehicles domestically (three-quarters of its production capacity) last year, accounting for over two-fifths of the Indian market share.
Yet it has capacity to produce more and with the Gujarat plant coming online in 2029 export markets such as South Africa become an enticing prospect. Put differently, the inventory destined for export in India by Maruti as one firm is about the same as South Africa’s national production of 500,000-600,000 units per annum.
The scale of production is incomparable. To then suggest, as one industry representative did in the Sunday papers last week, that the playing field is “level” is to completely overlook the nature of competition in this market, wherein landed and showroom prices are a faulty indicator.
Exclusive licences
The second is that the unintended consequences of South African auto-industrial policy often give importers and those with exclusive licences to bring these imported brands into the country an unfair advantage.
One area where this is pronounced is in the impact of duty credits generated by domestic assemblers, which are sold on to importers in a manner that reduces their effective rate of taxation and tariff protection for the self-same domestic industry.
Trade data indicates that the bulk of Asian import volumes make use of these credits, which are often sold into an opaque intermediary market and then used to reduce customs duty liability for importers, which in some cases end up only paying VAT and the ad valorem duty, with the credits fully offsetting the 25% duty on fully built-up cars.
There is a growing recognition within the government that these credits, while a necessary measure in the incentive package to attract domestic assembly, require urgent reform and regulation.
Concerningly, some suggest that under conditions of imperfect competition, lower prices and wider consumer choice ought to trump any consideration of stemming the tide of plant closures and job losses. However, to disavow protective measures that can contend with deindustrialisation is too ghastly to ignore.
• Cawe is chief commissioner at the International Trade Administration Commission. He writes in his personal capacity.
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