The recent lament by BMW South Africa CEO Peter van Binsbergen that cheap vehicle imports from China and India are “costing South African jobs” and “harming the economy” has ignited a complex debate at the intersection of industrial policy, consumer interest and competition law.
While consumers cheer for more affordable mobility, the local manufacturing sector hears a warning siren. The critical legal and economic question is whether this influx constitutes vigorous, pro-competitive rivalry or a potential predatory pricing threat — a strategy designed to eliminate competitors now to monopolise the market in future.
Theory of predatory pricing
The theory of predatory pricing is conceptually straightforward. A dominant firm sells its products below cost, incurring short-term losses to drive competitors out of the market. Once the competition is foreclosed, the predator raises prices to supra-competitive levels to recoup its earlier losses and enjoy monopoly profits. It is a strategy of short-term pain for long-term gain, ultimately harming consumer welfare.
In South Africa, this is regulated by Section 8(1)(d)(iv) of the Competition Act, which defines predatory prices as those below the firm’s average avoidable cost (AAC) or average variable cost (AVC). If an importer sells a vehicle for less than the cost it could have avoided by not bringing that specific unit to the South African market, it raises a red flag.
The legal precedent, such as the Media 24 case, underscores that while intent is considered, the objective effect of the pricing, its ability to foreclose competition, is paramount.
The act primarily targets the conduct of dominant firms, typically those with a market share of 35% or more. But the import market for budget vehicles is fragmented across several brands. Proving that any single importer is dominant in the relevant market is a steep, perhaps insurmountable, first hurdle. The competitive threat to local assemblers comes from the collective force of these imports, not necessarily from a single firm.
Preserving manufacturing, jobs
In its current interpretation South African competition law is heavily focused on short-to-medium-term consumer welfare — assessing impacts on price, choice and quality. From this vantage point, cheap imports are unequivocally pro-competitive. They lower prices, increase choice for entry-level buyers, and pressure incumbent brands to innovate and improve efficiency. This creates a direct tension with the industrial policy concern of preserving local manufacturing capacity and employment.
The antithesis to the pure consumer welfare view is a long-term structural argument. If sustained low pricing, potentially below cost, leads to the collapse of local vehicle manufacturing, the market could shift to a “monopoly of imports”. Once local competition is eliminated, the importers (or a consolidated few) could theoretically raise prices, reduce model variety or slow innovation, harming consumers in the long run. The short-term benefit of low prices would be outweighed by the future cost of a highly concentrated, import-dependent market.
If sustained, low pricing, potentially below cost, leads to the collapse of local vehicle manufacturing, the market could shift to a ‘monopoly of imports’.
Should BMW’s concerns escalate into a formal legal inquiry, the Competition Commission would need to undertake a detailed economic and legal exercise that includes carefully defining the relevant market and assessing if any single importer holds a dominant position.
It would have to engage in a complex verification process to determine if retail prices are truly below the importer’s AAC or AVC for the South African market, a task involving intricate supply chain analysis and evaluating whether the pricing is causing substantial market foreclosure of local manufacturers or is simply vigorous “competition on the merits”.
Competition law may not be the sole or most effective remedy. If the issue is one of international price discrimination or dumping (selling goods abroad below their home market price), the recourse lies with the International Trade Administration Commission and the application of anti-dumping duties, a trade law instrument, not a competition one.
The ultimate question is whether the pricing strategies of these imports are a temporary market correction, rewarding efficient global supply chains, or a strategic long-game to reshape the South African motor landscape permanently.
Unpacking this will require looking beyond short-term consumer price tags to long-term market structure, a task that demands nuanced analysis from competition authorities and trade regulators.
• Tlhong is director: corporate commercial at TGR Attorneys.
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