Increasingly recognised as a “game changer” in the automotive industry, AI is transforming manufacturing, research and development and customer interactions by enabling smarter and more efficient production processes, faster product development and improved customer understanding, says professional services firm KPMG.

Consequently, KPMG automotive global head Dr Andreas Ries explains that South African manufacturers can harness this technology by prioritising high-impact applications such as predictive maintenance, quality control, production automation and supply chain optimisation.

“Despite limited research and development (R&D) budgets, companies can accelerate digital transformation through targeted investments, collaboration and the adoption of scalable solutions such as cloud-based platforms and digital twins,” Ries states.

Additionally, he points out that data from the 2025 Global Automotive Executive Survey shows that 44% of companies globally are expecting productivity gains from the implementation of AI.

Further, 62% are seeing the value in enhanced connectivity and integration, which highlights the importance of alliances and shared expertise.

The survey also highlights that 68% of automotive companies are actively restructuring their supply chains to become more regional and localised.

Ries suggests that these trends, namely localisation and AI adoption, present both opportunities and challenges for South Africa, as they could create opportunities to deepen intra-Africa trade and build competitive local supplier ecosystems, particularly in the automotive sector, where original-equipment manufacturers (OEMs) are looking to diversify sourcing and strengthen supply chain resilience.

However, the shift toward localisation poses additional risks, as the prioritisation of proximity and resilience could disadvantage geographically distant and/or smaller suppliers.

“Without coordinated policies and infrastructure investment, South Africa risks being sidelined from established export routes. As such, success will depend on agility and proactive adoption, in addition to leveraging regional alliances and innovation networks,” he highlights.

However, as Ries points out, transformation across the automotive sector is capital-intensive, which means that many OEMs are unable to fund this transition independently.

As a result, collaboration and partnerships are becoming increasingly important, with the most effective partnerships focusing on a combination of expertise, strengthened supply chain resilience and application of innovation, rather than simply expanding brands or capacity.

“South African companies can participate in international projects in battery manufacturing, digital mobility platforms and smart infrastructure” rather than pursuing these projects on an individual basis and taking on all associated costs and risks, says Ries.

Customer Service Emphasis

Meanwhile, the growing emphasis on customer service is reshaping the manufacturer-dealer-customer relationship, with direct-to-customer business models and digital channels becoming more common, giving manufacturers greater control over pricing, brand experience and customer data.

However, dealers are not ‘disappearing’, says Ries, adding that, instead, dealers are evolving to take on hybrid roles that focus on vehicle delivery, after-sales services and experiential customer touchpoints, rather than traditional sales models.

This shift is making customer engagement a shared priority across the value chain.

Shift in Emissions

Global emissions regulations are becoming increasingly stringent, accelerating the shift toward electric and hybrid vehicles. Regulatory pressures have become one of the “most powerful” forces shaping R&D priorities and investment decisions, says Ries.

“The pace of this transition differs by region, with developed markets moving faster as a result of ambitious targets and incentives, while emerging markets such as South Africa are focusing on affordability and infrastructure challenges.”

Nonetheless, African countries, particularly South Africa, can support this global new energy vehicle transition through targeted incentives, including tax breaks, infrastructure subsidies and R&D partnerships.

Governance models such as Kenya’s Climate Change Act, and initiatives like the African Continental Free Trade Area and the EU’s Green Deal technology exchanges, provide frameworks that can support investment and technology transfer.

Ries adds that these mechanisms could help position Africa as both a manufacturing hub and a participant in the global green mobility transition.

“Africa has the potential to play a meaningful role in sustainable and advanced manufacturing by leveraging its critical mineral reserves, developing domestic processing and manufacturing capabilities and adopting digital technologies.”

Looking ahead to 2030, Ries states that the automotive industry is expected to be defined by rapid digitalisation, regionalised trade and a dual-speed innovation landscape, with AI, software-defined vehicles and electrification predicted to be the primary value drivers.

However, many companies could feel underprepared for the scale of change required, which highlights the need for stronger industry support and advisory structures.

Ries points out that supply chains are expected to remain fragmented, with 68% of firms continuing to restructure towards local and regional models. This fragmentation presents both risks and opportunities for emerging markets.

“The industry is moving towards a more regional, technology-driven future, providing South Africa with the opportunity to strengthen its role both as a supplier and as a growth market, thereby increasing the country’s attractiveness within the global automotive landscape,” he concludes.