The industry body that represents South African carmakers has called on government to initiate urgent trade discussions with the US, warning that the costs associated with the 25% tariffs being imposed on automotive imports to America cannot be absorbed by domestic original equipment manufacturers (OEMs).

In a statement following President Donald Trump’s ‘Liberation Day’ tariff announcement, which included the imposition of 30% tariffs on South Africa and confirmed 25% tariffs on vehicle imports to America, naamsa | The Automotive Business Council highlighted the importance of the US market.

In 2024, South African carmakers shipped about R35-billion-worth of vehicles to the US, or 6.5% of total vehicle exports, making it the third-largest export destination for South African vehicles.

“The proposed 25% tariff increase will severely impact local manufacturers operating in South Africa, including BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and Volkswagen - who produce vehicles for global markets, including the US,” CEO Mikel Mabasa said.

The move, he warned, imperilled jobs, industrialisation and investment, and posed “yet another challenge to a sector already grappling with multiple headwinds”.

“Urgent trade discussions must be initiated and prioritised and this is why we urge the South African government to continue negotiating and delivering solutions that support job creation, consumer demand, and economic growth.”

While using all “available diplomatic channels”, naamsa said government needed to urgently seek clarity on the future of the African Growth and Opportunity Act (Agoa) and “ensure that South Africa’s automotive sector is not unfairly penalised under these new trade measures”.

In parallel, naamsa would attend the Council meeting of the International Organisation of Motor Vehicle Manufacturers scheduled for Washington, DC, on April 18 to “advocate for South African positions”.

“The US decision to impose these tariffs undermines existing trade agreements and the principles of a fair, rules-based trading system,” Mabasa argued.

AGOA HAS ‘ESSENTIALLY ENDED’

XA Global Trade Advisors’ Donald MacKay also warned of the threat posed to South African automotive exports, but said that Trump’s April 2 announcement suggested that the tariff- and duty-free access granted under Agoa had “essentially ended”.

Even though the official Agoa review was due to be finalised only at the end of September, MacKay said the 30% announcement rendered the review meaningless.

While highlighting that South Africa’s tariffs averaged only 7.5% compared with Trump’s claim that the country “charged the USA” 60%, MacKay cautioned that “facts don’t matter” and the fallout would be negative, particularly for BMW and Mercedes-Benz South Africa, which both export luxury cars to America.

“The President also announce a 25% tariff on autos and it’s not clear where the 30% encapsulates the 25%, or if it is on top of. But either way, selling those two cars into the US is going to be a problem.”

In addition, he warned of indirect consequences as manufacturers in other markets also affected by high US tariffs sought to find new markets for their products, possibly at price points below South African production costs.

In addition, South Africa’s relative competitiveness could be undermined by the fact that some other producing countries face lower tariffs than is the case for South Africa.

This point was amplified by the Nelson Mandela Bay Business Chamber, which said in a statement that “by far the biggest risk in the short to the medium term is the competition that South Africa will face from non-US manufacturing countries which may have a lower tariff base”.

The chamber also highlighted the high reliance of the Eastern Cape economy on the automotive industry, with almost half of the country’s employment in the sector being in the province.

“We are particularly concerned about the potential knock-on impact of reduced vehicle assembly volumes of affected OEMs who export to the US, for the automotive components supply chain.

“It needs to be noted that there are some component manufacturers who export components direct to the US,” the chamber added.