South Africa’s seventh administration has taken office amidst a flagging domestic economy desperately seeking traction.

The automotive industry, South Africa’s biggest manufacturing industry, has seen vehicle sales declining steadily as embattled consumers increasingly seek the seemingly unattainable: an affordable car.

Vehicle and parts manufacturers all face challenging conditions, especially as energy availability remains uncertain and logistics systems continue to stutter.

Engineering News & Mining Weekly asked a variety of role-players in the South African automotive sector what their wish list is for the new government of national unity (GNU). What do they need from those now responsible for governance to remain internationally competitive in some of the toughest conditions the auto sector has seen in years?

Reliable Energy & Smaller Tax Burden

naamsa | The Automotive Business Council CEO Mikel Mabasa

naamsa welcomes the formation of the GNU, led by the ANC in collaboration with nine other political parties.

We also congratulate Mr Parks Tau on his appointment as Trade, Industry and Competition Minister, together with his two Deputy Ministers.

Minister Tau is not new to the automotive industry, as naamsa has worked with him in the past while he was the Gauteng Economic Development MEC.

Our wish as an industry collective is for a stable GNU, working in unison to guide and expedite economic reforms that the country desperately need to make a tangible impact on the lives of ordinary South Africans.

The automotive industry is widely regarded as an industrial policy success story in South Africa’s democratic era.

Over the past three decades – up to 2023 – a staggering six-million vehicles, gene­rating an export revenue of R1.75-trillion, along with automotive components with an export value of R959.5-billion, were exported to more than 150 markets.

The broader automotive industry contributed 5.3% to South Africa’s GDP in 2023, with a substantial 21.9% of domestic manufacturing output derived from vehicle and component manufacturing as the largest manufacturing sector in the country.

As far as a wish list for the GNU is concerned, naamsa’s first wish is for the GNU to urgently tackle the key challenges relating to reliable energy supply to all our manufacturing plants, and to prioritise infrastructure and transport logistics.

South Africa’s international competitiveness to compete for new-generation model investments is strongly influenced by a range of structural and environmental factors that affect the costs of production and trade.

Our second wish, directed to the dtic, is to reconsider a more progressive new-energy vehicle (NEV) policy framework (which would intentionally include hybrids and plug-in hybrids) that provide immediate production support for battery electric vehicle manu­facturing – instead 
of the too-late 2026 implementation date.

This will safeguard vehicle exports.

We also wish for appropriate demand-side support to stimulate NEV purchasing in the country.

naamsa’s third priority wish is for the GNU to address the heavy tax burden on vehicles, in order to address the affordability crisis in a declining new-vehicle market.

Contrary to popular belief, high vehicle prices could by and large be attributed to excessive government taxes of 42% on the price of a premium vehicle, and around 19% on the price of an entry-level vehicle.

Taxes and levies include a value-added tax, CO2 emission taxes, tyre levies, an ad valorem luxury tax of up to 30%, and other related fees.

The annual taxes paid to the fiscus by the seven original-equipment manufacturers (OEMs, or vehicle manufacturers) in 2023 amounted to R16.9-billion, while the independent vehicle importers paid in the order of R19.2-billion in taxes.

naamsa’s fourth priority is to launch a collaborative and detailed factual and informative public education narrative about South Africa’s automotive industry, together with GNU partner departments such as the dtic and the National Treasury.

Fly-by-night auto commentators have been spreading false, unsubstantiated and irresponsible pronouncements about so-called exaggerated automotive industry support.

The automotive industry’s contribution to the country’s economy is multiple times the limited costs to the fiscus in the form of automotive investment incentives.

As the source of all key automotive data in the country, naamsa’s website with all the relevant information is simply a click away and we intend to partner with other social partners, including government, to educate the public with 
accurate details.

With more than 500 000 formal jobs in the automotive supply chain and about one-
million across the value chain, the automotive industry remains fundamental to 
South Africa’s economy.

Accelerated Energy Investment

Volkswagen Group Africa MD and chairperson Martina Biene

Volkswagen Group Africa (VWA) would like to see the acceleration of investment into the grid for power generation and distribution to unblock energy constraints which have plagued the economy and hampered business performance.

Within local government, the focus must be on capital investment in the maintenance of power supply infrastructure, such as substations, which have been neglected over the years, resulting in sporadic power dips and/or breakdowns.

It is also necessary to work with the private sector to find lasting solutions to transport and logistics issues which are hampering the reliability and performance of the ports and rail network.

Government must also prioritise the safety and security of its citizens by strengthening the crime-fighting institutions to effectively deal with all levels or types of criminal activities.

Also, there needs to be a focus on youth unemployment by introducing effective skills development and job creation programmes.

For VWA to remain globally competitive, we need a stable government at all levels – local, provincial and national – to ensure consistent service delivery and administration.

We also need certainty on key policies that are relevant to the automotive industry, namely the Automotive Production and Development Programme (APDP) and NEVs.

We would also like to see the introduction of schemes to stimulate increased local NEV sales. (VWA produces the Polo and Polo Vivo at its plant in Kariega, in the Eastern Cape, for the local and export markets.)

More Local Content

National Association of Automotive Component and Allied Manufacturers (Naacam) CEO Renai Moothilal

The importance of policy continuity and stability, particularly within the automotive industrial policy framework, cannot be overlooked.

The automotive sector is a cornerstone of South Africa’s industrial landscape, contributing 5.3% to GDP and 21.9% to manufacturing output in 2023, whilst the components subsector is a strong base for employment, exports and new business creation.

It is critical that the seventh administration­ – and especially Minister Tau – maintains the sector-specific APDP version 2, and the South African Automotive Masterplan 2035 (SAAM35), whilst equally identifying opportunities to strengthen the operating environment and unlock growth towards SAAM35’s vision of a globally competitive and transformed automotive industry.

Unlocking those opportunities lies in improving the average local parts content level on a locally assembled vehicle by approximately 20% over the next ten years to achieve the SAAM target of 60% local content.

That rate has been sticky, not exceeding 40% in the past years, and, based on initial SAAM35 projections of where the sector was supposed to be by 2024, there are billions of rands of local procurement opportunities being foregone.

The global migration to NEVs is ongoing, and with the publishing of the White Paper on NEVs last year it is important to see the package bedded down.

Locally based vehicle assemblers should ideally now be making announcements about NEV platforms to be built in South Africa. This will allow component manufacturers to invest accordingly.

Naacam was instrumental in advocating for an additional cash incentive for NEV component investments, and with that added Automotive Investment Scheme (AIS) incentive now in play, assembly volumes are needed to deploy these incentives.

The predictability of vehicle production volumes is crucial to component sector competitiveness. In the post-Covid environment, suppliers have produced less than the forecast volume they had invested to reach.

This situation varies by OEM, with some having assembled up to 30% fewer vehicles than announced.

Component companies and their employees take the brunt of these volume losses, and it’s Naacam’s view that authorities need to find a way of buffeting the value chain against such losses.

Noting the constraints of having component manufacturers heavily linked to domestic OEM volumes, there may be an opportunity to craft policies and other measures to unlock new production in certain export and aftermarket categories.

The catalytic converter sector has long been an export leader, but 2023 has seen plant closures in this subsector, so finding new markets such as those in NEVs, the hydrogen economy, and better leveraging South Africa’s existing aftermarket expertise into the region may help lessen the reliance on domestic OEM assembly.

Policymakers could look at research and development, global alliances, as well as raw material advantages in strategic lines such as battery production, e-motors, high-voltage electronics and fuel-cell propulsion systems as ways to increase domestic component competitiveness into other global markets.

At a macro level, it is critical to see ongoing reform and improved reliability and sustainability of the logistics system and energy supply into the vital manufacturing nodes.

Energy and greening of production systems are crucial as global automotive companies deal with the increasingly regulated carbon neutrality frameworks, especially in traditional export markets like the European Union.

Labour and industrial relations stability, as well as rational approaches to wage negotiat­ions in 2025, will be an equivalent contributing factor to the South African automotive component sector’s competitiveness outlook.

Significance of Retail Sector

National Automobile Dealer’s Association chairperson Brandon Cohen

We wish for a collective auto sector where the government recognises the significant role of the retail sector within the industry.

As the industry’s largest employer, we make up 2% of the auto sector’s GDP contribution.

Being the direct interface with consumers, we have a unique understanding of the financial pressures and challenges they face.

We need clear policies and laws that take into account the specific structure of dealerships. For instance, employment equity targets should not lump dealerships together with general shopping centre retailers or manufacturers.

Government should understand that our industry requires the attraction, upskilling and retention of talent, especially in terms of the thousands of technical jobs available.

We could be a strong partner to government in achieving its job creation and economic growth targets.

Additionally, we need government to closely examine the economic impact of laws like the Administrative Adjudication of Road Traffic Offences Act (AARTO) and other regulations to ensure they are beneficial to the economy.

Favourable Policy & Stable Labour Environment

Mercedes-Benz South Africa CEO Andreas Brand

Mercedes-Benz South Africa (MBSA) has operated in South Africa successfully for 66 years, manufacturing various Mercedes-Benz C-Class derivatives in left- and right-hand drive, including the AMG-63 performance-hybrid for local and export markets.

Our rich history in the country and contribution to the local economy, in particular, the Buffalo City Metropolitan Municipality, is a demonstration of our commitment towards playing our part in the sustainability of the country.

Among others, initiatives such the broadening of our supplier base through local content, our photovoltaic installations to mitigate the electricity challenges, and skills development through the Mercedes-Benz Learning Academy, have characterised our heritage as a long-term investor 
and developer of our surrounding communities.

To continue to operate successfully and competitively, and to ensure sustained production excellence, we need a favourable operating environment which comprises a number of aspects.

We need a stable labour environment, where there is a stable and reliable relationship with our union partners; an increased collaborative private-public effort on skills funding and talent pipeline development; as well as a stronger effort in upskilling youths from technical schools and technical 
and vocational education and training colleges to provide industry-compatible training curricula.

We also need a favourable policy environment that seeks to stimulate the uptake of NEVs domestically and to increase the competitiveness of exporting OEMs.

Localising new capabilities and technolo­gies in the NEV industry, and positioning South Africa as a hub for cell and battery production will also be critical for the automotive industry’s competitiveness in the electric vehicle market.

It is also necessary to accelerate the finalisation of Phase 2 of the APDP and the AIS to support localisation and the transformation of the industry. This includes the enhancement of the existing industrial development zones and the construction and refurbishment of road, air, sea and freight infrastructure.

As a company, we are always reinventing ourselves, and we continuously need stronger, collaborative relations with government to remain globally competitive.

Growth-Boosting Policy Implementation

WesBank CEO Ghana Msibi

New-car sales were noticeably subdued leading up to the national elections as consumers chose to delay big-ticket purchases like motor vehicles until political stability was assured.

This has come to pass with the formation of the GNU and the appointment of the seventh administration.

We have to commend government on this, and the realisation of more stable power supply, which is a boost for economic growth.

With the first hurdle behind us, the implementation of policy will be the real litmus test for the effectiveness of the new government, and the markets will be watching this closely. 

If we wish to maintain a positive outlook, there should be a clear focus on delivering on policies that aid economic recovery and growth, which, in turn, will have the desired impact on the employment rate, consumer spending and revenue collection.

Speedy and amicable resolution of disagreements on policy decisions is imperative for the seventh administration.

Given the varied composition of the new government, this is not going to be easy, but it can be achieved if national interests supersede partisan politics.

We have proven in the past, and even through the recent elections, that when we work together towards a common goal, acting within the prescripts of the Constitution, which remains the anchor of our democracy, South Africa is very resilient, and is able to achieve the seemingly inconceivable.

We hope the newly appointed officials will maintain strict focus on advancing the country and wish them all the best in the execution of their duties.  

Rail Network Revival

Ford Motor Company of Southern Africa government affairs and transformation executive director Esther Buthelezi

The continued revival of the rail network is crucial to maintaining and building export volumes and transporting locally produced vehicles to export markets seamlessly.

This also links directly to enhancing Transnet’s port operations. Visible prosecution of cases of theft, fraud and vandalism of infrastructure must continue.

Challenges around energy and water security and infrastructure will remain, and government needs to tackle these head-on in cooperation with business and civil society, especially as climate change hurts the poor first and hits them the hardest. Political stability is crucial, as it is it is linked directly to business confidence, growth and investment – even though this would mean that a stronger rand affects vehicle exports.

Consultation and consensus must be expedited around issues such as electric vehicles and the roll-out of the accompany­ing infrastructure, so that the State can demonstrate commitment to policy certainty.

The same applies to incentives around renewable energy. (Ford produces the Ranger pickup for the local and export markets at its plant in Silverton, Pretoria.)