Amid external pressures on South African automotive vehicle and component manufacturers making it difficult to remain competitive, the industry is also faced with other development imperatives such as inclusive transformation and decarbonisation.

Small Business Development Minister Stella Ndabeni recognised during an address at the National Association of Automotive Components and Allied Manufacturers (NAACAM) 2025 Show on August 14, in Gqeberha, that the global economy faced strong headwinds owing to shifts to unilateralism and protectionism.

Locally, tariffs imposed on US imports from South Africa are likely to erode the competitiveness of manufacturers and suppliers, including those in the Eastern Cape.

This while the automotive sector is undergoing another area of transformation driven by technology and decarbonisation. “Failure to position ourselves strategically and reprioritise aspects of the South African Automotive Masterplan (SAAM), could see us falling behind,” she stated.

Ndabeni added that, while rebates on imports had improved the competitiveness of OEMs, it had not enabled the development of local supplier capabilities.

“We have not built the necessary capabilities in design and innovation in specialised components.

“To this end, decarbonisation presents huge opportunities, leveraging our natural resources for biocomposites and battery production,” the Minister said.

She said the overall competitiveness of the South African automotive sector depended on the extent to which vertical integration could be mastered across the value chain.

Shared economic infrastructure, such as automotive supplier parks and special economic zones, had played an enabling role in promoting such integration, as had industry clusters; however, without deep transformation to include more small, medium-sized and microenterprises (SMMEs), the sector would not meet targets set out in the SAAM.

The Department of Small Business Development currently supports 20 black-owned SMMEs through its Automotive Industry Transformation Fund and plans to establish a dedicated incubator to advance infrastructure, skills and market access programmes in Tshwane.

The department has various funding instruments that support SMMEs in the automotive value chain, which Ndabeni urged companies to participate in.

DECARBONISATION EXPECTATIONS

Moreover, Nedbank Commercial Banking manufacturing head Amith Singh said local component firms were facing tightening global expectations on carbon emissions, particularly from buyers in the EU.

Although 67% of South African companies export to the EU or UK, just one in three have begun preparing for the Carbon Border Adjustment Mechanism, which is an incoming tariff on carbon-intensive products imported to the EU that is due to become effective in 2026.

Citing a carbon emissions study undertaken between Nedbank and NAACAM, Singh explained that more than 60% of companies were not tracking Scope 3 emissions and 42% had no net-zero timeline.

Additionally, nearly 80% of respondents cite cost or lack of clarity as the main reasons for not decarbonising.

While there is a lot of interest in energy efficiency and green inputs, very few companies have clear pathways or support, he added.

“There is a quiet but growing urgency [to decarbonise]. For many firms, this is the line between staying in global value chains or slowly being locked out,” Singh concluded.