South Africa’s automotive industry must urgently strengthen policy certainty, deepen regional market development and protect domestic manufacturing if it is to remain globally competitive in a rapidly shifting automotive industry landscape. This was the consensus emerging from a high-level panel discussion hosted by Creamer Media Webinars on Wednesday.

The panel – facilitated by EY Africa associate director in the business transformation team Hugo van Wyk, and featuring naamsa | The Automotive Business Council chief policy officer Tshetlhe Litheko, National Association of Automotive Component and Allied Manufacturers (NAACAM) head of policy and regulatory affairs Beth Dealtry, Toyota Wessels Institute for Manufacturing Studies executive director Professor Justin Barnes, and Nedbank national manager for manufacturing Amith Singh – outlined a series of structural risks and opportunities that will shape the sector’s trajectory over the next decade.

Litheko emphasised that the industry’s foremost challenge is securing production volumes that justify continued original equipment manufacturer (OEM) investment. “Volumes drive all conversations,” he said. “Model allocations require certainty, predictable incentives, and an environment that convinces OEMs to commit locally.”

He noted that policy uncertainty around South Africa’s new-energy vehicle (NEV) framework has persisted despite the EU – the country’s largest export market – signalling the end of internal combustion engine demand. “To still have unresolved policy documents on how government will support NEV production creates uncertainty,” he cautioned.

According to Litheko, achieving policy predictability requires government alignment across adjacent frameworks such as transformation and competition rules, which can unintentionally destabilise automotive incentives.

Call for Localisation-Focused Reform

NAACAM’s Dealtry agreed on the primacy of production scale but stressed that the current policy mix disproportionately favours assembly over local value addition. “We need to rebalance the framework to drive localisation,” she argued. “Even among high-volume OEMs, local content levels vary widely. That tells us capability exists, but the system isn’t closing the gap.”

Dealtry noted that South Africa is lagging global peers in enacting quick policy adjustments that can stabilise the sector. She pointed to international examples, including Thailand’s requirement that OEMs localise key electric vehicle (EV) components if they want to operate in the local market.

“That kind of mandate is an interesting option for South Africa,” she said. “It ensures the incentives we provide translate into real value for the local economy.”

Barnes warned that South Africa’s industry is exposed to global shifts because its domestic and regional markets remain underdeveloped. “We have far more global production capacity than demand, and countries are restructuring to protect their markets,” he said. “South Africa is attractive for imports, but we do not have the socio-economic resilience that other import-heavy markets have.”

He highlighted structural policy contradictions – including disproportionately high taxes on low- to mid-priced vehicles, local government cost burdens and the erosion of protection through rebate mechanisms – that undermine the competitiveness of domestic manufacturing.

“Our policy environment is sophisticated and well-designed in the narrow automotive sense,” Barnes said. “But the broader operating environment reverses many of those gains.”

Africa’s growing middle class therefore presents one of South Africa’s biggest potential market-expansion opportunities. Litheko noted that the continent has about 110-million vehicles for a population of 1.4-billion – far below India’s 320-million vehicles for a similar population.

“We are at least 200-million vehicles short of where we could be,” he said. “But this cannot be unlocked without addressing second-hand imports and improving access to finance across the region.”

Barnes agreed, saying new-vehicle financing is nearly impossible when markets are flooded with imported used cars priced far below their actual value. “As long as second-hand imports dominate, you cannot build a new-vehicle market,” he noted. “But with age restrictions and regional partnerships, Africa could be consuming six-million new vehicles a year by 2050.”

Nedbank’s Singh, meanwhile, said banks remain committed to the automotive sector but require greater policy certainty to unlock more financing innovation. “We can’t think in terms of instant gratification,” he said. “Our role is long-term, but we need clarity to model risk. Without that alignment across the value chain, moving too early can put the sector and financiers at risk.”

He added that banks also play a role in supporting business sustainability through financial skills development, noting that financial mismanagement is a key cause of manufacturing failure.

CKD vs SKD

A major concern raised during the discussion was the possibility of attracting semi-knockdown (SKD) assembly operations from new entrants, particularly Chinese manufacturers.

Barnes was explicit in warning against this approach. “We do not need anyone to show us how to assemble seven pieces of a car. SKD adds no value. Nigeria has 34 SKD plants and produces fewer than 10 000 vehicles a year,” he said. “If South Africa shifts to SKD, the long-term damage would be significant.”

Both naamsa | The Automotive Business Council and NAACAM confirmed ongoing engagements with government to ensure South Africa remains firmly a completely-knockdown (CKD) manufacturing base.

Despite the challenges, the panel agreed that the long-term fundamentals remain strong. Component manufacturers are continuing to invest, regional demand is rising, and South Africa retains deep manufacturing capability.

However, the industry stressed that delays in decision-making are no longer neutral. “In this environment, standing still is moving backwards,” Barnes concluded. “We need decisive action on domestic market optimisation, regional value chain development and a clear NEV transition framework. The opportunities are significant – but only if we move now.”

Watch a recording of the webinar here