While original-equipment manufacturers such as Toyota South Africa Motors (TSAM) welcome more competition in the automotive market, CEO Andrew Kirby says the influx of Chinese-brand vehicle imports in the country is creating an unequal playing field in the market.

In his keynote address during the State of the Motor Industry event held on January 23, Kirby noted that Chinese imports were disrupting completely knocked down (CKD) production bases globally.

He added that trade pressures between China and key global markets were resulting in China shifting its exports to countries in the Global South, such as Asia, Africa and Latin America.

Chinese companies enjoying significant subsidisation, coupled with South Africa’s free trade of rebates and semi-knocked down option, encourages de-industrialisation as it is attractive under Chapter 98 of the Automotive Production Development Programme.

The distorted trade conditions for Chinese automotive and parts manufacturers over local producers necessitates the protection of the local automotive manufacturing sector from becoming an import replacement market.

To illustrate the growth of Chinese-branded vehicle imports, Kirby explains how locally produced vehicle sales have dropped from 46% of the overall market in 2018 to 43% in 2023.

In turn, Indian and Chinese-sourced vehicle sales have increased from 18% in 2018 to 37% in 2023.

This while traditional source countries such as Germany, Japan and Korea have significantly reduced.

Notably, the top five source countries for vehicles in South Africa changed from South Africa with 46%, India with 17%, Germany with 8%, Japan with 7% and South Korea with 5%; to South Africa with 43%, India with 30%, China with 7%, Germany with 4% and Japan with 3%.

For China to have reached the 7% source mark in South Africa, sales grew by 645% between 2018 and 2023. There are about 13 Chinese manufacturers offering 34 different vehicle models in South Africa, ranging from hatchbacks and sports-utility vehicles to sedans and bakkies. The most prominent Chinese vehicle brands in South Africa are BAIC, Haval, Great Wall Motors, Chery, Foton and JAC Motors. 

Industry body naamsa | The Automotive Business Council CEO Mikel Mabasa says Chinese vehicle imports in South Africa have increased from 11 000 in 2019 to 39 000 in 2023.

Haval and Chery alone each sell more than 1 500 cars a month in the country.

“There has been a structural change in the makeup of vehicles being sold in South Africa.

“Successful industrialisation in South Africa requires both CKD volume growth and localisation. The market is, however, seeing a shift from locally produced vehicles and parts to imported products,” Kirby notes.

South Africa’s CKD to completely built unit mix has deteriorated by more than 11% since 2018, from 54% to 60% in 2023, meaning that products are increasingly being imported rather than produced locally.

Moreover, Kirby finds that South Africa’s automotive localisation has reduced by 10% since 2021 from 42% to 38% in 2023 – with Tier 2 and lower suppliers being significantly underdeveloped.

Globally, China’s production share has grown from 29% in 2018 to 32% in 2023, while India’s production share grew from 5% in 2018 to 6% in 2023.

Germany effectively dropped out of the top five automotive producer list as South Korea started exceeding Germany’s production rate.

Kirby says the Chinese models of vehicles are particularly attractive for local consumers owing to their affordability, as the average selling price for a new vehicle in 2024 continued to drop to R490 478 from R501 901 in 2023.

This while there has been a 9.4% year-on-year increase in used car sales to more than 54 000 units, which, coupled with a decrease in banks’ successful financing for new cars, is testament to how constrained consumers are.

The “newer” brands in South Africa will nonetheless still need to build trust in their vehicles and survive market swings that are inevitable. Local manufacturers also have the benefit of after-sales service and customer support in the country, which provides them with a competitive edge.