South Africa’s automotive manufacturing industry faces a critical test as rising production costs, declining vehicle exports and intensifying global competition threaten its ability to retain investment and protect jobs.
This warning comes from the National Association of Automobile Manufacturers of South Africa (Naamsa) before South African Auto Week at Durban’s International Convention Centre scheduled from Tuesday to Friday. This is where government, vehicle manufacturers and industry stakeholders will deliberate on the future of the country’s automotive sector.
Despite improving domestic vehicle sales, Naamsa chief policy officer Tshetlhe Litheko cautioned that South Africa’s attractiveness as a global vehicle manufacturing destination was under pressure.
“We are increasingly concerned about the pace at which our international competitiveness is being eroded by structural costs, changing global trade arrangements and aggressive industrial policies in competing manufacturing jurisdictions,” Litheko said.
The warning comes against a contrasting performance last month, when domestic new vehicle sales increased by 12.7% to 61 645 units, while exports declined by 18.8% to 31 473 vehicles. Last year, South Africa manufactured about 618 077 vehicles and exported 414 271 units to 154 countries.
However, Litheko warned that recovering domestic sales should not be confused with improving manufacturing competitiveness. Global manufacturers allocate production contracts according to costs, market access, infrastructure reliability and policy certainty. Losing the allocations could have lasting consequences for South Africa.
“Once a vehicle platform or production allocation is lost to another country, recovering that investment can be extremely difficult,” he warned.
The gathering coincides with the government’s mid-term review of the South African Automotive Masterplan 2035 and potential adjustments to the Automotive Production Development Programme. Litheko said the industry urgently needed coordinated policy interventions addressing manufacturing costs, localisation incentives, regulatory certainty and infrastructure constraints.
The future of the automotive industry will also dominate discussions at the Gordon Institute of Business Science, which is hosting a separate event, titled “After the Masterplan — What Strategy Now for South Africa’s Motor Industry? on Tuesday.
The two gatherings place renewed attention on whether the automotive industrial strategy remains sufficiently competitive to attract investment in an increasingly challenging international environment.
Vehicle affordability will feature prominently at SA Auto Week, particularly as rising ownership costs continue to exclude many first-time buyers and middle-income households from the new vehicle market.
Litheko said customs duties, ad valorem excise duties and VAT contributed to the cumulative tax burden embedded in vehicle prices. Naamsa was advocating reforms to the ad valorem framework, including a proposed 53% Local Adjustment Factor, intended to improve the competitiveness of qualifying locally manufactured vehicles.
Another pressing concern is the rapid expansion of Chinese automotive brands and whether their growing South African market share will translate into manufacturing investments rather than increased imports.
Litheko welcomed the competition but said meaningful industrial participation should extend beyond vehicle distribution and limited assembly operations. “We must also distinguish between different levels of vehicle assembly. Limited assembly operations do not necessarily generate the same economic benefits as more integrated manufacturing activities with substantial local value addition.”
Electrification presents another challenge. During the first eight months of this year, South Africa recorded about 18 945 new-energy vehicle sales, surpassing the 16 703 units sold throughout last year.
However, Litheko cautioned that increasing sales of imported electrified vehicles did not necessarily translate into domestic manufacturing opportunities. He called for stronger incentives supporting battery production, component manufacturing, charging infrastructure and consumer demand.
Transformation will also receive attention, with the Automotive Industry Transformation Fund having supported 93 beneficiaries and associated employment opportunities exceeding 4 100.
Litheko said meaningful transformation should be measured through sustainable supplier contracts, production participation and lasting employment rather than programme participation alone.
Port inefficiencies, unreliable rail services and high logistics costs continue to threaten export competitiveness. With senior government representatives and automotive executives expected to participate in SA Auto Week, Litheko said the industry’s future depended on measurable implementation.
“Ultimately, the success of SA Auto Week 2026 will be determined … by how effectively those commitments translate into investment, production and jobs.”
- South Africa's automotive manufacturing industry is facing challenges due to rising production costs, declining vehicle exports, and increased global competition, according to the National Association of Automobile Manufacturers of South Africa (Naamsa).
- Domestic new vehicle sales rose by 12.7% to 61,645 units in the last month, but vehicle exports dropped by 18.8% to 31,473 vehicles.
- South Africa produced about 618,077 vehicles last year and exported 414,271 units to 154 countries.
- Naamsa advocates for reforms including a 53% Local Adjustment Factor in the ad valorem excise duty framework to boost competitiveness of locally manufactured vehicles.
- Sales of new-energy vehicles increased to 18,945 units in the first eight months of this year, surpassing last year's total, but increased imports of electrified vehicles do not guarantee domestic manufacturing growth.
