South Africa’s automotive industry is being reshaped by a surge in lower-cost Chinese vehicle brands, improving affordability for buyers but raising concerns about the future of the local sector, warns FNB and WesBank senior economist Thanda Sithole.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), Chinese brands accounted for more than 9% of new passenger vehicle sales in 2024, up sharply from low single-digit levels in recent years.
Reshaping affordability equation
Brands such as Chery, Haval, BAIC and others have been central to this growth, reshaping the affordability equation for many South African buyers.
Sithole says the influx of competitively priced new vehicles is already changing consumer behaviour.
“A growing influx of lower-cost Chinese vehicle brands is changing the affordability equation for consumers, with many buyers now able to purchase a brand-new vehicle at a price once associated with the used market,” Sithole said.
Pressure on used vehicle segment
He noted that this shift is beginning to place pressure on the used vehicle segment, as buyers who would traditionally opt for pre-owned cars are increasingly moving towards new models that offer improved features and financing options.
From a financing perspective, Sithole said the trend could provide some relief to a strained market.
“Greater affordability in the new vehicle market can support credit demand and stimulate fresh activity in a sector that has remained under pressure,” he said, pointing to weak household income growth and elevated borrowing costs as ongoing challenges.
Impact on local manufacturers
However, Sithole cautioned that the broader implications for South Africa’s industrial base require careful consideration.
“South Africa’s automotive industry is not simply another consumer-facing market. It is one of the country’s most strategically important manufacturing sectors,” he said, highlighting its role in supporting jobs, exports and a wide network of suppliers and service providers.
While competition from Chinese automakers can improve affordability and expand consumer choice, Sithole warned that the key issue is whether local manufacturers can remain competitive.
“The real concern is whether South Africa’s domestic automotive base is sufficiently competitive to absorb this shift without a meaningful erosion in local industrial capacity,” he said.
Possible policy responses
The debate has also sparked discussion around possible policy responses, including higher import duties. But Sithole cautioned against relying on protectionist measures.
“Import duties are a blunt instrument. They may offer temporary relief but would also raise costs for consumers and potentially delay the adaptation the industry needs,” he said.
Instead, he argues that the focus should be on strengthening competitiveness by addressing structural constraints such as logistics inefficiencies, energy security and the cost of doing business.
“The right question is not whether South Africa should resist competition, but whether it can build an automotive ecosystem capable of surviving and adapting to it,” Sithole said.
As Chinese brands continue to expand their footprint, the country faces a delicate balancing act between supporting consumers and safeguarding its industrial future.
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- Chinese vehicle brands now make up over 9% of new passenger car sales in South Africa in 2024, significantly increasing from previous years.
- Affordable Chinese models like Chery, Haval, and BAIC are making new cars more accessible, shifting consumer preference away from used vehicles.
- This trend pressures the used car market but may boost credit demand and activity in new vehicle financing despite economic challenges.
- Concerns exist about the impact on South Africa’s domestic automotive industry, which is vital for jobs, exports, and supplier networks.
- Experts suggest focusing on improving industry competitiveness and structural issues rather than using protectionist import duties to address these challenges.
“A growing influx of lower-cost Chinese vehicle brands is changing the affordability equation for consumers, with many buyers now able to purchase a brand-new vehicle at a price once associated with the used market,”
He noted that this shift is beginning to place pressure on the used vehicle segment, as buyers who would traditionally opt for pre-owned cars are increasingly moving towards new models that offer improved features and financing options.
From a financing perspective,
“Greater affordability in the new vehicle market can support credit demand and stimulate fresh activity in a sector that has remained under pressure,” he said, pointing to weak household income growth and elevated borrowing costs as ongoing challenges.
However,
“
While competition from Chinese automakers can improve affordability and expand consumer choice,
“
“Import duties are a blunt instrument.
Instead, he argues that the focus should be on strengthening competitiveness by addressing structural constraints such as logistics inefficiencies, energy security and the cost of doing business.
“
As Chinese brands continue to expand their footprint, the country faces a delicate balancing act between supporting consumers and safeguarding its industrial future.
