The South African automotive manufacturing sector, already grappling with a confluence of challenges, faces a potentially devastating blow with the United States’ imposition of a 25% import tariff on cars and key vehicle parts. President Donald Trump’s proclamation, citing national security concerns, threatens to undermine the industry’s crucial export market and exacerbate existing vulnerabilities.
The US administration’s move, justified as a means to protect its domestic automotive industry, has drawn sharp criticism from carmakers who warn of inflated prices for American consumers. However, for South Africa, the implications are far more profound. The tariffs are poised to circumvent the preferential trade terms afforded under the African Growth and Opportunity Act (Agoa), a cornerstone of the country’s automotive exports.
Naamsa, the National Association of Automobile Manufacturers of South Africa, reveals that the US is the nation’s third-largest export market, accounting for 6.5% of total vehicle exports in 2024. Companies like Mercedes-Benz, which exports left-hand drive models from its East London plant, and BMW, which had planned to export X3 models to the US, stand to be significantly impacted.
“The South African automotive industry has built a strong export relationship with the US,” states Naamsa chief economist Paulina Mamogobo. “Any potential disruption to trade flows will require close collaboration between industry and government.”
However, the US tariff is just one element in a perfect storm of challenges facing the local automotive industry. The impending shutdown of ArcelorMittal’s Newcastle and Vereeniging mills, crucial suppliers of long steel for vehicle components, threatens to disrupt supply chains and inflate production costs. The company cites escalating electricity prices, a surge in cheap imports, and unreliable rail services as reasons for the closures, which will also result in the loss of 3,500 jobs.
Furthermore, South African carmakers are struggling to compete with the influx of affordable vehicles from India and the growing market share of Chinese manufacturers. This competitive pressure, coupled with a delayed transition to new-energy vehicle (NEV) production, is further eroding the industry’s competitiveness.
The numbers paint a stark picture: South African plants produced 515,712 units in 2024, a significant drop from the 640,000 manufactured in 2019. With major export markets like the European Union planning to phase out fuel-powered cars, the industry’s slow adoption of NEV technology poses a grave threat to its long-term viability.
The government’s tax incentives for NEV production, which will only take effect next year, may prove too little, too late. The South African automotive industry, a vital contributor to the country’s economy, faces an existential crisis, demanding urgent and decisive action to mitigate the impact of the US tariffs and address the industry’s broader challenges.
