JOHANNESBURG, July 21 – South Africa’s automotive industry is approaching a decisive period as uncertainty grows over the future of US tariffs on vehicle imports, raising fresh concerns for one of the country’s largest manufacturing sectors.
While a US Supreme Court ruling in February overturned the broader 30% reciprocal tariff imposed on South African goods, reducing the general tariff rate to 10%, the separate 25% tariff on vehicle imports under Section 232 of the US Trade Expansion Act remains in place. Reports indicate the temporary status of that sector-specific measure is due to expire this month, placing renewed attention on the industry’s outlook.
The automotive sector contributes approximately 5.3% of South Africa’s gross domestic product (GDP) and supports more than 500,000 jobs across manufacturing and related industries, making any change in US trade policy significant for the country’s industrial economy.
However, industry analysts argue that even a favourable tariff decision would not resolve the structural challenges that have been weighing on the sector for several years.
Vehicle exports to the United States have fallen sharply since the tariffs were introduced. South African manufacturers exported 2,875 vehicles to the US during the first half of last year, compared with 16,112 units during the corresponding period a year earlier, representing an 82% decline.
According to the Automotive Business Council, export volumes fell by 73% during the first quarter, followed by declines of 80% in April and 85% in May as the tariffs took effect.
South Africa’s Minister of Trade, Industry and Competition, Mpho Parks Tau, has also highlighted the broader pressures facing the industry.
According to Tau, the combination of US tariffs, subdued domestic demand and rising import competition has resulted in 12 company closures and the loss of more than 4,000 jobs across the automotive sector over the past two years.
The impact has been particularly severe for export-oriented manufacturers.
Mercedes-Benz suspended production of the C-Class at its East London plant, where nearly 90% of output had been destined for the US market, while BMW’s Rosslyn plant, a key production hub for the X3 model, has faced declining competitiveness following the introduction of the 25% tariff.
Automotive exports to the United States were valued at approximately R28.7 billion, with vehicles accounting for around 64% of South Africa’s exports to the US under the African Growth and Opportunity Act (AGOA) during 2024.
Beyond the tariff dispute, industry performance has continued to lag national industrial targets.
South Africa produced 515,850 vehicles last year, significantly below the 784,509-unit production target outlined under the South African Automotive Masterplan 2035. Localisation levels have also remained at approximately 39%, well below the government’s 60% objective.
At the same time, imported vehicles now account for roughly 64% of domestic vehicle sales, limiting the ability of local demand to offset weaker export performance.
Consumer purchasing patterns have also shifted towards more affordable brands amid slower economic growth. Manufacturers such as Toyota, Suzuki and several Chinese automotive brands have expanded their market share, while premium manufacturers including Mercedes-Benz and BMW have experienced weaker sales.
Toyota reported that the average selling price of new vehicles declined by 2.3% over the past two years to approximately R490,478, despite inflation averaging around 4.5% annually over the same period, reflecting growing price sensitivity among consumers.
South African authorities have continued discussions with US officials in an effort to preserve preferential market access under AGOA.
Minister Tau has argued that South African vehicle exports account for less than 1% of total US vehicle imports, suggesting they pose little competitive threat to American manufacturers.
Business leaders have nevertheless warned that continued tariff uncertainty poses significant risks for manufacturers and component suppliers. Business Unity South Africa (BUSA) Chief Executive Khulekani Mathe described the industry’s exposure to US tariffs as substantial, while economists have cautioned that specialised automotive component manufacturers may struggle to redirect production to alternative markets because they are integrated into highly customised global supply chains.
Industry observers say the current situation highlights broader lessons for South Africa’s industrial strategy. While any easing of tariffs could provide short-term relief, strengthening local production, increasing localisation and diversifying export markets will remain critical to improving the long-term resilience and competitiveness of the country’s automotive industry.
