Auto industry needs to gear up says Toyota boss

To fully cement the viability and sustainability of the South African auto industry new vehicle sales volumes need to exceed 600 000 units a year according to Andrew Kirby, President and CEO of Toyota South Africa Motors (TSAM) who made the statement at his annual State of the Motor Industry address recently – at which event Toyota also revealed six new models for launch in the first quarter.

Kirby’s, keynote address titled “The Year That Was”, offered a deep dive into the challenges and opportunities facing South Africa’s motor industry and emphasised the urgent need to boost vehicle sales to attract increased foreign investment. He also stressed the critical role of government policies noting, while recent incentives for battery electric vehicle (BEV) production were a step forward, they remain insufficient to secure the industry’s future.

Andrew Kirby

“South Africa’s automotive sector is grappling with de-industrialisation and a decline in local content, which has dropped below 40% for domestically produced vehicles,” he said. However, he maintained cautious optimism, projecting a 3,7% growth in sales for 2025, reaching 535 000 units, attributing this to potential interest rate cuts and stabilising fuel prices.

Adding to the discussion, Mikel Mabasa, CEO of NAAMSA, highlighted South Africa’s political stability as a rare advantage in the region, expressing hope for what he termed a “year of abundance.”

Emerging Automotive Trends

Kirby identified five major trends reshaping the industry:

- Shifting Consumer Preferences: South Africans are increasingly opting for smaller, more affordable vehicles, with a 2,27% drop in the average passenger car price between 2023 and 2024.
- SUV Dominance: SUVs now account for over half of passenger car sales, with the number of available models rising from 114 in 2018 to 166 in 2024.
- Demand for In-Car Technology: Features such as customisation, connectivity and voice control are becoming standard, even in entry-level models.
- Rise of Indian and Chinese Production: Chinese and Indian vehicle imports have surged, making up 37% of local sales in 2023, compared to just 18% in 2018. Meanwhile, locally produced vehicle sales have dropped from 46% to 43%.
- The NEV Transition: The adoption of hybrid and electric vehicles is gaining traction, however, widespread adoption of BEVs in South Africa is unlikely before 2029 without stronger government incentives.

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“The industry’s growth will depend on collaboration, adaptability and a supportive policy framework – paving the way for a brighter future in the years ahead,” he says.

Steel Woes

South Africa's automotive industry has emphasised the urgent need for a robust and sustainable local steel supply chain, citing its critical role in vehicle production, particularly in safety-critical components. Kirby expressed concern about challenges facing the steel sector, including policy issues, logistical inefficiencies, and electricity costs, all of which are contributing to rising uncertainty.

"We cannot rely on scrap metal with impurities, which some local suppliers currently provide. This makes the stability of local steel production absolutely vital for us," he says. "The recent announcement regarding the risks to Newcastle’s operations is very serious for us. It’s encouraging that open discussions are underway, and there may be positive outcomes, but the underlying challenges are clear."

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Three key issues were identified as critical to resolving the steel industry’s struggles:

- Policy Concerns: The decentralisation of scrap metal exports has created an imbalance in the local market, with industries indirectly subsidising this system.
- Transport Costs: High logistical expenses are significantly driving up the cost of steel production.
- Electricity Prices: The sector continues to grapple with exorbitant energy costs, which undermine competitiveness.

Steel constitutes approximately 25%–30% of the local content in South African-manufactured vehicles, a figure that remains constant even with the transition to battery electric vehicles (BEVs). This highlights the importance of ensuring the sustainability of the steel industry for the future of the automotive sector.

"While we acknowledge the complexity of these challenges, we believe structural issues in the steel sector must be addressed by experts in the field. As an automotive industry, we are committed to supporting and collaborating where we can guide these efforts in the right direction," added Kirby.

A meeting with the CEO of ArcelorMittal South Africa (AMSA) further underscored the importance of increasing local demand for steel. AMSA urged original equipment manufacturers (OEMs) to source more steel domestically to help stabilise and grow the sector. Out of the seven OEMs operating in South Africa, four currently source most of their steel locally, with ongoing discussions aimed at encouraging further uptake.

"We need to create an environment where local steel production is competitive and sustainable. Investment in infrastructure and achieving scale is critical, not just for the steel sector but for the broader automotive industry," he says.

Looking back, Kirby said 2024 was anticipated to follow a predictable trajectory, with a softer first half and stronger second half. However, this pattern failed to materialise. While the resolution of the energy crisis – with 300 days of uninterrupted electricity supply provided much-needed economic relief, ongoing challenges in transport and logistics hampered recovery efforts.

“The national elections also played a pivotal role. Although they concluded smoothly, pre-election tensions impacted consumer and business confidence, delaying economic recovery. By year-end, vehicle sales reached 515 000 units, falling short of the forecasted 540 000. The taxi sector’s dramatic 60% contraction, driven by fraud and financing issues, exacerbated the decline. Adjusting for this anomaly, the market would have only dropped by 1,3%.

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“The South African automotive industry remains below pre-pandemic levels, with sales still trailing 2019 figures. For sustainable growth, experts suggest the market must exceed 600 000 annual units. Falling short of this benchmark makes it difficult for the sector to achieve scale and long-term stability,” he says.

Consumer Trends: Affordability and Preference Shifts

Affordability emerged as a dominant theme in 2024. The average selling price of passenger vehicles declined, reflecting a clear shift towards more budget-friendly options, particularly in the B-segment. This trend, driven by rising economic pressures and tighter credit conditions, was also evident in increased used car sales.

SUVs and crossovers continued their meteoric rise in popularity, now accounting for 53% of passenger vehicle sales. The introduction of new models has further bolstered this segment, particularly in premium categories. Consumer preferences have also evolved, with in-car experiences such as advanced infotainment systems, connectivity, and luxury features becoming key purchase drivers, even for mid-range vehicles.

“The automotive sector faces significant structural hurdles. Despite the existence of a national automotive master plan since 2018, little progress has been made in optimising the local market. The failure to implement key elements of the plan has stifled growth, while efforts to integrate regional markets through the African Continental Free Trade Agreement remain incomplete.

“Additionally, the lack of incentives to promote new energy vehicles (NEVs) is hindering South Africa’s ability to attract investment in this area. While a new tax mechanism offers a 35% incentive for capital investment in NEVs, the local market for these vehicles remains negligible, creating a barrier to growth in domestic production and exports.”

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Globally, Chinese and Indian vehicle manufacturers are asserting dominance, with China now accounting for 29% of global vehicle production. This trend is reshaping competition in South Africa, as both nations expand their influence in emerging markets.

At the same time, global conflicts, from the Russia-Ukraine war to Middle East tensions, have added to supply chain disruptions and market volatility. Climate-related challenges have also begun to impact South Africa, further complicating the operating environment.

“To thrive, the South African automotive industry must overcome structural inefficiencies and prioritise market integration and innovation. Affordability will remain a key factor influencing consumer behaviour, alongside a growing preference for SUVs and advanced in-car experiences.

“The sector’s future also hinges on its ability to embrace new energy vehicles, align with global trends, and secure regional trade agreements. With these measures in place, South Africa could unlock the growth potential necessary to surpass the critical 600 000-unit threshold and secure long-term sustainability.”

Vehicle Reveals

The event wasn’t just about industry insights. TSAM’s Senior Vice President for Sales and Marketing, Leon Theron, unveiled sic new models including:

- The updated Corolla Cross, featuring a refreshed design and enhanced safety features.
- The powerful Fortuner GR-S, now boasting 165kW and 550Nm of torque.
- The refined GR Yaris Upgrade, with an impressive 210kW output and a new eight-speed automatic option.
- The distinctive Hilux Legend 55, showcasing wide-body styling and performance upgrades.
- The enhanced Lexus LX and its newly introduced hybrid variant, the 700h.
- The all-new Lexus GX, a rugged yet luxurious off-roader debuting with an adventurous Overtrail variant.

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Hino 700: The Ultimate Cattle Freighter for Namibia's Farmers

Trucks transporting cattle are not an uncommon sight on the road, especially in rural areas but, other than seeing them as an impediment to progress, most road users give no thought to the weight considerations of 33 or more oxen.

Commissioned by Gobabis Toyota, there is a Hino 700 that was launched into the market last year, used as a cattle freighter in Namibia and, with the trailer attached, is capable of carrying 56 oxen each weighing around 230 kilograms, split evenly between the truck and the trailer.

The Hino 700 2841 6x4 freight carrier is paired with a custom-built trailer manufactured by Motor Body Construction (MBC) in Johannesburg. This vehicle is operated by dealership principal Theo Redelinghuys as a dedicated service for the local farming community.

This initiative has been especially beneficial during drought conditions, enabling farmers to move livestock to auctions or abattoirs at affordable rates. While most trips are within Namibia’s expansive Omaheke district, the rig has also been used for journeys across the country.

Having clocked more than 28 000 km, the truck has demonstrated its suitability for Namibia’s diverse terrain, from rough gravel tracks to paved roads, with an impressive average fuel consumption of 2,6 km/litre.

“The Hino 700 is ideal for this demanding role, thanks to its rear axle with diff-lock and cross-lock capabilities, advanced driver safety features, and the Hino hallmark of quality, durability, and reliability,” says Redelinghuys.

Recognising the need to support farmers with ageing transport fleets, Gobabis Hino developed this tailored solution to meet the challenges of Namibia’s remote, unpaved landscapes. The vehicle, boldly branded to echo Hino’s Dakar Rally trucks by Vista Branding in Gobabis, has received overwhelmingly positive feedback from the farming community.

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Africa Automotive - 2024 Growth of Africa's Automotive Sector

In 2024, Africa's automotive sector witnessed notable progress, primarily spurred by increased local production and advantageous trade policies. The continent is attracting a variety of automakers, both international and local, who recognise the potential within the region. This interest has led to a rise in automotive manufacturing plants across multiple African countries, reflecting a deliberate move towards regional production. The industry is also seeing a diversification of vehicle models being produced, catering to both local market demands and export opportunities.

Efforts to bolster the automotive industry are evident in the investments being made in infrastructure and technology. Countries such as South Africa, Nigeria, and Morocco are key players, offering a blend of skilled labour and favourable business environments. This development is creating job opportunities and fostering skills transfer, contributing to broader economic growth.

Another critical factor in this growth is the increasing collaboration between governments and industry stakeholders to create supportive policies and initiatives. These include tax incentives for manufacturers, streamlined customs procedures, and efforts to harmonise vehicle standards across the continent. Such measures are aimed at making Africa an attractive destination for automotive investment.

Furthermore, the push towards sustainability is also shaping the sector, with an increased focus on electric vehicles and green manufacturing practices. This trend is aligning with global shifts towards environmentally friendly motoring solutions, positioning Africa as a forward-thinking player in the global automotive arena.

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Impact of the African Free Trade Agreement

The African Continental Free Trade Agreement (AfCFTA) has the potential to transform the automotive industry across the continent. By connecting more than1,3-billion people into a single market, the AfCFTA provides significant opportunities for automakers to expand their reach and streamline operations. Additionally, a World Economic Forum report anticipates that global business under this agreement could boost the African automotive industry by $12-billion by 2027. These developments promise a more integrated market, reducing tariffs and improving trade efficiencies among African nations.

The removal of trade barriers under the AfCFTA is expected to ease the movement of automotive components and finished vehicles across borders. This will likely result in lower costs for manufacturers and consumers alike, fostering a more competitive market environment. Additionally, the agreement encourages regional value chains, allowing different African countries to specialise in various stages of vehicle production. This approach can lead to increased efficiency and higher-quality outputs.

Moreover, the harmonisation of regulations and standards across member states will simplify compliance for automakers, making it easier for them to operate in multiple countries. This is particularly beneficial for small and medium-sized enterprises looking to enter the automotive market. The AfCFTA's emphasis on economic integration and industrialisation aligns with the broader goal of sustainable development, positioning Africa as an increasingly attractive destination for automotive investment.

Indicators of Growth in the Automotive Industry

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The positive trajectory of Africa's automotive sector can be seen through various indicators. Afreximbank, in collaboration with the African Association of Automotive Manufacturers, is actively supporting industry growth. By harmonising automotive standards, developing training programmes, and providing financing, they aim to facilitate industry growth, with Afreximbank committing $1 billion to these efforts.

Vehicle production and sales figures are on the rise, reflecting increased consumer demand and manufacturing capacity. The establishment of new manufacturing plants in various African nations demonstrates robust confidence from both international and local investors. These investments are not only boosting production but also generating employment opportunities and enhancing skill development.

Furthermore, the automotive sector is benefiting from a rise in partnerships and joint ventures aimed at leveraging local expertise and global technology. This collaborative approach is leading to improved production processes and the introduction of innovative vehicle models tailored to the African market.

Another crucial indicator is the development of supply chain networks that are becoming more sophisticated, ensuring the efficient movement of automotive components and finished vehicles. These advancements are essential for meeting the growing demand for cars and motoring solutions across the continent.

In summary, these indicators highlight the increasing dynamism within Africa's automotive industry, showcasing a sector poised for sustained growth and development.

Industry Challenges

The African automotive industry, despite its promising growth, faces a range of challenges that could impede its progress. One of the most pressing issues is the inadequacy of infrastructure. In many regions, road networks and port facilities are not sufficiently developed to support efficient supply chain operations. This situation creates bottlenecks that can delay the movement of automotive components and finished vehicles, thereby increasing costs and affecting competitiveness.

Economic instability in some African nations also poses significant risks to the industry's growth. Fluctuations in currency values and inflation rates can create an unpredictable business environment, making it difficult for automakers to plan long-term investments. Additionally, political instability in certain areas can deter potential investors and disrupt existing operations.

Another challenge lies in the regulatory landscape, which can vary significantly from one country to another. This lack of uniformity complicates compliance for automakers, particularly those looking to operate across multiple African nations. While efforts are being made to harmonise vehicle standards under initiatives like the AfCFTA, achieving comprehensive regulatory alignment remains a work in progress.

Furthermore, access to financing is a critical hurdle for many local enterprises looking to enter the automotive sector. High interest rates and limited availability of credit can stifle innovation and restrict the growth of small and medium-sized enterprises that are essential for a vibrant automotive ecosystem.

Labour issues, such as the availability of skilled workers, also present obstacles. While some countries are investing in training programmes, the overall skill level of the workforce needs to be elevated to meet the demands of advanced automotive manufacturing.

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Technological Progress and Innovation

Technological advancements are playing a pivotal role in Africa's automotive evolution. There is a noticeable rise in electric vehicle production and adoption, driven by the continent's commitment to sustainable development. Pilot projects for sustainable vehicles are already underway in Rwanda, Egypt, and South Africa, with e-mobility startups emerging across the continent. The introduction of smart technologies in vehicles, such as advanced driver-assistance systems and connectivity features, highlights Africa's readiness to embrace innovation and align with global automotive trends.

Market Potential and Consumer Preferences

Africa's automotive market is burgeoning, spurred by emerging economies and an expanding middle class. These factors are significantly reshaping consumer preferences across the continent. There's a noticeable shift towards vehicles that prioritise sustainability, reflecting broader global trends towards environmentally conscious motoring. This change in preference offers automakers a valuable opportunity to introduce eco-friendly models that align with the increasing environmental awareness among African consumers.

In addition to the demand for sustainable vehicles, there's a growing appetite for advanced features and technologies in cars. African consumers are becoming more discerning, seeking vehicles equipped with the latest in safety, connectivity, and comfort. This trend is pushing automakers to innovate and adapt their offerings to meet these evolving expectations.

Moreover, the rise in disposable income among the middle class is leading to a higher demand for a diverse range of vehicles, from economical models to luxury cars. This diversity in consumer demand is encouraging manufacturers to broaden their portfolios to cater to different segments of the market. The interest in luxury and premium vehicles, in particular, is indicative of a market that is maturing and becoming more sophisticated.

The burgeoning interest in electric vehicles is another critical aspect of the changing market dynamics. Governments and private entities alike are increasingly promoting electric mobility as a sustainable alternative to traditional combustion engines. This is not only in line with global sustainability goals but also addresses local issues such as urban air pollution and fuel dependency.

Overall, the evolving market potential and consumer preferences in Africa present a promising landscape for the automotive industry. By responding to these trends, automakers can tap into a market that is both growing and increasingly sophisticated in its demands.

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Future Outlook and Opportunities

Looking ahead, Africa's automotive sector is poised for further advancement, driven by a combination of strategic investments, policy reforms, and technological innovation. The region's commitment to enhancing infrastructure and reducing trade barriers sets the stage for a more integrated and efficient automotive industry. Continued collaboration between governments and industry stakeholders will be crucial in creating an environment conducive to growth and innovation.

One of the most promising opportunities lies in the development of electric vehicles, with several countries already pioneering initiatives in this space. The shift towards sustainable motoring not only aligns with global trends but also addresses local challenges such as air quality and fuel dependency. This focus on green technology could position Africa as a leader in the adoption of environmentally friendly automotive solutions.

Additionally, the rising middle class and increasing urbanisation are expected to drive demand for a diverse range of vehicles, from budget-friendly models to premium cars. This expanding market offers a lucrative opportunity for automakers willing to tailor their offerings to meet the specific needs and preferences of African consumers.

Partnerships and joint ventures between local firms and global automakers are likely to enhance the transfer of knowledge and technology, fostering innovation and boosting production capabilities. As these collaborations flourish, they will contribute to the overall competitiveness of Africa's automotive sector on the global stage.

In summary, the future of Africa's automotive industry holds significant promise, with numerous opportunities for growth and development as the continent continues to embrace modernisation and innovation.

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