Egypt's Automotive Market Recovery Compared to South Africa

The future of South Africa’s automotive industry hangs in the balance as parliamentary leaders and global manufacturing executives call for urgent government intervention to protect the sector from aggressive international competition, while elsewhere on the continent Egypt’s market shows signs of a robust recovery.

During an oversight visit to the Eastern Cape recently, the Portfolio Committee on Trade, Industry and Competition met with industry giants including Volkswagen Group Africa and Isuzu to assess mounting challenges facing the Coega Special Economic Zone and the broader automotive precinct.

Volkswagen Group Africa chairperson and managing director Martina Biene revealed the high stakes facing the Kariega-based manufacturer, warning that decisions made now will determine whether new models are produced locally in the next decade.

“I’m now pitching for an investment in 2030, and I need that approval now,” said Biene. “If Volkswagen does not consider spending money in South Africa, then I won’t be able to launch a new car in 2030.”

The stakes are particularly high as the group weighs whether to produce its next generation of new energy vehicles in South Africa or shift that capacity to more cost-effective hubs in India.

“It’s not about protectionism,” she said. “It’s levelling the playing field in terms of cost of doing business, which is way lower in India and also lower in China for very different reasons.”

Portfolio Committee chairperson Mzwandile Masina echoed these concerns, noting that the committee identified quite a number of critical challenges during visits to the Coega SEZ and Volkswagen facilities. Masina pointed to the country’s competitive disadvantages, particularly regarding labour costs.

“We’re informed that in terms of labour cost, India, as an example, is 35% cheaper to produce a car because of their labour laws,” he said.

While reaffirming South Africa’s position as an open economy, Masina said the committee is finalising a report with far-reaching recommendations to protect the sector. “We had to tighten our labour laws due to our history. Therefore, it will be important to strike the balance between our labour laws and ensuring we can have affordable production here in South Africa.”

Beyond policy, both government and industry flagged serious concerns about infrastructure and service delivery. Biene provided a stark look at the logistical reality, explaining the company has been forced to abandon rail for road transport.

“Currently, for the domestic market business, we’ll truck all of our cars,” Biene said. “We’ll have in the domestic market probably 50 000 to 60 000 sales. The majority of that is sold in Gauteng province, so it all gets trucked from here to Gauteng because the South Corridor is not operational because of cable theft or infrastructure.”

She noted that even if the rail were functional, the financial burden remains a barrier. “If it would be operational now, we would have to pay more, and it’s the infrastructure cost of doing business which I tried to raise.”

Masina acknowledged the strain on municipalities, particularly ageing infrastructure, and stressed the need for stronger collaboration between local government and major investors.

As Volkswagen prepares for the 2027 launch of its new A0-entry SUV, known as Project Tengo, the success of current operations remains a prerequisite for the 2030 investment approval.

While South Africa confronts these challenges, Egypt’s automotive market has shown strong momentum. According to data published by the Automotive Market Information Council, vehicle sales reached 14 100 units in January 2026, compared to 10 150 units in the same period in 2025, representing a 38,7% year-on-year increase.

The performance was driven largely by passenger cars, which increased by 43,3% to around 10 900 units. The bus segment also showed growth, with 901 units sold compared to 698 a year earlier, while truck sales increased by 25 03% to 2 278 units, a key indicator of recovery in productive activity and domestic trade.

The January figures follow strong performances in recent months. In November 2025, vehicle sales surged by 54,7% year-on-year to around 16 800 units.

Egypt’s Industry Minister Khaled Hashem recently met with a delegation from Mercedes-Benz Egypt headed by chief executive Stefanie Volz to discuss opportunities to localise automotive manufacturing and expand the company’s operations. The discussions explored investment opportunities in line with the government’s strategy to deepen local manufacturing and facilitate the transfer of advanced technologies.

Dongfeng Box from SN Automotive in Egypt

Hashem noted that the Automotive Industry Development Programme represents a key pillar in attracting major international brands, offering incentives designed to localise the industry. The programme links investment incentives to increasing the share of local content and expanding domestic supply chains.

Volz expressed the company’s aspiration to further strengthen its strategic partnership with the Egyptian government, noting that Mercedes-Benz is marking 26 years of operations in Egypt.

Meanwhile, data compiled by the International Organization of Motor Vehicle Manufacturers shows South Africa consistently ranks among the countries with the highest car ownership in Africa, supported by a developed automotive industry, a relatively large middle class, and extensive road networks in major urban centres. Access to vehicle financing and a thriving used car market have also made ownership more attainable.

South Africa consistently ranks among the highest, supported by a developed automotive industry, a relatively large middle class, and extensive road networks in major urban centres. Access to vehicle financing and a thriving used car market have also made ownership more attainable for many households.

Libya has historically recorded high ownership levels due to low fuel prices stemming from its oil wealth, combined with long distances between cities and limited public transport options. Despite political and economic challenges in recent years, car ownership remains widespread.

Small island nations such as Mauritius and Seychelles also feature prominently, buoyed by stable economies, higher household incomes, and growing populations that increasingly rely on private vehicles for daily commuting.

Botswana and Namibia round out the list, where vast distances between communities make private transport a practical necessity. Both countries have invested heavily in road infrastructure in recent years, further supporting vehicle ownership.

Algeria and Morocco complete the picture as North Africa’s largest markets, with rising urbanisation and government policies encouraging local assembly driving demand across both countries.

In West Africa, Nigeria’s automotive aftermarket is drawing attention as a potential growth frontier. Industry estimates suggest the country’s spare parts market is worth between $5-billion and $6-billion annually, with new original equipment manufacturer components and aftermarket parts accounting for roughly 70% to 80% of that figure. Second-hand parts, commonly known as tokunbo, make up the remainder.

Mechanical engineer Okpamen Obasogie said the combination of a large replacement market, high import dependency and foreign exchange pressure has created a significant opportunity for localised spare parts manufacturing, particularly in high-turnover components such as brake pads, filters and suspension parts.

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Afreximbank Membership: Transforming South Africa's Auto Market

In a strategic move poised to reshape the continent’s economic landscape, South Africa’s recent accession as a shareholder of the African Export-Import Bank (Afreximbank) is being heralded as a potential game-changer for its cornerstone auto industry.

Analysts suggest the decision could unlock crucial finance, accelerate the implementation of the African Continental Free Trade Area (AfCFTA), and ultimately steer the sector towards a more prosperous, integrated future.

A US$8-billion commitment: HE Cyril Ramaphosa, President of South Africa and Dr George Elombi, President and Chairman of Afreximbank at the Country’s accession signing ceremony, marking the launch of a major Country Programme engineered to bolster the South African economy

The local automotive industry, a critical pillar of the national economy contributing nearly 5% to GDP and supporting hundreds of thousands of jobs, has long grappled with the challenges of limited scale, fragmented markets, and expensive access to trade finance. Joining Afreximbank directly addresses these pain points.

The most significant potential impact lies in the synergy with the AfCFTA. While the agreement promises a continental market of 1,3-billion people, its rollout has been hampered by logistical hurdles, payment system disparities and a simple lack of trade finance tailored for intra-African commerce.

Afreximbank, a key financial architect of the AfCFTA, operates the Pan-African Payment and Settlement System (PAPSS), which allows for instant cross-border payments in local currencies.

The macroeconomic outlook for local automakers, battered by global supply chain woes and sluggish domestic demand, stands to gain substantially. Increased export volumes into Africa would improve plant utilisation in places like Kariega, East London, and Rosslyn, enhancing economies of scale and potentially making local production more cost-competitive globally.

Furthermore, Afreximbank’s project finance capabilities could attract investment into the critical transition to new energy vehicles, however success hinges on our local industry’s agility to produce vehicles competitively tailored for diverse African consumers and on government’s parallel work to fix our ports, rails and energy supply.

If these domestic challenges are met, the combination of Afreximbank’s financial muscle and the AfCFTA’s market access could transform South Africa from a powerhouse serving mainly its domestic and traditional European export markets into the undisputed automotive hub of Africa.

The journey has begun, and the industry is now watching closely to see how quickly the promised finance flows onto the factory floor and out through the continent’s borders.

More than 2-million VW Polo models have been built at the Kariega plant

As always, there is a ‘but’ and in this case it comes from Volkswagen South Africa.

When Volkswagen Group Africa (VWGA) chairperson and managing director Martina Biene wrote to President Cyril Ramaphosa shortly before Christmas, it was an effort to push urgency into a process she believes has dragged on far too long, with real implications for the future of South Africa’s automotive industry.

Speaking at VW’s annual Media Indaba in Kariega, Biene said: “I wrote a letter to the President prior to Christmas. I mainly outlined that for us at VWGA, this year is crucial for securing an investment decision from VW headquarters for the next project in the pipeline.”

Her request was straightforward: clarity. Not only on the financial viability of future projects, but also on whether South Africa’s policy direction gives investors enough confidence to commit long-term capital.

“For this investment decision, they look at the economics and the business case,” she explained. “But headquarters also look at what’s happening in the country. One of their non-negotiables is seeing improvement in South African policies.

“You might have a business case,” she cautioned, “but there are stronger business cases elsewhere if we can’t show that investing here is sustainable.”

She didn’t mince her words: “This year for us is make or break.”

Professor Adrian Saville, economist and strategy specialist at GIBS, echoed the concern. Asked whether a major manufacturer could realistically leave South Africa, he didn’t hesitate.

“Could a specific business leave? Absolutely. Capital can go anywhere,” he said. “There are 200 markets you can choose to allocate capital to. There’s nothing that guarantees South Africa a place at the front of the queue.”

Saville pointed out that the country’s industrial history is full of once‑significant manufacturers that no longer exist. “South Africa is an industrial graveyard. No company is too big, too established or too important to walk away if conditions deteriorate.”

Despite the seriousness of her message, Biene says she received no direct reply from Ramaphosa. “The unfortunate thing is that the President didn’t reply to me,” she confirmed.

She did note that there has since been activity between the Automotive Business Council (Naamsa) and the Presidency’s staff, suggesting the letter may have prompted some movement behind the scenes.

Whether that translates into actual policy progress remains unclear. “Am I satisfied with that? I don’t know,” she said.

Saville argues that certainty alone isn’t enough if the underlying policy is weak. “Policy certainty over a policy that doesn’t work is a death blow,” he said. “We’ve got a knife at a gunfight.”

Still, both he and Biene acknowledge that South Africa has shown it can get policy right. The Automotive Production and Development Programme and the South African Automotive Masterplan are often cited as examples of what’s possible when government acts decisively.

The challenge, Biene says, is timing. “We don’t have the luxury of two or three years of debating and deliberating. The requirement is urgent.”

Her letter to the President was intended to make that point clear. Whether the message lands will matter not only for Volkswagen, but for the entire vehicle manufacturing sector in South Africa.

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