Naacam 2025: Strategies for Revitalizing South Africa's Automotive Industry

Against a backdrop of significant industry pressures, key government figures this week committed to tangible interventions aimed at securing the future of South Africa’s automotive components manufacturing sector.

Speaking at the opening of the 2025 National Association of Automotive Component and Allied Manufacturers (Naacam) Show, politicians outlined a multi-faceted approach designed to address immediate threats while positioning the industry for the new energy vehicle (NEV) era.

Nelson Mandela Bay Mayor, Babalwa Lobishe, set a local tone, emphasising the metro's commitment to sustaining existing manufacturers and attracting new investment to the region. Her remarks underscored the critical importance of the sector to the Eastern Cape economy, a point robustly expanded upon by Eastern Cape MEC for Economic Development, Environmental Affairs and Tourism, Nonkqubela Pieters.

MEC Pieters firmly established the province as the cornerstone of South Africa's automotive industry, responsible for exporting over half the country's manufactured vehicles. She pointed to the long-standing presence of major Original Equipment Manufacturers (OEMs) such as Isuzu, Volkswagen and Mercedes-Benz and welcomed the anticipated Stellantis production facility.

However, Pieters did not shy away from the challenges, explicitly citing increased import tariffs, persistent energy supply constraints, and logistical bottlenecks as direct threats to businesses and employment.

"Electricity supply remains the decisive factor in attracting and attaining investment," Pieters says, outlining provincial efforts to diversify the energy mix. These include proposed liquefied natural gas infrastructure development and the accelerated deployment of wind and solar projects.

Furthermore, she detailed plans to enhance freight capacity at the Gqeberha port, finalise a provincial hydrogen strategy, and collaborate with Technical and Vocational Education and Training (TVET) colleges and universities on skills development programmes tailored to the NEV transition.

The national perspective highlighted deeper systemic issues. Minister of Employment and Labour, Nomakhosazana Meth, framed global disruptions as potential opportunities for market diversification into Asia, Latin America and Africa. Yet, she starkly illustrated the sector's fragility by referencing the closure of ArcelorMittal's steel operations in Newcastle and Vereeniging.

"The direct impact is over 3,500 jobs lost in steel production," Meth noted, "with ripple effects across the automotive supply chain potentially pushing total job losses beyond 13 000 in the near term."

While acknowledging a R380-million government lifeline provided through InvestSA and the Industrial Development Corporation, Meth argued for proactive measures. She advocated for a comprehensive steel master plan, built on public-private collaboration, to secure buffer stocks, upgrade mini-mills for OEM-certified steel production, and address underlying competitiveness barriers like energy, logistics, and infrastructure.

To support the NEV shift, Meth confirmed the allocation of R1 billion in state funding aimed at catalysing R30 billion in private investment for local manufacturing projects.

Minister of Trade, Industry and Competition, Parks Tau, presented a sobering analysis of the domestic market. He contrasted 2024’s new vehicle sales of 515 712 units with the South African Automotive Master Plan (SAAM) 2035 target of exceeding 780 000 units. Tau highlighted concerning trends: 64% of vehicles sold domestically are imports, undermining local production, while local content in domestically produced vehicles remains static at 39%, significantly below the 60% SAAM 2035 goal. Compounding this, US tariffs now impact R28,7-billion worth of South African automotive exports.

"These pressures have directly contributed to 12 company closures and over 4 000 job losses within the past two years," Tau says, citing recent production suspensions at Mercedes-Benz and others as symptomatic of industrial value erosion. He stressed that a relatively modest 5% increase in local content could unlock R30 billion in new procurement, far outweighing the potential loss of the R4,4-billion US export market.

Tau detailed specific policy responses. Reforms to the Automotive Production Development Programme Phase 2 (APDP2) are underway, including shifting incentive structures to favour manufacturing over mere assembly.

A critical minerals and metals strategy will prioritise beneficiating platinum group metals, copper, and manganese for high-value NEV components like fuel cells and batteries. Significant tax incentives are also being deployed; the Taxation Laws Amendment Act gazetted in December 2024 introduces a 150% capital allowance for qualifying investments in EV and hydrogen vehicle production assets, applicable between March 2026 and March 2036.

On skills development, Tau confirmed collaborations with Tshwane University of Technology, Cape Peninsula University of Technology, and Unisa to develop new EV manufacturing curricula and certification programmes, culminating in a 100-student pilot project next year. He also reaffirmed commitment to transformation targets, including the SAAM 2035 goal of establishing 130 new black-owned manufacturers.

Addressing the broader investment climate, Tau announced plans for a general laws amendment bill designed to fast-track high-impact investments within 90 days, aiming to reduce red tape. A study via the International Trade Administration Commission (ITAC) will examine the impact of imports on local production.

"Our policy response prioritises offering the carrot, not wielding the stick," Tau concluded, "to attract investment and increase the value-add of our component manufacturers."

The collective message from Gqeberha was clear: the government recognises the severe headwinds facing the auto components sector, from energy instability and logistics failures to global market shifts and job losses.

The pledges made at Naacam 2025 represent a concerted, albeit complex, effort to stabilise the industry through infrastructure investment, policy reform, skills development, and targeted financial support, aiming to navigate the transition towards a more resilient and technologically advanced future. The success of these undertakings will be measured in the coming years by their ability to translate commitment into concrete results on factory floors and in export figures.

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Africa Automotive: Exploring Green Steel in South Africa - A Path to Sustainability

As global industries shift towards greener practices, South Africa is beginning to explore the potential of ‘green steel’—a low-carbon alternative to traditional steelmaking—with interest from both steel producers and automotive manufacturers. 

Image Supplied: ArcelorMittal

Green steel is produced using renewable energy and hydrogen instead of coal, significantly reducing carbon emissions. Given that steel production is a major contributor to global CO₂ emissions, the push for greener alternatives has gained momentum worldwide. In South Africa, where the steel and automotive sectors are key economic drivers, the transition could play a crucial role in maintaining competitiveness, especially as international markets impose stricter environmental regulations. 

Currently, no South African automakers are using green steel in large-scale production, but industry leaders are closely monitoring developments. Companies like Mercedes-Benz South Africa and BMW Group South Africa have committed to sustainability goals, including carbon-neutral manufacturing, which could eventually incorporate green steel. 

Image supplied: ArcelorMittal

On the production side, ArcelorMittal South Africa, the country’s largest steelmaker, has signalled interest in decarbonisation. The company has partnered with renewable energy providers and is exploring hydrogen-based steelmaking, though full-scale green steel production is not yet a reality. Similarly, South Africa’s Industrial Development Corporation (IDC) has highlighted green steel as a priority for future investment, aligning with global trends towards sustainable industrial processes. 

Experts suggest South Africa, with its abundant solar and wind resources, is well-positioned to produce green hydrogen, a key component in green steel manufacturing. However, high costs and infrastructure challenges remain barriers to rapid adoption. 

The transition to green steel is inevitable, but it will require significant investment and policy support but for South Africa to remain a player in global automotive and steel markets, it must accelerate its shift towards sustainable production methods.

While the local industry is still in the early stages, the global push for decarbonisation means green steel could soon become a critical factor in South Africa’s industrial future. For now, automakers and steel producers are watching closely, preparing for a greener transition. 

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Africa Automotive: South Africa's Automotive Industry Faces Production Challenges Amid Global Pressures

The suspension of C-Class sedan production at Mercedes-Benz South Africa's (MBSA) East London plant until late July underscores a deepening crisis within South Africa's vehicle assembly sector, according to Renai Moothilal, chief executive of the National Association of Automotive Component and Allied Manufacturers (Naacam). Moothilal describes production plant volume cuts as increasingly frequent over the past two years.

MBSA confirmed the planned non-production period from 24 June to 30 July, attributing it to sufficient existing stock meeting current demand and standard procedure for volume adjustments. Operations are set to resume on a two-shift basis from 1 August. Naacam indicates component suppliers received advance notice of this specific shutdown.

"This planned closure aligns with patterns observed across the South African vehicle assembly landscape for approximately two years," Moothilal stated. "While uncertainty stemming from US tariff situations presents obvious market issues, the persistent volume reductions pose a significant threat to the business sustainability of component manufacturers."

Naacam has documented numerous local component plant closures and associated job losses directly linked to assemblers failing to achieve the production volumes initially projected when vehicle platforms were launched. "This correlation is clear and has occurred at several assemblers locally since 2023," Moothilal emphasised.

He points to the anticipated 2025 policy review of the government's Automotive Production and Development Programme (APDP), led by the Department of Trade, Industry and Competition, as a critical juncture. Moothilal argues the review must urgently devise mechanisms to shield component companies from the damaging impact of volatile assembly volumes. Currently, vehicle manufacturers receive the largest portion of APDP incentives, including cash and duty rebates tied to assembly volumes and domestic value addition.

"The goals of the South Africa Automotive Masterplan 2035 (SAAM 35) concerning localisation and employment hinge on addressing this imbalance," Moothilal warned. "Failure to do so jeopardises these objectives." When SAAM 35 was drafted between 2016 and 2018, average local content in domestically assembled vehicles stood below 40%, ranging from roughly 30% for high-tech passenger cars to 45% for light commercial vehicles. Moothilal notes that nearly a decade later, this figure remains largely unchanged, despite SAAM 35 targeting 60% local content by 2035. The plan also aims to double employment within the automotive value chain, from about 112 000 to 224 000 people.

Export Reliance and Global Headwinds

MBSA's situation highlights the sector's export dependency. Over 90% of its East London output is shipped to more than 80 global markets, vital as domestic sales for premium brands like Mercedes-Benz have declined sharply. Factors include increased competition from Chinese imports and a consumer shift towards more affordable vehicles.

The parent company, Mercedes-Benz Group, faces its own challenges: a sluggish German economy, potential US tariffs, and surging Chinese competition. The company warned in April of "material impacts" on its financial results if all implemented and announced tariffs remain through 2025.

The European Union, South Africa's largest vehicle export market, presents a mixed picture. While overall EU new car registrations dipped slightly (0.6%) year-to-date until May 2025, battery-electric vehicle (BEV) market share grew to 15.4%. Chinese automakers doubled their EU market share to 5.9% in May 2025 compared to May 2024, demonstrating resilience even amidst new EU tariffs on Chinese EVs by focusing on plug-in and full hybrids. Mercedes-Benz ranked tenth among the top 25 BEV brands in the EU for May, behind Volkswagen (first) and BMW (third), both of which also manufacture in South Africa.

Contrasting African Markets and Local EV Lag

While South Africa contends with production volatility, other African markets show strong growth. Morocco's new car market surged 36.14% in the first half of 2025, selling 112 026 units. Egypt recorded a dramatic 128% year-on-year increase in total automotive sales for May 2025, reaching 14 300 units, with passenger car sales up 98%.

South Africa's automotive sector, contributing 5.2% to GDP (3.2% manufacturing, 2% retail), demonstrated resilience in June 2025 with new vehicle sales climbing 18.7% year-on-year, buoyed by interest rate cuts, controlled inflation, and affordable Chinese imports. However, exports showed signs of strain for major players.

A significant lag remains in electric vehicle adoption. While global EV sales exceeded 17 million units in 2024, growing over 25%, South Africa is a slow starter. Naamsa, the National Association of Automobile Manufacturers of South Africa, is spearheading efforts to build foundational infrastructure. It has commenced work on a national network of 120 publicly accessible EV charging stations along major routes, featuring fast chargers.

Shivani Singh, Naamsa's chief projects officer, highlighted fuel station forecourts as ideal locations due to their traffic, location, and permits. The current scarcity is stark: fewer than 400 public EV chargers compared to 4 800 licensed petrol stations. Timothy Oliver, fuel specialist at Connect Group South Africa, cited capital constraints for diversification and complexities of managing multiple sites as hurdles for retailers.

Naamsa's charging network initiative represents a concrete step towards making EV ownership viable, aiming to replace the unreliable and sparse infrastructure currently available. The success of this infrastructure push, coupled with addressing the fundamental challenges of assembly volume stability and localisation incentives highlighted by Naacam, will be crucial for the future sustainability and growth of South Africa's critical automotive industry.

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Africa Automotive - How Policy and Partnership Are Igniting Africa’s Automotive Revolution

In the heart of Botswana’s Lobatse, a quiet industrial revolution is unfolding. Inside Delta Automotive Technologies’ sprawling factory, skilled hands weave intricate webs of wires and connectors — components destined for Volkswagen and Nissan vehicles across Africa.

Intricate wiring harness assembly in Lobatse, Botswana

This facility, powered by strategic financing and regional collaboration, embodies a transformative vision: Africa as a hub of automotive innovation, not just a market for second-hand imports. But to shift gears from potential to reality, the continent’s governments must accelerate policies that fuel local manufacturing, cross-border trade, and sustainable mobility.

The Road So Far

Africa’s automotive sector sits at a crossroads. In 2024, Sub-Saharan Africa (excluding South Africa) saw just 175 915 new vehicle sales, overshadowed by over a million used imports. Countries like Ghana, Nigeria, and Rwanda remain tethered to ageing fleets, often a decade old, which guzzle fuel, pollute cities and drain foreign exchange. Vehicle penetration lingers at three cars per 100 people — a stark contrast to the global average of 18. Yet, this gap signals untapped opportunity.

“We’re scratching the surface,” says Martina Biene, Chairperson of Volkswagen Group Africa. “But unlocking this potential demands policy alignment, investment in clean energy, and a continent-wide rethink of how we approach mobility.”

Policy as the Engine of Growth

Victoria Backhaus-Jerling

At a recent Volkswagen-hosted event in Kigali, Victoria Backhaus-Jerling, CEO of the African Association of Automotive Manufacturers (AAAM), outlined the non-negotiables for progress. “Political will to implement automotive policies is paramount,” she asserted. “Without legal frameworks, Original Equipment Manufacturers (OEMs) won’t invest.”

Her message resonates across boardrooms and government offices: Africa needs cohesive policies to attract giants like Toyota, Volkswagen, and Renault. South Africa, Morocco, and Tunisia have already demonstrated this. South Africa’s auto sector contributes 4,3% to GDP, supported by incentives like the Automotive Production and Development Programme.

Morocco, now Africa’s top car exporter, leveraged tax breaks and port upgrades to lure Renault and Stellantis. Algeria, too, is drafting an auto policy to position itself as a manufacturing contender.

Filter assembly at Johannesburg's Mann & Hummel facility

But fragmentation persists. Forty-one African countries lack basic automotive standards, from fuel quality to emissions. Ghana’s nascent assembly incentives — tax breaks for local plants — are hamstrung by uneven regional regulations. Backhaus-Jerling’s solution? “One Africa, one automotive standard. Harmonisation reduces costs and builds value chains that stretch from Accra to Addis Ababa.”

AfCFTA: The Continental Catalyst

The African Continental Free Trade Area (AfCFTA) could be the game-changer. Its proposed Rules of Origin (RoO), requiring vehicles to contain 40% local content for tariff-free trade, might reshape supply chains. For Ghana, this could mean component manufacturing booms; for South Africa, expanded markets for its OEMs. Regional collaboration is already budding. Botswana’s Delta Automotive supplies wiring harnesses to South African plants, a synergy Backhaus-Jerling calls “a blueprint for cross-border industrialisation.”

Yet AfCFTA’s success hinges on execution. “It’s not just about agreements,” says Biene. “It’s about ports that clear goods swiftly, roads that connect factories, and grids that support electric vehicle (EV) charging.”

Botswana’s Delta

Delta Automotive Technologies exemplifies this potential. Founded with an $80-million African Development Bank (AfDB) credit line, the company now produces 120 wiring harnesses daily for Volkswagen’s Polo Vivo and Nissan’s H60 models. By 2027, it aims to triple output, employing 1 000 workers — 95% Batswana nationals.

“This isn’t just manufacturing; it’s opportunity,” says Delta’s Director of Manufacturing, Darryn Hattingh. The factory’s impact ripples beyond Lobatse: rural communities gain skilled jobs, women shatter industry stereotypes (75% of Delta’s workforce is female), and Botswana diversifies beyond diamonds.

Clara Kaekane, a Delta engineer, embodies this shift. “We’re challenging perceptions,” she says. “Every harness we build proves women belong in engineering and Africa belongs in global supply chains.”

The EV Opportunity

As the world pivots to electric mobility, Africa can’t afford to lag. Kenya’s electric motorbike boom and Morocco’s EV exports hint at a greener future. Ghana, with its renewable energy mix, is poised to lead in battery assembly and EV production. Initiatives like Volkswagen’s GenFarm — electric tractors deployed in Rwanda — show how local solutions can address global challenges.

But EVs require more than innovation. “Africa needs infrastructure—charging stations, reliable power, and skilled technicians,” notes Biene. Ghana’s planned technical institutes, focusing on EV tech, could become regional talent hubs.

From left, Teddy Mugabo, CEO: Greenfund Rwanda, Michael Frambourg, Executive Manager: Sustainability Solutions, Volkswagen Group Innovation Centre Europe, Martina Biene, Chairperson & Managing Director: Volkswagen Group Africa, Dr Ron Rosati, Vice Chancellor: RICA, Dr Telesphore Ndabamenye, Director General: Rwanda Agriculture Board, Serge Kamuhinda, CEO: Volkswagen Mobility Solutions Rwanda, Hildegard Muller, President: VDA.

The Used Car Conundrum

Grappling with used imports remains thorny. In Ghana, 70% of vehicles are second-hand, often evading emissions standards. Banning them risks public backlash, but gradual reforms — stricter age limits, low-interest loans for new cars — could tilt the balance. Kenya’s 2018 age limit (eight years for imports) offers a model, though enforcement is patchy.

Financing the Future

Development finance institutions like AfDB are critical. Their investment in Delta Automotive unlocked $23-million in exports and positioned Botswana as a component supplier. “This is how you industrialise Africa,” says AfDB’s Moono Mupotola. “Connect communities to global value chains.”

Yet private-sector partnerships are equally vital. Volkswagen’s collaboration with Ghana’s Universal Motors to assemble Tiguan SUVs shows how OEMs can seed local industries.

Africa’s automotive journey isn’t about catching up — it’s about redefining mobility on its own terms. From Algeria’s emerging factories to South Africa’s OEM hubs, the pieces are falling into place. But without political drive, even the best policies stall.

As Backhaus-Jerling puts it, “Africa has the market, the youth, and the resources. Now, we need the will to build an industry that doesn’t just assemble cars but engineers solutions for the world.”

In Lobatse, that future is already taking shape. With every wire harness Delta’s workers craft, they’re weaving a new narrative — one where Africa isn’t just open for business but is building the vehicles that will drive it forward.

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Africa Automotive: Transforming Africa's Automotive Industry - Key Regulatory Challenges

Africa’s automotive industry stands at a crossroads, balancing untapped potential against systemic challenges. The African Association of Automobile Manufacturers (AAAM) has intensified calls for governments to accelerate the adoption of unified automotive regulations, a move seen as critical to unlocking regional economic growth and integration.

With 41 of the continent’s 54 nations lacking standardised fuel quality controls or vehicle manufacturing frameworks, industry leaders argue that fragmented policies are stifling investment and hindering cross-border collaboration.

Speaking at a recent industry briefing in Kigali, AAAM CEO Victoria Backhaus-Jerling underscored the urgency of aligning national regulations with global benchmarks. “Harmonising standards for vehicles, components, and fuel is not merely beneficial—it is foundational,” she stated. “Without cohesive policies, Africa risks missing opportunities to transform raw materials into higher-value products and build resilient regional supply chains.”

Her remarks highlight a pressing dilemma: while not every country needs vehicle assembly lines, coordinated standards could enable nations to leverage comparative advantages, fostering specialisation and shared industrial growth.

Volkswagen plant in Kariega, South Africa

Policy Gaps and Economic Costs

The absence of regulatory alignment has tangible consequences. Volkswagen Group Africa’s Managing Director, Martina Biene, pointed to Nigeria as an example, where inconsistent fuel quality standards disrupted the company’s operations and delayed market re-entry. Such barriers, she noted, undermine Africa’s ability to attract manufacturing investments, despite its burgeoning consumer markets and raw material reserves.

The automotive sector’s economic significance is well-documented. In South Africa, it contributes 4.3% to GDP and supports over 450,000 jobs, trailing only mining in economic impact. Yet, across much of the continent, disjointed policies mean similar benefits remain unrealised. Backhaus-Jerling emphasised that political continuity is key: “Sustainable industrial growth requires commitment beyond electoral cycles. Policy formulation cannot halt with changes in leadership.”

Regional Integration and the AfCFTA Imperative

The African Continental Free Trade Area (AfCFTA), operational since 2021, offers a pathway to address these challenges. By reducing intra-African tariffs and streamlining customs procedures, the agreement aims to create a unified market of 1.3 billion people. For automakers, this could catalyse economies of scale, making local production more viable. However, progress hinges on complementary national policies.

“Regional integration must be prioritised,” urged Backhaus-Jerling. “Policies that facilitate cross-border trade and value-chain collaboration are essential to position Africa within global automotive networks.” The AAAM advocates for frameworks that incentivise domestic manufacturing, reduce reliance on imported vehicles, and attract foreign direct investment (FDI). Countries like Morocco and Egypt, which have implemented targeted automotive strategies, serve as models, drawing major manufacturers through tax incentives and infrastructure development.

Ford's PHEV battery assembly plant in Rosslyn, Pretoria

Trade Turbulence and the US Tariff Threat

While continental integration advances, external pressures loom. South Africa’s export-driven automotive sector faces uncertainty due to proposed US tariffs. Former President Donald Trump’s 2024 announcement of 25% levies on automotive imports, coupled with an additional 31% duty targeting South Africa, threatens to disrupt a trade relationship underpinned by the African Growth and Opportunity Act (AGOA). Since 2001, AGOA has granted duty-free access to the US market for eligible African nations, with South African automotive exports — including brands such as BMW , Ford and Toyota — accounting for 64% of AGOA-related shipments.

Though only 6,5% of South Africa’s automotive exports currently go to the US, industry representatives caution against underestimating the tariffs’ ripple effects.

Complicating negotiations is South Africa’s recent foreign policy stance, including its International Court of Justice case accusing Israel of genocide in Gaza — a move criticised by US lawmakers. With trade discussions likely to intersect with geopolitical tensions, industry stakeholders emphasise the importance of safeguarding jobs without compromising national sovereignty.

Market Shifts: The Rise of Asian Manufacturers

BAIC assembly facility in Coega, Eastern Cape

Amid policy debates, Africa’s automotive landscape is undergoing a quiet transformation. Asian manufacturers, particularly from China, are gaining ground in markets traditionally dominated by European and American brands. In South Africa, Chinese automakers such as GWM (Haval) and Chery have doubled their market share since 2020, challenging incumbents through competitive pricing and local assembly investments.

China’s influence extends beyond finished vehicles. In 2021, 64% of South Africa’s imported aftermarket parts originated from China, reflecting deepening supply-chain integration. Companies such as BAIC and Yanfeng Plastic Omnium have committed billions to local production facilities, while established players including Toyota are partnering with Asian suppliers to reduce costs. This shift is reshaping manufacturing strategies, with Original Equipment Manufacturers (OEMs) increasingly sourcing components from Asian partners to maintain competitiveness.

Government’s Role in Navigating Transition

Industry leaders argue that targeted government support is vital to harness these trends. South Africa’s Automotive Investment Scheme (AIS), which co-funds manufacturing upgrades, and initiatives by the National Association of Automotive Component and Allied Manufacturers (NAACAM) to bolster local suppliers, exemplify measures that could be replicated continent-wide.

Transitioning to electric vehicles (EVs) presents another opportunity. With global OEMs pivoting to electrification, African nations could leverage mineral resources like cobalt and lithium to develop EV value chains. However, this requires proactive policy-making, including investment in charging infrastructure and incentives for local battery production.

A Roadmap for the Future

Toyota's manufacturing base is in Prospecton, Durban

The AAAM’s push for regulatory harmonisation coincides with a pivotal moment for African industry. As global trade dynamics shift and regional integration gains momentum, coordinated policies could unlock manufacturing potential, stimulate job creation, and reduce dependency on imports. For policymakers, the challenge lies in balancing immediate economic pressures with long-term strategic vision.

For automotive stakeholders, the message is clear: Africa’s success hinges on collaboration. By aligning standards, fostering specialisation, and prioritising regional value chains, the continent could transition from a patchwork of isolated markets into a cohesive automotive hub—one capable of competing on the global stage. The road ahead is complex, but with concerted effort, the rewards could be transformative.

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Africa Automotive - Billy Tom Leads AITF Driving Change in Automotive Equity

The Automotive Industry Transformation Fund (AITF), established in 2020 to drive equity and growth in South Africa’s automotive sector, has appointed Isuzu SA CEO Billy Tom as its new chair, succeeding independent chair Dr Sizeka Magwentshu-Rensburg.

The fund, backed by major manufacturers including BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and Volkswagen, operates as a collective Equity Equivalent Investment Programme (EEIP) under BBBEE codes. Each contributing firm allocates a portion of annual earnings to foster black-owned automotive enterprises through funding, market access, and mentorship.

Billy Tom

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Under Tom’s leadership, the AITF has transitioned to a rotational chair system, enabling OEM executives to leverage industry expertise directly. Since its inception with an initial R596-million investment, the fund has supported 70 black-owned companies — surpassing its 2029 target of 90 — and facilitated R5-billion in market access. A further R1-billionn has been earmarked to develop tier 2 and 3 black-owned suppliers, alongside R500-million reserved for new energy vehicle (NEV) infrastructure, despite hybrids dominating 85% of the niche 3% NEV market share.

Tom highlighted challenges such as inefficiencies at South African ports, where logistical bottlenecks and security issues disrupt supply chains. These hurdles have intensified the push for localising components, a strategy reinforced by pandemic-era lessons. He cited a success story where a black female-owned supplier, initially providing R40-million in parts to Isuzu, secured R200m in contracts after AITF and Industrial Development Corporation support.

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However, external pressures loom. US tariffs on automotive imports, introduced under former President Donald Trump, threaten South Africa’s R35-billion annual vehicle exports to the US — its third-largest market.

Trade, Industry, and Competition Minister Parks Tau confirmed the government is considering expanding the Automotive Production and Development Programme (APDP), which offers production-linked incentives, to mitigate tariff impacts. Naamsa, representing local OEMs, warned the 25% levy could raise costs for US consumers and reduce export viability for brands like BMW and Ford.

Amid these headwinds, Tom advocates bolstering intra-African trade, referencing Algeria’s shift from importing 23 000 South African vehicles in 2011 to pursuing local production via partnerships with 13 international firms, including Hyundai and China’s Great Wall Motor. Algeria’s import ban and push for 500 component factories mirror broader continental strategies to enhance self-reliance.

Tom emphasised Africa’s need to “bulletproof” itself against global disruptions, drawing parallels to vaccine inequity during the pandemic. While acknowledging progress, he noted the AITF’s journey was far from complete, balancing ambition with systemic challenges.

As South Africa navigates trade uncertainties and infrastructural reforms, the fund remains pivotal in shaping an inclusive, resilient automotive future.

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US Tariff Impact on South African Automotive Industry

The recent announcement of a 30% tariff by the United States on goods imported from South Africa has created significant concern within the global motoring industry. This substantial increase in tariffs is expected to have far-reaching implications for South African car manufacturers, exporters, and the broader economy. The auto industry is now preparing for the substantial adjustments that this policy shift will necessitate.

Key stakeholders are paying close attention to how these changes will play out, as the new tariff introduces a host of challenges for South Africa's automotive sector, impacting everything from production costs to market competitiveness.

South Africa's automotive exports to the United States have been a crucial component of the country's export portfolio. In fact, the export of vehicles and parts from South Africa to the US is valued at over $2-billion. The introduction of the tariff is poised to disrupt this flow significantly. Notably, automobile exports accounted for 64% of South Africa's exports under the US African Growth and Opportunity Act (AGOA) in 2024. With such a substantial reliance on the American market, the potential impact of the tariff cannot be underestimated.

Industry experts and economists are weighing in on the situation. Some predict a decrease in South African vehicle exports to the US, which could lead to surplus inventory and financial losses for manufacturers. Additionally, South African cars could become less competitive in the US market due to increased costs, further exacerbating the situation.

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The new tariff brings numerous difficulties for South African car manufacturers. An immediate concern is the rise in production costs, which stems from higher expenses for raw materials and components. This escalation in costs could lead to increased vehicle prices, potentially dampening demand in both domestic and international markets.

Manufacturers might need to reconsider their production strategies to stay competitive. This could include relocating manufacturing to countries with more favorable trade terms or investing in technologies that cut costs. However, such shifts require significant time and resources, adding to the industry's existing challenges.

Additionally, the uncertainty surrounding international trade relations could make it harder for manufacturers to plan for the future. The industry may face financial strain and operational disruptions as it navigates these complex issues.

Effects on the South African Economy

The broader South African economy is poised to experience significant repercussions due to the new US tariff. The automotive industry is not only a major contributor to South Africa's GDP but also a substantial employer, so a decline in exports could trigger widespread economic consequences. Potential job losses in the auto industry are a serious concern, as reduced production and export volumes may compel manufacturers to downsize their workforce.

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Additionally, the uncertainty surrounding trade relations with the US might dampen investor confidence in South Africa's automotive sector. This could lead to reduced investment, stalling the industry's growth and innovation. Companies may also face increased financial strain, making it harder to maintain operations and fund new projects.

The knock-on effects could extend to related industries, such as suppliers and logistics providers, amplifying the economic impact. Overall, the new tariff introduces a layer of complexity that the South African economy will need to navigate carefully, affecting everything from employment rates to future investment opportunities.

Responses from Industry Stakeholders

Industry stakeholders are actively addressing the tariff announcement, with varied reactions across the sector. Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers, emphasized the need for more details, stating that the association will await further information on the specific components affected by the tariff proclamation.

Government officials and industry leaders are expected to pursue diplomatic discussions to negotiate the tariff's terms with the US, aiming for potential exemptions or revisions. Some stakeholders are urging the South African government to strengthen trade agreements with other countries to offset the impact of the US tariff.

There is also a call for increased investment in domestic technologies and alternative markets to reduce dependency on US exports. This multi-pronged approach could help mitigate some of the tariff's adverse effects on the South African automotive sector.

Chairperson of the federal council of the Democratic Alliance (DA), Helen Zille says the global tariffs unleashed by US President Donald Trump spell disaster for South Africa, amid the souring bilateral relationship.

“What can one say? It is going to be disastrous for our automotive industry in particular if they have 30%  tariffs slapped on our motor vehicles that are made in the facilities of Pretoria and Nelson Mandela Bay. Obviously, it is going to be terrible for us,” she said.

“The government won't learn. There is tension between the ANC and just about every democracy in the world, and there is certainly profound tension between the ANC and democrats in South Africa.”

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In the long run, South African car manufacturers will need to rethink their strategies to adapt to the new trade environment. They might start exploring untapped markets and diversifying their export destinations to reduce their reliance on the US This could involve strengthening trade relations with other countries and regions, potentially opening new avenues for growth. 

Additionally, investing in advanced manufacturing technologies and improving efficiencies could help mitigate the increased production costs imposed by the tariff. Collaborations with local and international partners could further enhance competitiveness and innovation within the industry. The South African auto industry's ability to navigate these changes will significantly influence its future trajectory.

The 30% US tariff on South African goods presents substantial challenges for the nation's automotive sector. The immediate consequences include a rise in production costs and potential job reductions, putting significant pressure on manufacturers to adapt swiftly.

Over the long term, the industry will likely need to diversify its export markets to lessen dependence on the American market. This shift could open new opportunities but will also require strategic investments in technology and efficiency improvements.

Stakeholders, including government officials and industry leaders, are working on responses to mitigate these impacts. Efforts are underway to negotiate better trade terms with the US and strengthen trade agreements with other countries. Additionally, there's a push for increased investment in domestic capabilities to reduce external dependencies.

The resilience of South African car manufacturers will be critical in navigating these changes. By exploring new markets and investing in advanced manufacturing technologies, the industry can adapt to the evolving trade landscape. While the road ahead is fraught with challenges, the potential for innovation and growth remains. The South African automotive sector's ability to pivot and respond strategically to these new conditions will significantly influence its long-term success and stability.

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Speed up AfCFTA and industrialise

Zimbabwe’s Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, has underscored the urgency of advancing industrialisation and expanding Special Economic Zones (SEZs) across Africa to accelerate the implementation of the African Continental Free Trade Area (AfCFTA). Speaking at the 57th Session of the Conference of African Ministers of Finance, Planning, and Economic Development in Addis Ababa, Ncube positioned these measures as vital for unlocking the bloc’s economic potential.

Zimbabwe, which ratified the AfCFTA agreement in May 2019, is among the early adopters of the initiative designed to create a unified continental market. The pact, established in 2018, seeks to dismantle trade barriers, harmonise regulations and boost intra-African commerce, which currently lags behind other regions. With a population of 1,4-billion and a collective GDP exceeding $3,4-trillion, the AfCFTA could elevate intra-African trade by 45% by 2045 — if infrastructural and regulatory challenges are resolved.

During his address, Ncube outlined key priorities drawn from discussions with the Committee of Experts. Strengthening regional value chains in agriculture, manufacturing, and services was highlighted as a priority to reduce reliance on raw commodity exports.

“Enhancing trade infrastructure and addressing non-tariff barriers will be central to maximising value addition,” he said, pointing to the need for harmonised regulations and improved access to finance.

The outgoing conference chair echoed these sentiments, advocating for innovative financing mechanisms such as blended finance and thematic bonds to support businesses. Digital transformation was also flagged as a catalyst for growth. Ncube stressed that integrating e-commerce platforms, digital trade tools, and fintech solution into the AfCFTA framework could lower transaction costs and broaden market access.

Zimbabwe’s Automotive Sector Opportunity
Zimbabwe’s recent approval of provisional tariff concessions by the AfCFTA Secretariat positions it to begin preferential trading under the agreement. This milestone aligns with the nation’s ambitions to leverage its mineral wealth, particularly in lithium and steel, to participate in regional value chains.

A recent study by Afreximbank, the AfCFTA Secretariat, and the African Association of Automotive Manufacturers identified several Zimbabwean firms — including Chloride Zimbabwe and United Springs — as potential contributors to Africa’s automotive sector.

With global demand for electric vehicles rising, Zimbabwe’s lithium reserves, critical for battery production, could see it emerge as a hub for component manufacturing. Ncube noted that such opportunities align with broader efforts to diversify economies and reduce dependency on volatile commodity markets.

As South Africa assumes the G20 presidency, Ncube urged African leaders to seize the platform to advocate for reforms in global financial architecture. He called for inclusive frameworks to improve access to climate finance and support sustainable development goals.

“Green industrialisation must be prioritised,” he added, emphasising the potential for renewable energy investments and climate-resilient trade policies to position Africa as a leader in sustainable growth.

While progress on the AfCFTA advances, concerns linger over external trade pressures. In South Africa, automotive sector stakeholders convened at the National Union of Metalworkers’ Bargaining Conference to discuss the potential fallout from losing access to the US African Growth and Opportunity Act (AGOA). Toyota CEO Andrew Kirby warned that exclusion from AGOA could cost the company 7% of its manufacturing output, underscoring the fragility of export-dependent industries.

Lada Iskkra

Meanwhile, Russian automaker AvtoVAZ announced plans to expand into Nigeria, targeting West Africa’s largest economy with a spare parts hub in Lagos by 2025. The firm, known for its Lada vehicles, is also exploring partnerships to establish a compressed natural gas conversion plant, aligning with Nigeria’s push for alternative energy solutions. With annual vehicle demand in Nigeria estimated at 720 000 units — far outstripping local production of 14 000 — the move signals growing international interest in Africa’s underdeveloped automotive markets.

As the ministerial conference closed, Ncube urged delegates to translate dialogue into tangible policies. “Macro-economic stability, debt management, and domestic resource mobilisation are non-negotiable for building investor confidence,” he asserted, stressing the need for coordinated national and regional strategies.

The outgoing chair reinforced this call, noting, “This conference must drive concrete commitments—not just aspirations—to realise Africa’s economic transformation.” With Zimbabwe poised to commence AfCFTA trading and regional partnerships gaining momentum, the bloc’s ability to address structural hurdles will determine whether its ambitious vision translates into equitable prosperity.

As global automakers and African industries navigate shifting trade dynamics, the continent’s path to industrialisation remains a complex yet pivotal endeavour—one requiring collaboration, innovation, and an unwavering focus on sustainable growth.

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Africa Automotive - All eyes on Algeria for IATF2025

Algiers is set to become the epicentre of Africa’s automotive industry as it hosts the Africa Automotive Show, a flagship event at the Intra-African Trade Fair (IATF) 2025. From September 4 to 10, 2025, the Democratic People’s Republic of Algeria will welcome industry leaders, innovators and policymakers to what promises to be a transformative gathering for the continent’s automotive sector.

Organised by Afreximbank, the African Union, and the African Continental Free Trade Area (AfCFTA) Secretariat, the event builds on the momentum of IATF 2023 in Cairo, where trade deals worth a staggering $43,8-billion were sealed, attracting more than 28 000 visitors and 1 939 exhibitors.

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The Africa Automotive Show is more than just an exhibition; it’s a strategic platform designed to accelerate the growth of Africa’s automotive industry. With intra-African trade currently accounting for just 14% of the continent’s global trade, the event aims to boost collaboration, innovation and investment in a sector that is increasingly seen as a cornerstone of Africa’s economic future.

Africa’s automotive potential is no longer a distant dream but a tangible reality. The continent is fast becoming a hub for both local and international players, with the African Association of Automotive Manufacturers (AAAM) leading the charge.

Victoria Backhaus-Jerling, AAAM’s newly appointed CEO, describes the moment as pivotal: “Our goal is to elevate the African market demand to between three and five million units by 2035,” she says. “This is a significant leap from where we are today, but it’s achievable with the right collaboration and investment.”

Victoria Backhaus-Jerling

The Africa Automotive Show will feature a two-day forum alongside a dedicated exhibition, creating a space for dialogue, partnership and progress. The event will bring together stakeholders from across the automotive value chain, including raw material suppliers, manufacturers, dealers and financial partners. It will also serve as a platform to showcase Africa’s achievements in the sector while laying the groundwork for future growth.

The 2023 edition of IATF in Cairo set a high bar, demonstrating the power of collaboration and the potential of intra-African trade. The Africa Automotive Show at IATF 2025 aims to build on this success, with a particular focus on advancing the continental automotive strategy approved by AfCFTA member states earlier this year.

This strategy, developed with input from AAAM, Afreximbank, and the AfCFTA Secretariat, aims to strengthen regional supply chains, boost local manufacturing, and promote African-made solutions.

One of the key challenges facing the industry is the dominance of used vehicle imports, which currently account for a significant portion of Africa’s automotive market.

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Backhaus-Jerling emphasises the need for a phased approach to reducing these imports. “The volume of used vehicles dilutes the opportunity for local manufacturing and after-sales services,” she explains. “By investing in local production, we can create jobs, empower communities, and build a resilient intra-African supply chain.”

As the host nation, Algeria is poised to play a leading role in shaping the future of Africa’s automotive industry. The country has recently implemented policy reforms to attract investment and boost local manufacturing. Major assembly plants, such as those operated by Stellantis, have already been established, signalling Algeria’s commitment to driving industrialisation and inspiring similar developments across the continent.

Algeria’s strategic location and growing infrastructure make it an ideal host for the Africa Automotive Show. The event will not only showcase the country’s progress but also highlight its potential as a key player in Africa’s automotive ecosystem.

The Africa Automotive Show is more than just a trade event; it’s a gateway to an integrated African market of some 1,3-billion people and a combined GDP exceeding $3,5-trillion. Enabled by the AfCFTA, this market represents a wealth of opportunities for industry players, from raw material suppliers and manufacturers to dealers and aftermarket providers.

Andrew Binning, Director of the Africa Automotive Show, describes the event as the ultimate platform for industry stakeholders. “Our vision is to unite players from every corner of Africa and beyond,” he says. “This is where the future of Africa’s automotive industry will be shaped.”

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The Africa Automotive Show will feature a diverse range of exhibitors, including original equipment manufacturers (OEMs), national assemblers and value chain partners. The accompanying Automotive Forum will bring together thought leaders, global partners, and heads of state to discuss the challenges and opportunities facing the industry.

By fostering collaboration, innovation, and investment, the show has the potential to transform the continent’s automotive landscape, creating jobs, boosting economies, and improving mobility for millions of people.

In the words of Victoria Backhaus-Jerling: “This is more than an event; it’s a catalyst for change. Together, we can build an automotive industry that reflects Africa’s resilience, creativity, and entrepreneurial spirit.”

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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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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.

Originally published on CHANGECARS

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