Morocco vs South Africa: The Future of the Automotive Industry

A strategic shift is unfolding across the African automotive landscape, defined not by a single event but by a confluence of ambitions in boardrooms from Casablanca to Johannesburg. The recent, quiet establishment of Tesla’s commercial presence in Morocco, signaled by the recruitment of a Country Sales & Delivery Leader in Casablanca, represents more than a new showroom; it is a calculated entry into a market being deliberately engineered as an electric vehicle hub.

This move coincides with a parallel gravitational pull from Chinese automotive manufacturers toward South Africa’s established industrial base, setting the stage for a continental transformation driven by competing visions of the future.

BAIC factory in South Africa's Eastern Cape

Morocco’s ascent is not accidental. While its overall vehicle production of 559 645 units in 2024 trails South Africa’s historical output, its trajectory and focus are distinct. The kingdom is poised to manufacture between 40 000 and 50 000 fully electric vehicles in 2024, a figure that underscores a targeted industrial policy.

This output is particularly significant given that South Africa has yet to produce a single fully electric vehicle domestically. Morocco’s 5% year-on-year production increase is built upon foundational advantages: geographic proximity to European markets and a charging infrastructure network of approximately 1 000 stations, dwarfing South Africa’s estimated 400-500.

Government policy has been instrumental in creating a fertile environment. Exemptions from value-added tax and customs duties on EV imports have lowered financial barriers for consumers and manufacturers alike. The market response is quantifiable, with EV sales reaching 1 125 units in 2024 and projected to surge to 4 248 in 2025.

Toyota's Prospecton factory near Durban, Kwa-Zulu Natal

This policy framework, designed to position Morocco as a central hub for EV manufacturing and sales, is what makes Tesla’s entry a strategic beachhead. The American automaker’s presence is widely interpreted as a move to capitalize on this surging demand and the country’s export-oriented logistics, potentially encouraging other EV-focused brands to consider North Africa.

“The country offers a mature industrial ecosystem, a skilled and experienced workforce, and a supply chain that has been tested and proven over decades,” says Lydia Zhang, Executive Vice President for Client Coverage in Corporate Investment Banking at Standard Bank, quoted recently in FANews. Zhang notes  South Africa’s role as a gateway to a continent with low motorisation rates presents a compelling investment rationale.

Yet, South Africa’s path is markedly different. Its automotive sector, a cornerstone of manufacturing for decades, finds itself at a crossroads. The rise of Chinese brands like Chery, GWM, BYD and BAIC has reshaped the domestic market, moving them from fringe players to household names based on affordability and improving quality.

This commercial success is now prompting deeper consideration. Several leading Chinese original equipment manufacturers (OEMs) have launched feasibility studies into establishing local assembly plants in South Africa, attracted by the existing supplier base and potential for continental growth.

This interest emerges as traditional manufacturers reassess their South African operations. The potential vacuum creates an opportunity, but one fraught with the nation’s well-documented challenges. “Infrastructure constraints, including energy supply and logistics, continue to be monitored,” Zhang observes, adding investors seek clarity on tariffs, labour laws and long-term policy.

The policy environment itself is a subject of intense debate. Experts argue South Africa’s automotive tax structure inadvertently undermines its own industrial ambitions.

Ford Ranger assembly in the modern plant in Rosslyn, Pretoria

“Our vehicles are overtaxed,” says Professor Justin Barnes, Executive Director of the Toyota Wessels Institute for Manufacturing Studies. He highlights an “inverted market structure” where ad valorem taxes are disproportionately high for cheaper vehicles, stifling domestic demand. Furthermore, the duty differential between imported completely built-up (CBU) units and locally assembled completely knocked-down (CKD) kits is considered too narrow, disadvantaging local component manufacturers who effectively compete against near-zero import duties.

South Africa’s Automotive Masterplan 2035 envisions producing 1,4-million vehicles annually, with half for the domestic and regional African market. Currently, the structure is inverted; the country imports more vehicles than it manufactures for local consumption. “We need a robust domestic market and need to make the regional market our operating environment,” Barnes argues. Failure to do so, he contends, leaves South African producers vulnerable to the demanding and rapidly shifting requirements of distant developed export markets, particularly as they transition to new-energy vehicles (NEVs).

This NEV transition is where the contrast with Morocco becomes stark. South Africa’s high import tariffs and limited purchase incentives have resulted in a negligible EV market. The finalization of a revised Automotive Production and Development Programme (APDP) framework to incentivize NEV production is seen as crucial. Such a policy could unlock a strategic advantage: South Africa’s duty-free trade access to Europe. This access could position the country as a manufacturing and export base for Chinese OEMs keen to produce NEVs for the European market.

“While we would expect Chinese OEMs to begin with semi-knocked down or limited-scale assembly, it is important that this evolves into full-scale CKD production within a defined timeframe,” says Lydia Zhang. “We see this progression as critical for job creation and meaningful local industry participation.”

The emerging picture is of a continent with two powerful, divergent automotive narratives. In the north, Morocco is leveraging agile policy, geographic advantage, and infrastructure investment to build a new, EV-centric manufacturing ecosystem from the ground up, attracting global pioneers like Tesla. In the south, South Africa’s established industrial complex, while grappling with internal policy contradictions and infrastructure woes, presents a compelling case for large-scale, traditional manufacturing investment, increasingly attractive to Chinese brands seeking scale and continental access.

The outcome will hinge on execution. Morocco must convert its potential into sustained industrial depth. South Africa must align its tax and trade policies with its masterplan ambitions to unlock regional demand and attract transformative investment. Together, these parallel developments signal that the African automotive industry is no longer on the periphery of global trends but is becoming a complex and contested arena where its future footprint is now being forged.

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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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