Uncertainty and fear haunt automotive industry in wake of tariff increases

Daily Maverick

a day ago

Workers and executives in the Eastern Cape automotive industry have expressed concern and anxiety after the Trump administration imposed a 30% tariff on imports from South Africa.
He left his fiancée and two daughters at home in KwaNobuhle, Nelson Mandela Bay, for a job in the technical department at Mercedes-Benz in East London, 300km away.
But now, after production at the plant was suspended for the month of July and amid uncertainty about its future because of the 30% tariffs imposed on automotive exports from South Africa to the US, the man, who asked to remain anonymous, is searching for a new job.
He said that when the plant halted production, he was left with a strange mix of emotions. While he was happy to spend time with his family, concerns over job security gnawed at him.
He went home for two weeks. He walked his daughters to school every weekday morning. He took his wife on a romantic getaway. He completed DIY projects at home.
He felt like a real family man for the first time in four years, since taking the job in East London.
But behind that was a sense of impending dread.
'If the plant halted production for a month this time, how long will it shut down next time? And how long until jobs are in danger?' he said.
After matriculating, he saved up to study at a technical college in Kariega before landing an apprenticeship and eventually a full-time job at a small engineering firm near his home.
When an opportunity at Mercedes-Benz presented itself, 'It was tough at first, but we found our rhythm. I visit them often, and they come to see me regularly, so we always make up for the time I spent away from home.
'But last month, when I was home for two weeks, it was absolute bliss. My eldest daughter started school this year, and the younger one's play school is near home, so I walked with them every day, and I really got to know them.'
The two weeks at home also allowed him to hunt for another job, as his uncertainty about the future of the automotive plant in East London grew.
'Mercedes has been good to me. They put food on the table for my family for many years, but will they be able to keep doing it? That is the stress that I am living with now.
'I have a family to take care of. My youngest will also start school in two years. I need to take care of my family, and I don't know how long that will be possible with the way things are going.
'It sounds like these tariffs will hit the whole automotive sector, so jobs will be scarce everywhere. I am worried, because it is the only sector I have ever worked in.'
There has been no official word from Mercedes-Benz about its future in South Africa, but several politicians and industry insiders have expressed concern about the future of the company in East London and Nelson Mandela Bay, where it is a critical contributor to the local economies.
Last week, the metalworkers' union Numsa voiced its concern that the new tariffs could jeopardise thousands of jobs.
Contracts in jeopardy
Meanwhile, management at Gqeberha-based Jendamark Automation said they were yet to determine just how hard the tariffs would hit their business.
Operations manager Siegfried Lokotsch said R750-million in US contracts was in jeopardy.
They were looking to diversify their business and explore other global markets, but, he said, these deals do not happen overnight.
'At this stage, we don't know how long the tariffs will be imposed; will we be hit by an additional 10% as a BRICS country, or when officials from the South African government will get a chance to negotiate with their American counterparts. There is still much uncertainty,' said Lokotsch.
Jendamark employs 500 people at its facility in Gqeberha, where it manufactures automated assembly lines and develops software for the global automotive sector, but any potential losses could trickle down the supply chain and affect as many as 3,000 jobs.
However, Lokotsch said they provide a niche product and their services could potentially be exempt from tariffs, much like platinum suppliers.
'As much as things could turn positive, they could also collapse overnight. It seems like all these tariffs are being imposed on the whim of one individual, and what if his mood changes and we are hit even harder? This just adds to uncertainty.
'Maybe we get lower tariffs, maybe we negotiate with our customers to absorb some of those costs. But it could just as easily swing the other way, and dealing with an SA-based company becomes too expensive for our US customers.'
Even if Jendamark comes out on the winning end of tariff talks, Lokotsch said their suppliers might not be so lucky, and absorbing costs within SA would hurt them.
In the short-term, Jendamark can sustain the business with a 30% tariff on its US exports. Lokotsch said the company had been exploring alternative markets, but clinching deals takes a long time.
'We first made contact with customers in Saudi Arabia two years ago, and after 18 months of back and forth we signed our first contract six months ago. These deals take time, and we cannot depend on securing more contracts to absorb potential losses in the US.'
Knock-on effects
Other businesses in and around Nelson Mandela Bay are also feeling the pressure.
Wayne McIntosh from Borbet, an alloy wheel manufacturer, said the company was bracing for potential knock-on effects from the tariff increase, though the full impact remained uncertain.
'It's all still up in the air for now, so it's too early to say anything. There are a lot of rumours about Mercedes taking a hard hit, but we don't know for sure,' he said.
As Borbet supplies directly to local original equipment manufacturers (OEMs), any slowdown in production or exports could affect its output.
'We're a very niche manufacturer, so we rely completely on the local OEMs. We are looking at a few options; there are things in the pipeline, but I can't disclose those yet. We're not just sitting and waiting, but yes, we do have a lot of concerns,' said McIntosh.
'Our customers export to the US. If they don't send cars there, then we don't send wheels to build the cars, so we will be impacted. But the extent of it we don't know at this stage.'
Anna-Marie Basson from Schnellecke Logistics echoed his uncertainty, saying it was still too early to make a clear assessment, but the focus was on ensuring employee security and putting contingency plans in place to prepare for the worst.
Car interior manufacturer Feltex said it would undoubtedly feel the impact of reduced vehicle production at plants like Mercedes-Benz.
The company's business development head, Kevin Claridge, said he doubted any automotive plants would close their doors completely, but slower production was almost certain.
'A reduction in Mercedes-Benz's production will surely impact our sales as well. The US is a big market for them and they will take a knock, but I can't see them closing their doors.'
Managing director at Continental Tyre South Africa, Matt Livigni, said, 'While the immediate impact of the US tariffs negatively impacts our export volumes at Continental Tyre South Africa, we are even more concerned about the broader implications for the local automotive industry.
'Any additional barriers to trade or shifts in global supply chains can create uncertainty for exporters and local manufacturers alike. As a long-standing investor in South Africa's manufacturing sector, we continue to monitor the situation closely and advocate for a stable, globally competitive environment that supports industrial growth and job creation.'
Crisis on all fronts
Speaking at an event on Friday, the CEO of the Nelson Mandela Bay Business Chamber, Denise van Huyssteen, said: 'Crisis seems to be coming at us on all fronts.'
However, she reminded guests that Nelson Mandela Bay still had much going for it, including two harbours, one a deep-sea port.
'This will affect global manufacturing footprints and where the best locations will be to produce products in the future. These changes and shifts are happening faster than we have ever experienced in our lifetimes.
'We have multinationals located here, highly skilled people, the ability to innovate, over 300 days of sunshine, unspoilt beaches and more biodiversity than the whole of the United Kingdom.
'And best of all, we have the most amazing people — in fact, the spirit of our people is our greatest strength,' she said. 'The reality is that it is easy to become overwhelmed by all the negativity we see around us. But we need to take a step back and look at what we actually have. We have incredible people who, despite everything, are still doing what's right.
'The easy option is to simply give up and feel sorry for ourselves. But we will not do that. Now is the time to fight. We will keep driving for action. There are more good people than bad people, who are committed to working together to drive positive change and have the courage to innovate, experiment and solve problems.
'And it's true what they say: there is always opportunity in every crisis, especially if you mobilise and unite behind a common vision of doing what's best for the Bay and its people.' DM