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Daily Maverick
10-08-2025
- Automotive
- Daily Maverick
Lessons for SA from Brazil in balancing incoming investment with local industrial development
Extracting greater value from the BRICS partnership has been highlighted as a key strategy for South Africa to diversify export markets and attract investment – particularly in the face of the US tariffs now in effect, and warnings of further tariff hikes targeted at BRICS countries. However, we must strike a balance between investment that strengthens local manufacturing, creates jobs and stimulates export value, and investment that weakens local industrialisation and employment. Nelson Mandela Bay's economy is anchored in manufacturing, which is dominated by the assembly of automobile and auto components, as well as other sectors such as pharmaceuticals and beverages. The experience of the Brazilian automotive manufacturing sector, which has attracted more than $4.5-billion in investment from Chinese automakers over the past few years, provides a number of lessons on both sides of the equation that can be learnt by South Africa and other BRICS partners to ensure new investments are mutually beneficial. While Brazil succeeded in attracting substantial foreign investment, domestic production remained dominated by foreign components imports, with little use of locally manufactured components. This highlights a persistent challenge for Brazil and other emerging economies: how to leverage foreign investment for genuine industrial upgrading and localisation of components, rather than merely becoming a minor assembly point. South Africa is already experiencing a rapid influx of Asian-manufactured vehicles into our local market, edging out sales of locally produced vehicles. Incoming manufacturing investments include the assembly of imported vehicles that are already partly assembled with all their components (semi-knockdown, or SKD assembly), which add little value in terms of manufacturing employment or growing local component manufacturing. This production mode is eroding the strength that completely knockdown (CKD) manufacturing, as performed by the long-standing original equipment manufacturers (OEMs), brings to the local economy, with its far greater levels of investment, employment and localisation of manufacturing. CKD manufacturing enables deep value chains that develop an interconnected ecosystem of local Tier 1 and Tier 2 component manufacturing, along with a surrounding network of local suppliers of goods and services, that has a ripple effect into all other sectors of the economy. Given the current situation of not only the US tariffs but also the need to strengthen the policy and incentives environment to encourage CKD over SKD manufacturing, prevent dumping of cheap products into the South African market, and support local manufacturers to respond to the global shift to new energy vehicles, the experience of the Brazilian automotive industry warrants attention. Brazil is a key market for the global automotive industry, recognised as the world's sixth-largest car market and holding the dominant position in Latin America. Substantial market size coupled with its strategic role as a gateway to the broader Latin American region, makes Brazil an exceptionally attractive growth opportunity for global automakers. The country's expanding middle class and a growing demand for eco-friendly transport solutions, supported by government policy, further amplify its appeal, positioning it as a key destination for new energy vehicle exports and investment. The massive investments in Brazil by Chinese automakers, with their advanced EV technologies and aggressive expansion strategies, have disrupted the long-standing dominance of traditional Western and Japanese brands and Brazil's CKD auto manufacturing sector. This is similar to the disruption in South African automotive manufacturing, which has grown rapidly in the past five years. Like South Africa, Brazil faces a delicate balancing act between attraction of foreign direct investment with its long-standing objective of fostering a robust and self-sufficient local automotive industry. Tariff exemptions initially led to a rush of fully built-up Chinese vehicles into the Brazilian market, a 'dumping' strategy that undermined local manufacturers. Chinese investors initially pursued SKD assembly, importing most parts, particularly high-value EV batteries where China has substantial capacity. Job creation commitments were much lower than initially promised – due to factors including Brazil's substantial skills gaps, the use of imported labour and the lower job creation of SKD manufacturing and lack of creation of local supporting value chains of any substance. Due to different approaches to labour, Chinese companies also encountered significant friction with Brazil's strong labour union movement, attracting outrage at the treatment of workers. The focus on SKD assembly resulted in limited technology transfer and did not stimulate growth of local supply chains, reducing the industry to an assembly line dependent on China's value chains and imported labour, rather than enabling innovation and the creation of direct and indirect jobs as seen in CKD manufacturing. The influx of Chinese investment created a fundamental tension with Brazil's national industrial development goals, which aim for deep local value creation, job security and genuine technology transfer. Brazil has since reintroduced import tariffs on EVs, commencing in 2024 and projected to reach 35% by July 2026, serving as a significant policy driver compelling automakers to establish local production. It is also now implementing robust policies on investment, to deepen manufacturing supply value chains into component production, with policies also related to technology transfer and adherence to labour laws. Achieving sustainable long-term success in Brazil for automakers requires moving beyond assembly to deeper localisation, investing in local research and development and skills development, and proactively engaging with labour unions to build trust and ensure compliance. For the Brazilian government, a refined industrial policy that actively incentivises technology transfer, supports local supplier development and invests strategically in critical infrastructure and workforce retraining is paramount to truly harness the benefits of the EV transition and foreign investment for national industrial upgrading. In moving to ensure that investment meets local industrialisation and employment goals, Brazil has flexed its considerable muscle – as a top-tier global automotive market and having a significant renewable energy matrix – to ensure that it is not a passive recipient of foreign investment. It actively employs policy tools, such as tariffs and the 'green mobility and innovation programme' (Mover), to assert its national interests. By insisting on local production and job creation, Brazil positions itself as a critical arena for global EV dominance. The willingness of major Chinese automotive players to adapt to local market demands, such as producing ethanol-flex hybrids, underscores Brazil's significant leverage in shaping the terms of engagement for foreign automakers. This adaptation to local needs and policies is a testament to Brazil's ability to influence foreign investment to align with its unique market characteristics. A further consideration as South Africa seeks to strengthen trade and investment relationships with the BRICS countries is that of the nature of the exports. While South Africa's exports to the European Union and to BRICS and related markets are roughly equivalent at about $20-billion per annum, there is a key difference in that exports to BRICS comprise mostly unbeneficiated minerals and other raw materials while those to the EU (and the US) are, in addition to minerals, more focused on a diversified range of added-value manufactured products. In the latter case, innovation is stimulated, intellectual property generated and higher-value employment is created along with integrated value chains. South Africa needs to shift the balance of its trading equation from being a source of low-margin raw materials to a source of high-margin, value-added products, as well as a destination for value-adding investment. Another key factor to ensure the sustainability of CKD vehicle manufacturing is to make it an entry requirement for incoming investors to not only compete in the domestic market, but to also have export markets for vehicles and/or locally produced components. Simply displacing domestic vehicle sales of OEMs who already produce in the country, further exacerbates the risk of factory closures. In the same way that there needs to be rules of entry for manufacturers entering the country, this also needs to be in place to ensure that orderly and responsible exits take place from the market. This should be centred on protecting the surrounding ecosystem of suppliers, and providing a level of mitigation and transition support to enable them to explore alternative options. We can retain local manufacturing by putting mutually beneficial investment and trading relationships at the centre of negotiations, rather than perpetuating extractive relationships. This we believe is essential if we are serious about retaining and attracting investment and employment, especially in the Bay, which is the area in South Africa most adversely affected by the current global trade shifts. DM
Al Jazeera
31-03-2025
- Automotive
- Al Jazeera
Trump's ‘America first' policy is complicating business of making cars
United States President Donald Trump's latest tariffs on the auto sector have made one thing clear, experts say: The US is no longer a beacon of free market trade, and businesses need to switch to the reality of 'America first'. On Wednesday, Trump announced 25 percent tariffs from this Thursday on all cars, light trucks and auto parts imported into the US, a move experts called 'devastating' for the industry. Almost half of the 16 million cars sold in the US last year were imported with a total value exceeding $330bn, according to news reports quoting Goldman Sachs analysts. It is not clear whether the tariffs will go into effect as laid out in Trump's latest announcement or if there will be exceptions or any rollback. 'But one thing we know for sure', said Ilhan Geckil, senior economist at the Anderson Economic Group (AEG), is that 'Trump's policies are protectionist and not free market and free trade the way that the US has done [things] for decades. Now that's shifting. … That's the new rule, and companies have to play accordingly and will have to increase business presence in the US.' Some car manufacturers, including South Korea's Hyundai and Kia, have announced plans to boost production in the US. While that gives the impression that Trump is right to argue tariffs will force manufacturers to produce more in the US, the full picture is more complicated, Geckil said. 'The US really is the best in terms of the size of the market' and accounts for nearly 25 percent of global auto sales, Geckil said, explaining why automakers do not want to lose access to the US market. But the reason a lot of manufacturing moved out of the US was to take advantage of lower prices and cheaper goods. Bringing manufacturing back to the US will lead to higher prices for their products, hitting demand, he said. 'Prices are going to go up significantly, and that will have a spillover effect,' Geckil said, adding that he expects to see higher sticker prices within a month or so of the tariffs kicking in. 'A $50,000 vehicle will become a $75,000 to $80,000 vehicle in a couple of years, and that price hike is going to stay there forever,' he said. That, in turn, will eventually lead to job losses, contrary to Trump's stated goal of protecting American workers, Geckil said. As per an earlier estimate by AEG, tariff proposals floated by Trump in February would raise the price of a car assembled in the US, Canada and Mexico from $4,000 to $10,000 for most vehicles and $12,000 or more for electric vehicles (EVs) The estimate did not include the impact of retaliatory tariffs that other countries might impose. In addition, Trump's 25 percent tariffs on steel and aluminium, which kicked in on March 12, are expected to increase prices of conventional engine vehicles by $250 to $800 and those of EVs by $2,500 or more, AEG previously said. AEG said the measures unveiled on March 26 would be 'much more costly' for European- and Asian-manufactured cars than its previous estimate and potentially more expensive or less expensive for North American-produced vehicles. Ford CEO Jim Farley told employees in an email on Friday that 'the impacts of the tariffs are likely to be significant across our industry – affecting automakers, suppliers, dealers and customers,' the Reuters news agency reported. He gave the warning even though about 80 percent of Ford vehicles sold in the US are assembled domestically. One reason auto tariffs have such a wide-ranging impact is because the industries of different countries are so deeply intertwined. In North America, the US and Canadian auto industries have been broadly integrated since the 1965 signing of a pact that facilitated the duty-free movement of vehicles and parts, said David Adams, president and CEO of Global Automakers of Canada. That was followed by free trade agreements in 1989 and 1994 that bound the industries of the two countries and that of Mexico more closely together. Over the years, the three countries have built up specialisations for certain auto parts, partly driven by costs, Adams said. For instance, the Canadian dollar is typically lower than the US dollar and since Canada has a public healthcare system, employers usually do not have to bear health insurance costs for their workers, making it cheaper to do some work in Canada over the US. For a vehicle made in Canada, half the parts would come from the US, and for one made in Mexico, 30 percent to 35 percent of its parts would be from the US on average. 'By tariffing Canadian vehicles you're effectively tariffing American suppliers,' Adams told Al Jazeera. Since Canada and Mexico – and all other nations that the latest tariffs apply to – are likely to retaliate, prices will almost certainly spiral further. 'We don't want to cut off our nose to spite our face, but what we're looking at hurts everybody. … Because of the high degree of integration, the impact will be to a same degree on both sides,' Adams said. The tariffs on auto parts, which do not apply to components deemed to be 'US content', complicate things even further. In car production, raw materials are typically turned into a component in one jurisdiction before being folded into a larger component or components elsewhere. It is common for parts to cross borders three to five times per vehicle. In practice, this means the tariff burden may vary wildly for different companies and different vehicles. 'It is highly confusing and complex,' Adams said. 'Trump's desire seems to be not to have a Canadian auto sector. But that would cost $50bn to $60bn to relocate everything to the US. This is not a short-term proposition. We're ultimately looking for a long-term solution that creates stability not just in the auto sector but in the North American economy, so we can focus on doing business.' That solution needs to include Mexico because a globally competitive auto industry needs a low-cost region for carrying out the most labour-intensive parts of the manufacturing process, Adams said. 'Part of the current challenge is that [Trump] is looking at the auto industry from a myopic view of the auto sector as an American industry rather than a North American industry,' he said. Adding to the uncertainty hanging over the sector is Trump's pledge to impose 'reciprocal' tariffs on all countries and specific duties on Canada and Mexico over their alleged failure to stem the flow of fentanyl and undocumented immigrants into the US. Some of Trump's claimed rationale for the tariffs is based on 'false' information, given that little fentanyl flows from Canada to the US, said Brett House, an economics professor at Columbia University's Business School. 'The so-called data that the Trump White House has is absolutely false,' House told Al Jazeera, adding, 'and that makes it clear that these tariffs were never about those things.'
Zawya
10-02-2025
- Business
- Zawya
Daewoong Pharmaceutical, a leading healthcare company in Korea, has launched its botulinum toxin product NABOTA in Saudi Arabia
SEOUL, South Korea and RIYADH, Saudi Arabia /PRNewswire/ -- Daewoong Pharmaceutical (Co-CEOs Seongsoo Park and Chang-Jae Lee), a leading healthcare company in Korea, announced the official launch of its high-purity, high-quality botulinum toxin product, NABOTA, in Saudi Arabia. The launch follows a rigorous quality evaluation process conducted by the Saudi Food and Drug Authority (SFDA). As recognized with approvals from the U.S. Food and Drug Administration (FDA), the European Medicines Agency (EMA), and Health Canada, Daewoong Pharmaceutical's botulinum toxin has demonstrated outstanding quality and safety. This milestone is expected to serve as a key gateway for Daewoong Pharmaceutical's expansion into the Middle Eastern market. Leveraging NABOTA's superior quality and safety, Daewoong Pharmaceutical aims to meet the needs of patients in Saudi Arabia and the wider Middle Eastern region while expanding its market share. Daewoong Pharmaceutical's premium high-purity botulinum toxin, produced using the patented 'HI-PURE™ Technology' and advanced vacuum drying processes, received FDA approval in 2019, making it the first Asian-manufactured botulinum toxin to gain such recognition. NABOTA boasts a high-purity composition with over 98% of the 900kDa complex and ensures rapid and precise effect. Additionally, its drying process prevents the formation of ice nuclei, minimizing the formation of inactive toxins, which contributes to immunogenicity and ultimately, enhancing safety. NABOTA shares the same molecular structure (900kDa) as AbbVie's Botox, which holds the largest market share in Saudi Arabia, and has demonstrated equivalent(non-inferior) efficacy, positioning NABOTA for smooth transition and accelerated market adoption in the region. To commemorate the launch, Daewoong Pharmaceutical hosted a symposium on January 24 at the Fairmont Hotel in Riyadh, Saudi Arabia. The event gathered approximately 300 local healthcare professionals and featured Dr. Hassan Galadari, a key opinion leader in the region and dermatologist from the UAE. Dr. Galadari delivered a presentation titled 'CHANGE THE GAME Prabotulinum Toxin,' sharing global clinical results and treatment insights of NABOTA to local healthcare professionals. "NABOTA has the same protein molecular structure as Botox, at 900kDa, and has proven its efficacy and safety through clinical trials and regulatory approvals in advanced markets," said Dr. Galadari. "It stands out for its precision, longevity, and high patient satisfaction." Dr. Amr Abduljabbar, a Saudi Arabian dermatologist and symposium moderator, added, "This event allowed us to share valuable insights into NABOTA's advanced manufacturing process, superior quality, and global clinical data. I believe NABOTA will be a game-changer in Saudi Arabia, a key market within the Middle East and Africa botulinum toxin industry." Jun-soo Yun, Head of the NABOTA Business Unit at Daewoong Pharmaceutical, stated, "NABOTA is Korea's most exported botulinum toxin product, owing to its high purity and quality. Daewoong Pharmaceutical's botulinum toxin products are currently approved in 69 countries and partnered in over 80 countries. Saudi Arabia is the largest market in the Middle East, and with this launch, Daewoong Pharmaceutical will further strengthen its presence in the Middle East and Africa."
