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IOL News
12-05-2025
- Automotive
- IOL News
The impact of Trump's tariffs on South Africa's automotive industry
Trump's April 2 'Liberation Day' announcement saw duties being levies across the world with South Africa attracting around 30%. Image: Kamil Krzaczynski / AFP US President Donald Trump's frightening import duties into that country are already pushing down sales of cars made locally for the export market and his moves effectively nullify benefits under the African Growth and Opportunity Act (AGOA). However, South Africans are nothing if not resourceful and are already planning how best to target alternative auto markets. The National Economic Development and Labour Council (Nedlac) provides figures that indicate that more than local 360,000 vehicles 'set sail' for more than 150 countries across the world in 2023. Of these, the best sellers were the Volkswagen Polo, followed by the Mercedes C-Class, the BMW X3, and then what it called a 'bakkie' tussle between the Ford Ranger and the Toyota Hilux, with the former winning out. Most locally produced vehicles for export go to Europe, where sales are already under threat due to that bloc's increasingly strict carbon emission requirements. Nedlac added that Isuzu and Nissan are also slowly making inroads into African markets. In 2024, however, exports dropped some 22.8%, which could be likely linked to the fact that 2023 was an all-time high, figures from NAAMSA (the Automotive Business Council) showed. Of South Africa's top export destinations in this sector, OEC noted that most vehicles produced in 2023 went to Germany, followed by the US, and then the UK. Now South Africa's exports to America are under threat, with Trump's sweeping tariffs already having an adverse impact. Smart Procurement stated that the South African automotive sector 'is particularly vulnerable' to tariffs. Its figures show that vehicles account for about a fifth of all exports to the US each year, amounting to about R33 billion annually. Trump's April 2 'Liberation Day' announcement saw duties being levies across the world with South Africa attracting around 30%. Although Trump walked back many of these taxes in the coming days and is in talks with several countries to negotiate better trade conditions, the local automotive industry has already been hit with a 25% export tax, and there could be more in the wings depending on which way the US President moves. Dr Paulina Mamogobo, the Automotive Business Council chief economist at NAAMSA said that US tariffs already had a rather pre-emptive impact on first quarter sales as exports to the US reduced from 6% in 2024 to 2% in the first three months of the year. Before the implementation of the new regulations, 99% of vehicles and automotive components from South Africa entered the US under the AGOA agreement, benefiting from duty-free treatment. Jenny Tala, director for Southern Africa at Germany Trade & Invest, said that the US' tariffs effectively nullify the benefits of AGOA, which poses a threat to South Africa's automotive manufacturing competitiveness. Tala said the solution is to diversify export markets by expanding regional and international trade relations. 'As we navigate shifting trade agreements, tariffs, and international relations, South African automotive businesses are actively seeking new partnerships and market opportunities," said Michael Dehn, MD at trade fair company Messe Frankfurt. Local companies are 'repositioning themselves within evolving trade frameworks' such as withing the African Continental Free Trade Area (AfCFTA) and other BRICS+ countries: Brazil, Russia, India, China among others, said Dehn. Mamogobo stated that the AfCFTA is a strategic response to many challenges, and it has opened up access to a $3.4 trillion economic market across 44 African countries by eliminating tariffs and boosting intra-regional trade. Yet, infrastructure gaps remain a significant challenge to fully realising this potential, she said. Ronel Oberholzer, head of sub-Saharan Africa Economics at S&P Global Market Intelligence, explained that the global automotive landscape is further complicated by China's oversupply of vehicles, especially EVs, potentially getting into African markets, creating direct competition for South African manufacturing, while India's low-cost advantage intensifies competitive pressures. As a result, she believes that BRICS countries may not be new markets so much as a source of further investments into Africa. IOL
IOL News
05-05-2025
- Automotive
- IOL News
South Africa's automotive industry defies global economic challenges in April
Even though export sales decreased by 2 266 units, or 6.6%, to 31 822 units in April compared to the 34 088 vehicles a year ago, vehicle exports for the year to date were still 6.3% ahead of the same period last year. Image: Supplied The automotive industry in South Africa demonstrated resilience in April and increased new vehicle sales for the month by 11.9% in spite of the global economic landscape continuing to shift under escalating uncertainty. The Automotive Business Council (Naamsa) on Friday said the aggregate domestic new vehicle sales reached 42 401 units, up from the previous year's figure of 37 899 units. This surge reflected the industry's structural depth, export capabilities, and ability to pivot within a shifting global economy even as external headwinds strengthened. Even though export sales decreased by 2 266 units, or 6.6%, to 31 822 units in April compared to the 34 088 vehicles a year ago, vehicle exports for the year to date were still 6.3% ahead of the same period last year. Naamsa CEO, Mikel Mabasa, said the automotive sector found itself once again at the coalface of global economic shifts. 'While the new US tariff measures are concerning, the resilience and competitiveness of the South African automotive exports remain steadfast. Our industry has navigated difficult global tides before, and we will compellingly do so again,' Mabasa said. 'Despite fewer selling days in April 2025 compared to April 2024, due to the configuration of public holidays, as well as formidable global headwinds, the new vehicle sales performance encouragingly continued the upward momentum of the first quarter into the second quarter 2025. 'Inflation fell to 2.7% year-on-year in March 2025, marking the lowest level since June 2020, aided by a notable easing in fuel and education costs. The latest headline inflation rate should encourage the Reserve Bank to cut interest rates further, even though inflation is expected to trend higher in the second half of 2025 due to global developments.' Vehicle export sales, despite decreasing during the month, demonstrated underlying resilience. One major OEM halted production for more than half of the month due to facility upgrading in preparation for a new model investment, which negatively impacted on the industry's export performance. Brandon Cohen, chairperson of the National Automobile Dealers' Association (NADA), said the automotive sector had maintained its growth momentum in April. 'Despite global economic headwinds and a relatively short trading month, the local auto sector, once again, delivered solid numbers, a pleasant surprise to even the most avid industry observers,' Cohen said. 'With affordability still a major concern for the average consumer and the Reserve Bank likely to be cautious about interest rate decisions in the face of global economic pressure, it is with mild optimism that we look forward to the May sales numbers.' However, Naamsa said there was a concern that domestic vehicle exports may moderate as the full impact of the US Section 232 tariffs filters through. The announcement of sweeping tariff hikes on 3 April by US President Trump, notably under the revived Section 232 trade measures, marked a critical escalation. Higher tariffs on imports from 57 countries, ranging from 11% to 50%, were scheduled to take effect on April 9 but were almost immediately suspended for 90 days for all countries, except China. While much attention focused on the 10% universal tariff imposed on 5 April and the 30% reciprocal tariff specifically targeting South Africa, Naamsa said it was the application of Section 232 tariffs on automotive exports that presented perhaps the most profound structural threat. Originally designed to protect US national security interests, the Section 232 tariffs impose punitive duties on automotive products, including vehicles and parts - sectors where South Africa has established world-class export capabilities over decades. With South Africa's vehicle exports to the US previously enjoying tariff-free access under African Growth and Opportunity Act, the sudden imposition of these duties significantly alters market access conditions. Naamsa said South Africa's automotive exports to the US will now face material cost disadvantages, raising concerns aboutpricing competitiveness and profitability for multinational OEMs operating domestically. Mabasa said global economic growth was expected to be significantly and immediately curtailed as a result of the tariffs, casuing competitive distortions and market dislocations elsewhere. He said the tariff uncertainty was creating a very difficult environment for businesses and could hinder competitive strategies, delay capital investments, distort long-term planning and increase short-term operational volatility. 'The future of South Africa'sautomotive industry will be shaped by how boldly we respond to global change,' Mabasa said. 'As we navigate rising uncertainties, we remain committed to leading innovation, strengthening competitiveness, and expanding South Africa's role as a critical manufacturing hub in the African continent andglobal economy.' BUSINESS REPORT
IOL News
26-04-2025
- Automotive
- IOL News
US tariffs could have serious implications for jobs, investment in SA auto sector, warns Naamsa
SA vehicle production factory export 6.5% of South Africa's vehicle exports are to the United States. The 'Liberation Day' trade measures, announced by US President Donald Trump on April 2, could have serious implications for the South African automotive industry, says Naamsa | The Automotive Business Council. The move imposes punitive tariffs on all products imported into the US. These differ between countries, but South Africa has been hit with a 30% import tariff on all products. Naamsa stated that these recent announcements present another challenge for an industry already grappling with multiple headwinds. In 2024 the US accounted for 6.5% of South African vehicle exports, making it the third-largest destination for locally produced vehicles, with an annual export value in the region of R35 billion. However, of South Africa's seven volume vehicle manufacturers, only BMW and Mercedes export to the US. These companies have not disclosed the percentage of vehicles exported to that destination, but it is likely to be significant. Vehicle manufacturers will not be able to absorb these proposed tariff costs, and as a result imported vehicles in the US will see significant price increases, leading to lower sales of these products. Naamsa CEO Mikel Mabasa said the US tariffs undermine existing trade agreements and the principles of a fair, rules-based trading system. "The SA auto industry contributes significantly to economic development, employment, and industrialisation, and these tariffs could undermine our progress,' Mabasa said. Naamsa has urged the South African government to prioritise trade discussions with the US, to seek clarity on the future of the African Growth and Development Act (AGOA) and to deliver solutions that support job creation and consumer demand. South Africa's Minister of Trade, Industry and Competition, Park Tau, announced earlier this week that South Africa will "urgently" seek a meeting with US authorities of the tariffs and AGOA. The Minister argues that South African vehicle exports pose no threat to the US industry, accounting for just under one percent of its automotive imports. Naamsa is due to attend a Council meeting of the International Organisation of Motor Vehicle Manufacturers (OICA) on April 18, hosted in Washington. Mabasa said the industry body would use this opportunity to lobby as well as advocate for South Africa's positions. Get your news on the go, click here to join the IOL News WhatsApp channel. IOL
The Citizen
22-04-2025
- Automotive
- The Citizen
Act now to absorb impact of Trump tariffs on SA vehicle manufacturing sector
The vehicle manufacturing sector is the star of the South African economy and makes up 60% of the country's exports of manufactured goods. Government must act now to absorb the impact of US president Donald Trump's tariffs on South Africa's vehicle manufacturing sector by focusing on the rest of Africa and ensuring that the African Continental Free Trade Agreement is fully implemented for vehicles. Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA), points out in her weekly newsletter that the US is the fastest-growing region for South Africa's vehicle exports and that the tariffs of the Trump administration will have a significant impact on particular models exported to the US. 'If we want to forestall the impact of tariffs on our industrial base, we must act by trying to engage US leaders to shift course. We must also reassess the South African Automotive Industry Masterplan tabled in 2018.' She says South Africa's automotive industry is the industrial backbone of its economy and is responsible for 60% of its manufactured goods exports, as well as the single largest domestic manufacturing sector. ALSO READ: Trump tariffs' seesaw impact on Southern Africa The vehicle manufacturing sector already in trouble before Trump tariffs 'The automotive industry faced challenges even before the Trump administration's tariff policies, with increased competition from imports and weak domestic demand, but the tariffs are a further blow. 'Vehicle exports to the US benefited from the African Growth and Opportunity Act (AGOA), which allowed duty-free access to the US market. Now the sector is facing a 25% tariff on foreign-made vehicles and components, as well as the 30% tariff on South African imports that was suspended for 90 days.' The US was the destination of 6.5% of vehicles exported from South Africa last year, which was 22% higher than the previous year, making the US the fastest-growing region for South African vehicle exports. Mavuso warns that the tariffs will have a significant impact on particular models exported to the US and deal a major blow to the factories and towns where they are produced, with ripple effects throughout the value chains that are linked to them. ALSO READ: Automotive Business Council concerned about Trump's tariffs Action needed before Trump tariffs affect SA's industrial base Although South Africa is in the same position as many other countries facing US tariffs, it's time to act if we want to mitigate the impact on our industrial base, she says. 'The first step is to engage with US leaders to shift course. US foreign policy, through Agoa, has long reflected an understanding of the strategic importance of growing Africa's economies and building them as source markets for US consumers. 'South African vehicles are only 0.1% of those sold in the US, but it helps to diversify exposure to Chinese manufacturing, which is an increasingly important priority for the US government. In addition, by ensuring the US is an important market for South Africa's products, the US ensures it is a strategic priority for the SA government. 'If the US were closed to our goods, South Africa's wider geopolitical interests would shift to other strategic relationships to the cost of US influence. The Trump administration has said it wants to negotiate. We must take it up and aim to clear trade barriers for the benefit of both our economies.' ALSO READ: Trump's tariffs make no economic sense — economists Time to reassess the South African Automotive Industry Masterplan Mavuso says the second step will be to reassess the South African Automotive Industry Masterplan that provides a roadmap to 2035 for the industry and focuses on building African markets as well as diversifying into electric vehicles. 'It is time to revisit the plan to assess how it can cope with the US tariff shock and ensure it is geared for the world we now find ourselves in. 'The plan has ambitious targets, including growing the industry by 60%, increasing local content and significantly increasing employment. These are fine targets, but the world for which the plan was set up has changed. 'It is now more important than ever, for example, to focus on the rest of Africa. To do so, we must ensure the African Continental Free Trade Agreement is fully implemented for vehicles. The continent buys 1.3-million new vehicles per year, a figure which will grow significantly.' She emphasises that South Africa's manufacturing must focus on brands and vehicle types that are suited for the continent, which has much to gain from lower-cost mobility solutions. 'We must ensure supply chains adapt for these outputs and that our skilling system delivers people with the right skills. 'The plan already envisages South Africa as a manufacturing hub for the continent but such long-term plans must be dynamic and adapt to the changing environment.' ALSO READ: Government still talking to ArcelorMittal while Seifsa identifies challenges Another challenge for the vehicle manufacturing sector besides Trump tariffs In addition to the US tariffs, Mavuso points out that Europe's Carbon Border Adjustment Mechanism poses a further challenge for vehicles manufactured in South Africa, despite already being the biggest market for our vehicle exports. However, she says, the EU must also deal with American trade shocks that could provide new opportunities for local exports, while the markets in the rest of the world will also be looking to forge new deals. 'Business clearly recognises the importance of the vehicle manufacturing sector. It has critical spillover effects into the rest of the economy, supporting industrial capacity that enables many other producers. 'It is a major employer and export revenue earner. It is, within a general theme of deindustrialisation over the last three decades, the one exception. It is also a fine example of how business and government can work together to develop industry.' Mavuso says the first Motor Industry Development Plan, launched in 1995, transformed the vehicle manufacturing industry from a domestic producer to an export-oriented manufacturing powerhouse. She says it stands out as an example of how export-oriented industrial policy can work. 'Industrial policy has certainly not always followed the example, often becoming distracted by import substitution, a sure way to harm international competitiveness. 'The master plan must adjust to the strange new world we find ourselves in, where the world's former champion of free trade and globalisation has become its biggest challenger.'
