Latest news with #R28.7
The Citizen
4 days ago
- Automotive
- The Citizen
12 companies close, 4 000 jobs lost as US tariffs and sales slump bite automotive industry
The automotive industry was in big trouble before with a slump in new vehicle sales and this has now intensified with the introduction of the US tariffs. The US tariffs and a slump in new vehicle sales caused 12 companies to close and 4 000 people lose their jobs over the past two years. The erosion of the industrial value of the automotive indsutry is emphasised by recent suspensions at Mercedes-Benz and other Original Equipment Manufacturers. Minister of Trade, Industry and Competition Parks Tau shared this grim news with people who attended the annual National Association of Automotive Component and Allied Manufacturers (NAACAM) show on Thursday. He pointed out that the automotive sector is the cornerstone of South Africa's manufacturing economy, contributing 5.2% to gross domestic product (GDP) and 22.6% of industrial output. 'This industry faces intersecting challenges that demand urgent collaboration but within these challenges lie transformative opportunities to redefine and leverage our global competitiveness.' ALSO READ: Automotive Business Council concerned about Trump's tariffs Automotive industry faces stark reality The automotive industry employs 115 000 South Africans directly, with over 80 000 in component manufacturing alone. However, Tau says, we confront a stark reality that domestic sales of locally produced vehicles plummeted to 515 850 units in 2024, far below the South Africa Automotive Masterplan 2035 target of 784 509. He said it is also important to remember that 64% of vehicles sold in South Africa are imports, eroding local production scales. 'Compounding this, local content remains stagnant at 39%, well short of the 60% target, while US tariffs now significantly affect our R28.7 billion automotive exports. These pressures triggered 12 company closures and over 4 000 job losses in two years.' According to Tau, localisation is not merely policy compliance, but existential. 'A 5% increase in local content would unlock R30 billion in new procurement, dwarfing the R4.4 billion US export market. To achieve this, we must act collectively to address some of the bottlenecks to growth. 'Therefore, we are reviewing the Automotive Production Development Programme (APDP) as a comprehensive way of responding to the challenges the sector face, but also to ensure that we see regular growth in the sector to meet the goals of the Automotive Masterplan. 'Some of these reforms include the incentive structure and shifting duty credits to reward manufacturing instead of assembly credits. 'Our critical minerals and metals strategy will prioritise beneficiating platinum group metals (PGMs), copper and manganese for high-value new energy vehicles components such as fuel cells and batteries. Isondo Precious Metals' fuel cell plant in the OR Tambo SEZ proves this viability.' ALSO READ: South Africa faces 25% tariff on US car imports, Minister Parks Tau voices concern Is innovation the answer for automotive industry? Turning to innovation, Tau said global competitiveness hinges on embracing disruption. 'We have been on a path of developing a new industrial policy which focuses on decarbonisation, digitisation and diversification and we follow the example of players in the auto sector. 'In the area of digitisation, Eastern Cape pioneers like S4 and Jendamark demonstrate how AI and automation can future-proof operations.' In decarbonisation, Tau said Borbet SA's 20-year solar energy commitment and Malben Engineering's green steel pilot project align with global carbon rules reshaping trade. As NAACAM notes, carbon has become 'part of the cost of doing business – and increasingly, part of the value too'. Turning to diversification, Tau said catalytic converter exports, historically our lead sub-sector, are declining due to EV shifts and Chinese competition. 'We must scale new products, such as e-axles and thermal systems as well as markets, particularly under the Africa Continental Free Trade Agreement (AfCFTA).' ALSO READ: Devastating impact of US tariffs on SA automotive sector even before implementation Transformation in the automotive industry 'We walked a long journey with the automotive sector on transformation. Therefore, it goes without saying that inclusion drives growth. The South Africa Automotive Masterplan 2035's target of 130 new black-owned manufacturers is advancing, with 26 black-owned MSMEs exhibiting, supported by the Automotive Industry Transformation Fund and OEM partnerships such as Toyota-Isuzu's supplier development programme. 'As you would agree, the pace does need to be hastened. Therefore, we are hopeful that the industry will support the endeavour of the Transformation Fund that we are pursuing at the dtic with the view to enhance overall transformation through enterprise and supplier development (ESD) funds.' ALSO READ: US tariffs: SA sends new proposal but no changes to laws Tau emphasised that South Africa must accelerate skills development to ensure that we prepare our labour force for the dramatic changes that artificial intelligence will bring into the sector. 'It is therefore critical that we partner with institutions in the country to address this urgently. 'Entrenching supply chain equity through initiatives like linking equity investments to procurement from black-owned tier 2/3 suppliers will create symbiotic growth. As government, we are also working hard to eliminate compliance burdens and reduce red tape which inhibits investment in our country's automotive sector. 'Our policy response is accelerating and we plan on introducing an Omnibus (general laws amendment) Bill to fast-track high-impact investments and projects within 90 days. This is but one of the ambitious plans we have for the medium-term. ALSO READ: 'Open our eyes and ears' – Ramaphosa on how to tackle US tariff hike on SA cars ITAC to look into impact of exports on automotive industry 'We will also, through the International Trade Administration Commission (ITAC), look at the impact of imports into the country and the impact they have on local production. We want to grow the sector and therefore our first option must not be to wield a stick but rather offer a carrot to these companies to attract more investment into the country, increasing the value-add of particularly our component manufacturers.' Tau pointed out that the Eastern Cape produces 46% of South Africa's vehicles and 54% of its exports, epitomising our potential. Therefore, he said, everyone has the responsibility to reignite the collective ambition that drives NAACAM's advocacy. 'With South Africa chairing the G20, our automotive sector can model African industrial resilience rooted in localisation, powered by innovation and fortified by equity.'
IOL News
05-08-2025
- Automotive
- IOL News
Automotive industry braces for impact of Trump's proposed 30% tariffs on South Africa
The automotive industry raised concern about President Donald Trump's 30% tariff on South Africa that could come into effect in a few days' time. Image: supplied The South African automotive industry is reeling from the announcement of a potential 30% tariff on automotive exports to the United States, expected to take effect in the coming days. This move by President Donald Trump has sparked warnings from the Department of Trade, Industry and Competition of up to 30 000 job losses, with industry leaders voicing deep concerns over the implications for the nation's economy. Renai Moothilal, the CEO and Executive Director of the National Association of Automotive Component and Allied Manufacturers (Naacam), on Monday said that they were deeply concerned about the potential impact on South African automotive exports to the US. 'In 2024, South Africa exported R28.7 billion worth of automotive products to the US, of which R4.4 billion was attributable to automotive components,' Moothilal said. 'The US ranked as the country's third-largest export destination for automotive goods, following Germany and Belgium. This accounted for 10.7% of South Africa's total automotive exports, significantly supporting jobs, industrial output, and the country's trade balance.' Moothilal added that only about one third of South African automotive component exports to the US were affected under Section 232 measures, but with the latest tariff expansion, 100% of these exports are now impacted. 'The impact will be felt across the entire value chain. Direct component exporters to the US are likely to see reduced demand as buyers shift to more cost-effective sources,' he said. 'In addition, suppliers within South Africa who support domestic Original Equipment Manufacturers that export vehicles or integrated systems to the US may face volume reductions, putting pressure on production planning, employment, and investment decisions.' Moothilal said that the imposition of tariffs would directly increase the landed cost of South African vehicles and components in the US market. 'This would make them less competitive compared to products from countries that continue to benefit from preferential or zero-duty access, such as those under the USMCA (United States-Mexico-Canada Agreement). Overall, such tariffs threaten to disrupt well-established trade flows and weaken the global competitiveness of South Africa's automotive manufacturing ecosystem.' Moothilal added that policy cushioning for component manufacturers impacted by the developments in the US was needed to assist the sector and protect its significant economic contribution. Dr Eliphas Ndou, an economist and author at Unisa's Department of Economics, said that the imposition of 30% tariffs will reduce volumes of South Africa's automotive sector's exports to the US. 'The large decline in car exports to the US reported by the Automotive Business Council in the first half of 2025, compared to the same period last year, suggests the contribution of the automotive sector to GDP this year will fall below the level reached in 2024,' he said. Ndou added that, in addition, the economic cost includes the direct loss of employment from the sector, reduced contribution of personal income tax from this sector to total tax revenue, and loss of jobs and tax revenue from supplier networks. Waldo Krugell, a Professor of Economics at North-West University, said that the major automotive exports to the US were BMW X3s and Mercedes C-class, and with the 30% tariff, they will be priced out of the market. 'We know that Mercedes has already suspended C-class production. This is already having a major impact on component suppliers. They cannot easily pivot to new markets because they are supplying a tailor-made product into a global supply chain,' Krugell said. He added that the resulting production losses and job losses will be concentrated in the communities where the production takes place, which means East London specifically will be hard hit. Khulekani Mathe, Business Unity South Africa CEO, said the impact on local industries was substantial. 'In the automotive sector, where exports to the US total approximately R24.1 billion, the exposure to tariffs will be monumental. The sector is currently facing 25% Section 232 tariffs, and the proposed 30% increase could raise total duties to 55%, rendering exports uncompetitive,' Mathe said. 'Approximately 20 000 jobs are at risk in this sector, affecting both OEMs and component manufacturers due to the new tariffs.' BUSINESS REPORT
