South Africa’s crown jewel in existential crisis

South Africa’s automotive sector, responsible for tens of thousands of jobs in the country, is facing an existential threat in the form of low-cost Chinese vehicle imports.

At the same time, the industry faces high tariffs from the United States while contending with South Africa’s declining manufacturing sector.

Business Leadership South Africa CEO Busi Mavuso has attributed the automotive sector’s crisis to slow government response, urging the state to act urgently to protect the industry.

In her latest CEO newsletter, Mavuso explained that South Africa’s automotive sector is, in many respects, an “economic crown jewel”.

The sector supports an estimated 115,000 direct manufacturing jobs and more than 500,000 across the value chain. 

It has proven to be a boon for the country’s economy, contributing around 5.3% to GDP and constituting a large portion of South Africa’s exports.

Despite its critical role in the economy, Mavuso explained that the auto sector faces “an existential crisis”, specifically highlighting the surge of low-cost Chinese vehicle imports. 

South Africa has seen a boom in imported cars over the past few years, with Chinese manufacturers now beginning to dominate both the new and second-hand car markets.

Brands such as BYD, Jaecoo, and Omoda have seen searches for their cars on AutoTrader more than double year-on-year in 2025.

Autotrader’s latest Mid-Year Report revealed that sales of Chinese brands rose by 89% in the first half of 2025. While off a low base, this has become a serious cause for concern among local manufacturers.

Chinese brands are directly taking market share from local manufacturers because they can offer significantly lower prices to South Africa’s highly price-sensitive consumers.

China’s dominance in the local automotive market extends beyond vehicles as well, with the Asian nation also responsible for a large percentage of South Africa’s automotive parts.

Since 2018, China has been the top supplier of automotive aftermarket parts in South Africa. In 2021, a striking 64% of all imported aftermarket parts into South Africa were made in China.

Now, China is also taking steps to set up manufacturing plants in South Africa, a move that could see the nation firmly entrench itself as the most dominant player in the local automotive sector.

Chinese firm Beijing Automotive Group, for example, has invested R11 billion in a new plant in Gqeberha for local vehicle production.

Saving the crown jewel

Mavuso said this existential threat to local manufacturers requires a new policy response, potentially including tariff adjustments, local content requirements, or revised trade agreements.

Regardless, she said it reflects one of South Africa’s most pressing underlying problems – “government has been slow to respond to clear and present threats to domestic manufacturing”.

“Business has sought engagement on this issue repeatedly, but we have yet to see the level of urgency the situation demands,” she said. 

“Protecting domestic manufacturing capacity must be recognised as a strategic economic priority.”

The local automotive sector’s troubles reflect a broader decline in South Africa’s manufacturing capacity over the past decade.

South Africa’s manufacturing sector has seen a steady decline in its output over the past five years, with few signs of a recovery anytime soon.

The sector’s output remains more than 6% lower than the level of output reached just before the start of the pandemic in 2020.

Stanlib chief economist Kevin Lings said the sector has struggled to gain any momentum in recent years and is feeling the pressure from unstable electricity and water supply, rising costs, and a lack of demand. 

He explained that the declining output from the sector is despite the government spending a lot of time and resources developing extensive industrial policies and emphasising the need to improve competitiveness.

“There is a lot of talk about improving competitiveness, lifting South Africa’s export base, and improving manufacturing, but we are just not able to do that,” Lings said. 

“Understanding why that is, I think, is fairly obvious because we just do not have the supportive policy agenda to improve manufacturing. We also do not have the infrastructure in place.”

The weak local operating environment has led major firms like steel manufacturer ArcelorMittal South Africa to close some of their operations in the country.

This has led to thousands of job losses, with the manufacturing sector responsible for thousands of jobs across the value chain. Therefore, even one operation being shuttered has severe downstream effects on employment.