South Africa’s automotive industry under siege from low-cost Chinese cars

The automotive industry in South Africa has come under siege from the influx of low-cost Chinese car brands.

While this has made the prospect of buying new cars more affordable and attractive for many South African citizens, it could have drastic consequences for the local auto sector.

This is according to FNB and WesBank senior economist Thanda Sithole, who outlined the impact of Chinese car imports on South Africa in a recent press release.

Sithole points to market data from the National Association of Automobile Manufacturers in South Africa (NAAMSA) as evidence of the growing popularity of Chinese cars in the country.

By 2024, there were 14 different Chinese car brands being sold in South Africa, accounting for as much as 17.1% of all car imports into the country.

Some of the most popular Chinese car brands in South Africa include Great Wall Motors, BAIC, and Chery, with the latter recording year-on-year sales growth over 80% in 2023 and 2024.

Lightstone reported that Chinese car brands accounted for 9% of all light vehicle sales in South Africa between January and July 2024, up from just 2% in 2019.

Sithole said this had some positive effects, with more affordable cars potentially driving credit demand and stimulating activity in the new vehicle finance market.

He argued, however, that this came with broader ramifications for the local automotive industry in South Africa, one of the country’s most critical employers and exporters.

Sithole said Chinese manufacturers were no longer merely low-cost alternatives to South African options, but now represented true competitors.

“If that competitive pressure accelerates faster than local producers can adapt, the risk is not simply lower margins,” Sithole said.

“It is a gradual weakening of domestic productive capacity, reduced model relevance, shrinking local value add and, ultimately, pressure on investment and employment over time.”

Strong policy a solution to the problem

With the growing pressure being placed on South Africa’s automotive industry by Chinese manufacturers, government intervention may be necessary to protect the local industry.

While higher tariffs on Chinese auto imports may seem like a viable solution to protect South African jobs, Sithole said this has its own complications.

“Higher duties may offer temporary relief to domestic producers, but they would also raise costs for consumers, particularly lower- and middle-income households already facing strained affordability,” Sithole said.

“They could reduce competitive discipline in the market, shield structural inefficiencies and delay the very adaptation that the industry ultimately needs.”

Sithole argued that tariffs would not effectively address the root causes of South Africa’s automotive competitiveness, which are determined by more factors than just pricing alone.

These factors include the cost of logistical inefficiencies, energy security, issues of localisation and high input costs, among others.

Sithole said the rising dominance of Chinese cars in South Africa’s market reflects a more globally competitive automotive market, which the country is greatly exposed to.

However, he said this does not mean the South African government should remain passive, but should strive to implement a feasible policy response to address this issue.

“A more credible policy approach would be one that preserves the consumer benefits of competition while strengthening the domestic industry’s ability to compete,” Sithole said.

This includes reassessing existing industrial support frameworks, strengthening localisation, improving logistical and infrastructural efficiency, and positioning the domestic sector to better handle future technological shifts.

Sithole said that while this response may be more difficult and costly to implement, it will ultimately prove more sustainable for the long-term competitiveness of the local auto sector.

“In other words, the right question is not whether South Africa should resist competition,” Sithole said. “It is whether it can build an automotive ecosystem capable of surviving and adapting to it.”