Critical South African industry employing over 100,000 people in serious trouble

South Africa’s automotive exports to the United States plummeted by 82% in the first half of 2025 compared to the same period last year. 

This has primarily been due to the imposition of 25% tariffs on all automotive components imported into the United States. 

These tariffs have been kept in place since early April despite several pauses to other elevated duties to enable other countries to negotiate trade deals with the United States. 

The impact these duties have had on South Africa’s automotive industry is an example of what could happen to the country’s other export-dependent industries if wider tariffs are implemented on local exports to the United States. 

This sector is vital to South Africa’s economy, supporting over 100,000 jobs and generating significant, hard foreign exchange from manufactured goods. 

The chief economist at The Automotive Business Council (Naamsa), Dr Paulina Mamogobo, has warned that the decline in exports could create a socio-economic crisis in South Africa. 

Mamogobo said that unless there is a breakthrough in trade negotiations with the United States, some parts of the Eastern Cape could be rendered ghost towns. 

The country cannot simply shift exports to new markets as cars are highly complex manufactured goods and, in most cases, designed for specific markets. 

The challenges faced by the automotive industry are likely to be exacerbated by the imposition of 30% tariffs on South African exports by the United States, making local exports even less competitive in the world’s largest economy. 

“For us, it is going to be quite significant, mainly due to the current impact of the 25% tariff on automotive exports to the United States,” Mamogobo told 702. 

“When we look at the automotive industry, it has been hit by a specific tariff that falls outside of those currently being negotiated.”

Mamogobo explained that the United States is a key export market for South African carmakers, regularly being the number one destination for locally-manufactured products. 

Automotive exports to the United States generate significant export revenue for South Africa, which has been effectively decimated by the imposition of the 25% tariff. 

Crucially, the vehicles exported to the United States are classed as premium vehicles and thus generate substantial profits for local manufacturers. 

This also makes it challenging to shift the production to a different market that is less lucrative and willing to spend on premium vehicles. 

“These tariffs impact the competitiveness of South African-manufactured vehicles in the US market, resulting in less demand for our vehicles and, thus, less production in South Africa,” Mamogobo explained. 

The impact so far

In the first quarter of the year, South African automotive exports to the United States declined by 75%. In the second quarter, this decline deepened to 84% year-on-year. 

Mamogobo explained that these are predominantly premium vehicles, and South Africa is still relatively attractive as a manufacturing base for these types of cars. 

“In terms of the impact on manufacturers, we will continue to see a decline in the export of these vehicles to the United States,” Mamogobo said. 

Local manufacturers are likely to face increased competition from other manufacturing plants, often owned by the same brand, in different parts of the world. 

These other plants may be located in a country that manages to negotiate a trade deal with the United States, and, thus, a reduction in the duties imposed on its exports. 

As a result, manufacturers are likely to shift production to other markets that offer some protection from higher tariffs.

So far, South Africa has been relatively lucky in that a blanket tariff has been imposed on automotive imports, which does not result in a particular country having enhanced competitiveness. 

If this picture changes in the future, South African-based manufacturers may lose further ground on exports to the United States, or, if a deal can be negotiated, it may benefit them. 

So far, South African automotive manufacturers have been relatively quiet about how the tariffs have directly impacted their production. 

BMW South Africa CEO Peter van Binsbergen has been clear in stating that the company currently does not export any vehicles to the United States. 

Volkswagen also exports relatively few vehicles to the United States, which allows it to avoid the worst effects of the tariffs. 

However, Mercedes-Benz, which produces the C-class sedan in East London, does export a significant share of its production to the United States. 

It has suspended production at its plant in East London for over a month, telling News24 that this is standard procedure for a manufacturer to adapt to local and international demand.