SA’s automotive sector can model African industrial resilience, says Minister
By Mandla Mpangase
The annual Naacam Show takes place at a defining moment for the South African automotive sector, which is facing intersecting challenges that demand collaboration.
With these words Minister of Trade, Industry and Competition, Parks Tau, began his assessment of the automotive manufacturing sector in a key note address to the Naacam audience in Gqeberha on 13 August 2025.
This year’s show brings together automotive component manufacturers, public and private sector stakeholders, and service providers to foster collaboration, with the aim of galvanising the industry around the goals outlined in the South African Automotive Master Plan 2035.
The automotive manufacturing sector is the cornerstone of South Africa’s manufacturing economy, contributing 5.2% to the country’s gross domestic product and 22.6% of the country’s industrial output.
Despite these significant numbers, the industry faces several interconnected challenges, the minister noted.
“Yet within these challenges lie transformative opportunities to redefine and leverage our global competitiveness.”
The minister went on to urge all stakeholders to unify their actions across three pillars: on localisation, innovation, and inclusive transformation.
Urgent challenges
Although the industry employs 115 000 South Africans directly, with over 80 000 in component manufacturing alone, it faces the stark reality that domestic sales of locally produced vehicles plummeted to 515 850 units in 2024, far below the South Africa Automotive Master Plan 2035 (SAAM) target of 784 509.
In addition, Minister Tau noted: “Importantly, 64% of vehicles sold here are imports, eroding local production scales.”
Local content remains stagnant at 39%, well short of the 60% target, he said, adding this was at a time when United States tariffs are impacting significantly on the country’s R28.7-billion automotive exports.
These pressures have triggered 12 company closures and over 4 000 job losses in two years. The erosion of industrial value of the sector is exemplified by recent suspensions at Mercedes-Benz and other original equipment manufacturers.
The path forward: Strategic imperatives
“Localisation is not merely policy compliance, it is existential,” Minister Tau said.
“A 5% increase in local content would unlock R30-billion in new procurement, dwarfing the R4.4-billion US export market.”
However, to achieve this, “we must act collectively to address some of the bottlenecks to growth”.
With this in mind, the Department of Trade, Industry and Competition is reviewing the Automotive Production Development Programme (ADPD) as a comprehensive way of responding to the challenges the sector is facing, but also to ensure regular growth in the sector meets the goals of the SAAM.
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, copper, and manganese for high-value new energy vehicle components like fuel cells and batteries.”
Digitisation, decarbonisation, and diversification global competitiveness hinges on embracing disruption
“At the dtic, we have been engaged on a path of developing a new industrial policy which focuses on decarbonisation, digitisation, and diversification.
“As Naacam notes, carbon has become ‘part of the cost of doing business and increasingly, part of the value too’.”
As the globe shifts to new energy vehicles and competition from China, it is crucial South Africa scale new products such as e-axles and thermal systems, and markets, particularly under the Africa Continental Free Trade Agreement.
Referring to development around new energy vehicles, the minister reported that amendments of the automotive production and development programme phase 2 legislative framework for the inclusion of electric vehicles and associated components have been completed.
In addition, the relevant amendments to the existing Automotive Investment Scheme (AIS) guidelines are being finalised to align with APDP2 amendments and the energy vehicle legislative framework.
“The Taxation Laws Amendment Act, gazetted on 24 December 2024, introduces a 150% capital allowance for qualifying investments in energy and hydrogen vehicle production. It covers assets such as buildings, plant, and equipment brought into use between 1 March 2026 and 1 March 2036.”
A critical minerals strategy and battery value chain master plan are also being developed.
A comprehensive skills gap analysis was completed under the energy vehicles skills workstream.
Curricula and certification programmes are now being developed with Tshwane University of Technology, Cape Peninsula University of Technology, Durban University of Technology, and Unisa.
A pilot project involving 100 students is expected to be rolled out in Q1 of 2026 once the academic materials are finalised.
Transformation: Scale, skills, and equity
“We have walked a long journey with the automotive sector on transformation. It therefore goes without saying that inclusion drives growth.”
SAAM’s target of 130 new black-owned manufacturers is advancing, with 26 black-owned small, medium, and micro enterprises (SMMEs) exhibiting at the 2025 Naacam Show.
However, pace needs to be picked up.
“To this end 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.”
The minister added: “We need to accelerate skills development to ensure that we prepare our labour force for the dramatic changes that artificial intelligence will bring into the sector.”
The government is also working hard to eliminate compliance burdens and reduce red tape which inhibits investment into the country’s automotive sector.
“Our policy response is accelerating, and we plan on introducing an Omnibus (General Laws Amendment) Bill which looks to fast-track high impact investments and projects within 90 days.”
In addition, the government is looking at the impact of imports into the country and the impact they are having on local production.
“We want to grow the sector so 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, thereby increasing the value-add of particularly our component manufacturers.”
Minister Tau also encouraged the industry to accelerate collaboration.
“OEMs need to continue to honour local procurement targets and mentor and invest in SMMEs.”
Tier 1 Suppliers must drive equity partnerships and Tier 2/3 development.
“Naacam’s partnership with TASEZ (the Tshwane Automotive Special Economic Zone) to boost supplier growth and skills is a model to replicate,” said Minister Tau.
“With South Africa chairing the G20, our automotive sector can model African industrial resilience: rooted in localisation, powered by innovation, and fortified by equity.”