Future of auto industry at centre of national discourse – MEC Maile

By Mandla Mpangase

The discussion on the importance of new energy vehicles is taking place at a critical time in South Africa, where the future of the automotive industry is at the centre of national discourse, Gauteng MEC for Economic Development and Finance Lebogang Maile told the New Energy Vehicles Summit in Midrand today.

The summit comes at a time when Gauteng is positioning itself as the automotive industrial hub for Africa, leveraging its existing automotive base, advanced logistics, and skills ecosystem.

Critical to this positioning is the need to embrace the revolution that is the new energy vehicles (NEVs).

Gauteng is determined to lead South Africa’s transition to electric and low-carbon mobility in line with global decarbonisation imperatives and the South African Automotive Masterplan 2035.

“The South African automotive industry is facing a tough operating environment, heightened by the imposition of a unilateral 30% reciprocal trade tariff by the government of the United States, which has consistently been South Africa’s second-largest trading partner and key export destination for South African-manufactured vehicles,” Maile said, adding that on the manufacturing side, Original Equipment Manufacturers (OEMs) also face mounting challenges.

South Africa’s automotive sector is particularly vulnerable to the 25% sectoral tariff imposed under Section 232 of the United States Trade Expansion Act of 1962, which specifically targets automotive exports.

Key sector

“The South African automotive industry is a cornerstone of the economy and contributes 22.6% to total domestic manufacturing output. It also directly supports over 110 000 formal sector jobs – a significant number in an economy that is battling with the creation of sustainable employment.”

The MEC noted that a few months ago, naamsa (the Automotive Business Council) noted that the tariffs, and the broader uncertainty in our trade relations with the United States strike at the heart of South Africa’s industrialisation agenda and threaten future investment in high-value manufacturing.

Mercedes Benz in East London, for example, exports at least 90% of its vehicles to the United States, making evident the impact of such an uncertain economic climate on the East London Special Economic Zone.

“Tariffs have had a severe impact on South Africa’s automotive industry, leading to a sharp drop in exports to the United States, job losses, company closures, and reduced GDP contribution of the automotive sector.”

Vehicle exports to the United States have fallen drastically, with one report noting an 82% drop in the first half of 2025 compared to the previous year.

Challenges

“The industry has also experienced layoffs and job losses, with thousands of positions under threat due to companies losing contracts and reducing production,” the MEC said, adding that at least 12 company closures have been linked to these pressures, impacting the component manufacturing sector and its over 80 000 employees.

Communities like those in East London, and the broader Eastern Cape, which are heavily dependent on the automotive sector, are at risk of economic destabilisation.

Beyond job losses, the National Union of Metal Workers of South Africa (NUMSA) has also highlighted the risk of short-time that has been introduced at 26 companies in the Eastern Cape – many based in Gqeberha.

“Various economists have identified three structural challenges that are currently confronting the automotive industry, specifically, navigating South Africa’s exposure to tariff barriers in the United States as outlined, the danger of dumping, and adapting to the global shift towards new energy vehicles,” said Maile.

However, he noted, while these are real challenges with far-reaching implications, critical interventions can transform them into opportunities – particularly in relation to new energy vehicles.

“New energy vehicles are crucial for South Africa’s future as they offer significant economic and environmental benefits, including reducing greenhouse gas emissions and lowering fuel costs, while supporting industrial growth and job creation through local manufacturing and infrastructure development.”

New energy vehicles produce significantly fewer greenhouse gases and pollutants compared to internal combustion engine vehicles, which can help in combating urban air pollution and climate change.

The place of new energy vehicles is also clear with their lower operating costs and potential for industrial growth, the MEC said: “Electricity is cheaper than petrol and diesel, and energy vehicles have fewer moving parts, reducing overall maintenance costs.”

Additionally, as South Africa’s automotive industry contributes over 4% to GDP and 12.5% to exports, transitioning to new energy vehicles can safeguard this sector’s global competitiveness, especially with European Union bans on internal combustion engine  vehicles by 2035.

New energy vehicles are also key to a Just Energy Transition, reducing reliance on fossil fuels, which can help reduce reliance on imported fossil fuels that are increasingly subject to price volatility.

Recognising potential

NEVs could position South Africa to become a hub for regional battery production and new energy vehicle technology.

Recognising this potential, the national government has developed policies covering for NEV production, infrastructure, and skills development.

“As a result of this intervention, a 150% tax rebate for new energy vehicle production starts in March 2026, with over R1-billion having recently been allocated to support local new energy vehicle and battery manufacturing.”

The MEC said that such investments in local battery production address the salient challenge that new energy vehicles pose – mainly that they are significantly more expensive than internal combustion energy vehicles due to import duties and more importantly, a lack of local battery production.

A strategy is currently being finalised to secure supply chains for critical minerals like cobalt, lithium, and nickel, which are essential for battery production.

“This is part of a larger plan to beneficiate these materials locally instead of exporting raw forms.” This is in alignment with the Gauteng’s mineral beneficiation strategy that focuses on adding value to raw materials by transforming them into higher-value products, with a key role in refining precious and base metals.

Developing local battery manufacturing capacity for NEVs, and mineral beneficiation broadly, will address economic diversification, ensuring that the province moves beyond raw material extraction to creating a more value-added mineral economy and to retain more wealth within the province and the country broadly.

“We are aiming to leverage the province’s economic strength and infrastructure, including special economic zones, to support industries like diamond and gold processing, as well as the manufacturing of components for renewable energy technologies such as batteries and catalytic converters, contributing to the green energy transition.”

Furthermore, such interventions will address skills gaps through partnerships with universities and other institutions to ensure a qualified workforce for research, development, and skilled manufacturing.

“At the heart of our strategic approach is developing and strengthening public-private partnerships, which must necessarily be central to the engagements at this important summit,” Maile said.