‘Do not compete with China’

There are two possible reactions to the news of Morocco overtaking South Africa for the number of cars made in 2025. One is to believe that the Mzansi automotive industrial complex is, as the younger Daily Maverick readers would say, cooked… Actually, that’s the only way to react.

The secret to the kingdom’s success? Morocco grants automotive firms a five-year corporate tax exemption, or a 25-year exemption if most production is exported.

That was enough to lure BYD. Although it may also have been the rock bottom $106 labour cost per vehicle – the cheapest in the world. It was inevitable, then, that the nation would soon achieve its one million cars per year goal, which it did in a bumper 2025, which is almost double SA’s output in the same period.

Dr Markus Thill, regional president for Robert Bosch, told the Deepening and Widening Automotive Value Chains panel at Mining Indaba that one million units is the magic number for Bosch to consider as a tier one vendor.

Bad medicine is what we need

Thill’s diagnosis was clinical: South Africa simply does not have the volume to support a purely automotive hi-tech supply chain any more.

The hard truth is that the thresholds for viable component manufacturing have shifted. That one-million unit threshold is for internal combustion engine (ICE) components. If you want to play the EV game? It doubles to a two-million unit threshold for component localisation.

South Africa produced just shy of 600,000 units in 2025.

Thill pointed to a lack of critical mass, and that the secondary and tertiary tiers of our supply chain (the smaller manufacturers that feed the big factories) have been eroded. We are left with a hollow industry: assembly plants that import their hi-tech internals (electronics, mechatronics) because it makes zero business sense to build a factory for them here.

Where the minerals meet the road

Thill’s suggestion, and the reason for the odd sight of car execs at a mining conference, is that South Africa can no longer afford to treat automotive and mining as separate silos.

If we cannot sell one million alternators for cars, perhaps we can survive by manufacturing components that serve both mining haul trucks and passenger EVs. The convergence in electrification, battery systems and power electronics offers a sliver of hope.

However, the African Association of Automotive Manufacturers (AAAM) admitted in response to Daily Maverick questions that no formal platform exists to coordinate technical standards between these two giants. While multinational OEMs coordinate at a firm level, South Africa lacks the industrial object to force this integration.

An industry under siege

While we look to mining for salvation, the domestic market is bleeding out. Andrew Kirby, president and CEO of Toyota South Africa, painted a grim picture of the local landscape in his re-industrialisation presentation during last year’s SA Auto Week.

The South African market is effectively stagnant, trapped by an economy averaging 0.4% GDP growth over the past five years. But the real killer is what he calls “ad valorem creep”.

Vehicle taxes have not been adjusted for inflation in years. An entry-level car, which cost under R100k in 2004, now sits in the R200k-R300k bracket.

Yet, the government taxes these basic runners as if they are luxury purchases because the tax curve hasn’t moved. The result? The middle class can’t afford to buy the cars we build.

Into this vacuum flows a torrent of imports. In 2006, locally assembled cars – complete knockdown (CKD) – made up 56% of the market.

Today, that has collapsed to 33%. We are now a nation that imports 67% of its vehicles, predominantly CBU (Fully Built Units) from India and China, that bypass our local factories entirely.

Paper factories

Even where we do manufacture, the definition is slipping. Kirby warned of the rise of SKD (semi-knocked down) assembly; kits that require little more than bolting together. SKD plants require a fraction of the investment (R100-million vs R3-billion for a real plant) and create almost no jobs (30 vs 1,200). It is a Trojan Horse form of industrialisation that offers no depth and minimal value-add.

The industry’s counter-strategy, dubbed the “20:20 Vision”, calls for a 20% increase in domestic production and a 20% boost in exports. But achieving this requires fixing the ad valorem tax structure to stimulate local demand and aggressively pivoting to New Energy Vehicles (NEVs) to save our exports.

Shifting tides

Europe buys 68% of our vehicle exports. With the UK and EU banning ICE vehicles by 2030 and 2035 respectively, our biggest customer is closing the shop on petrol and diesel. If we don’t transition, those export numbers go to zero.

The AAAM argues that our only hope for scale lies in the African Continental Free Trade Area (AfCFTA) aggregating demand across the continent to finally hit those production targets. But with Morocco already sprinting ahead and Egypt revving its engine, South Africa is in danger of becoming just another showroom for Chinese EVs, rather than the industrial engine of the continent. DM