The announcement by the South African government that it will publish a new automotive policy by the end of February 2026 signals a pivotal moment for the nation’s industrial ambitions. This strategic review, aimed at reviving local vehicle manufacturing, comes at a time when global automotive value chains are shifting dramatically and regional competitors are intensifying their ascent. South Africa’s ability to reclaim its position as Africa’s automotive manufacturing hub will depend on how effectively it navigates these global and domestic dynamics.
Over the past decade, the global automotive industry has transformed under the influence of electrification, tightening emissions standards, evolving trade flows, and the rapid rise of Asian manufacturing capacity. Traditional exporters in Europe, Japan and North America face mounting pressure from low-cost producers in China and India, while the industry’s pivot towards electric vehicles (EVs) demands new production capabilities and supply chains.
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Against this broader backdrop, South Africa’s automotive sector, long a cornerstone of its industrial base has confronted structural headwinds. Models that dominated earlier decades are increasingly challenged by imports that combine competitive pricing with rapidly improving quality. Vehicles imported from China and India have gained substantial market share in South Africa, with light vehicles accounting for around 69.3 per cent of total national sales in 2025, according to recently reported industry data. This influx has eroded the domestic manufacturing footprint at a time when localisation targets remain unmet.
For much of the 20th and early 21st centuries, South Africa was Africa’s largest vehicle manufacturer, a distinction grounded in its diversified industrial base, established assembly plants and export ties to global markets. By contrast, Morocco’s automotive ascent has been one of the most striking industrial developments on the continent in recent years.
Industry estimates show that Morocco’s automotive production exceeded one million vehicles in 2025, a surge of nearly 79 per cent compared with its 2024 output, which enabled it to overtake South Africa as Africa’s leading vehicle producer. During the same period, South African production growth was more modest, with figures of roughly 554,613 vehicles produced between January and November 2025, leaving it behind Morocco’s milestone total.
Morocco’s strategy has emphasised export-oriented production and a strong industrial ecosystem led by major global firms such as Renault and Stellantis, supported by a dense network of local and international suppliers. Estimated export revenues for Morocco’s automotive sector are projected at nearly €15 billion in 2025, underscoring its emergence as one of the country’s most significant export earners.
South Africa’s Strategic Response
The forthcoming policy review announced by the South African government represents both an acknowledgement of these competitive pressures and a strategic opportunity. Officials are considering adjustments to luxury taxes, the ad valorem tax and import tariffs to favour local production, measures aimed at making domestically assembled vehicles more price-competitive relative to imports. These fiscal tools are part of a broader effort to stimulate localisation, encourage investment in production capacity, and strengthen domestic content in vehicles assembled in South Africa.
This policy review sits atop the framework of the country’s Automotive Masterplan 2018, which set ambitious targets for the sector: lifting local vehicle production to 1 per cent of global output (approximately 1.4 million units) and raising the local content of assembled vehicles to 60 per cent. In practice, South Africa’s output has fallen short of these goals, with local production at around 602,302 units in 2025 and local content levels remaining below the target despite incremental improvements.
Stakeholders within the sector have emphasised the importance of deepening localisation not just as a compliance metric, but as an existential imperative for sustainable industrial growth. Current debate within government and industry circles points to a comprehensive review of the Automotive Production Development Programme (APDP) and related incentives to address bottlenecks including infrastructure constraints, energy costs, and skills shortages.
Structural Strengths and Long-Term Opportunities
South Africa’s automotive sector retains intrinsic strengths that could undergird a resurgence. It remains one of the largest industrial employers in the country, with the industry directly employing over 115,000 people and supporting hundreds of thousands more across supply chains. Its established assembly plants and experience with global brands provide a foundation on which to build.
In addition, recent reforms aimed at aligning production with global sustainability trends are creating new opportunities. From March 2026, manufacturers investing in EV and hydrogen vehicle production will be eligible for a 150 per cent tax deduction on relevant capital investments, signalling policy alignment with the global shift to cleaner technologies and encouraging long-term investment. South Africa’s substantial reserves of critical minerals such as manganese and nickel further position it to contribute to battery supply chains, an area of strategic importance as the automotive industry electrifies.
Another potential boon lies in international investment partnerships. The government has engaged with Chinese and Indian manufacturers about expanding their local manufacturing presence, a development that if realised could revitalise production capacity and introduce new lines tailored to both domestic and regional markets. The recent sale of Nissan’s Rosslyn manufacturing assets to China’s Chery Automobile’s South African arm illustrates this trend and carries implications for future capacity utilisation and localisation strategies.
Strategic Challenges Beyond Policy
Despite these opportunities, structural challenges will not be resolved by fiscal incentives alone. Infrastructure deficits, particularly in energy and logistics, continue to raise production costs relative to major competitors. South Africa’s reliance on coal for the bulk of its electricity supply contrasts with countries such as Morocco, which combines industrial incentives with comparatively lower energy costs and a regulatory environment favourable to export-oriented manufacturing.
Furthermore, regional trade dynamics present both opportunities and obstacles. South Africa’s efforts to access African markets can be influenced by tariff policies within regional economic communities. For instance, resistance from some East African states to duty-free entry of South African vehicles under certain trade arrangements underscores the complexity of market access across the continent.
The Road Ahead for South Africa’s Automotive Sector
Reclaiming its status as Africa’s automotive manufacturing hub is neither unattainable nor assured. It will require sustained policy coherence, targeted investment, and strategic engagement with global and regional partners. While Morocco has surged ahead through export-oriented strategies and integration into global value chains, South Africa’s deep industrial base, policy reforms and alignment with emerging technologies offer a credible path to revitalisation.
The success of these efforts will hinge on the government’s ability to translate policy into effective action, address structural impediments to competitiveness, and cultivate an industrial environment that attracts long-term domestic and foreign investment. If these elements are aligned, South Africa could not only recapture its leadership role but also help redefine automotive manufacturing across the African continent in the era of electrification and technological transformation.
