Overview

Unit: $ billion

Date Source: Above figures are unofficial estimates obtained from industry sources.

Total automotive exports and imports (includes vehicles, OE components and aftermarket parts)

In 2022, the broader automotive industry’s contribution to the gross domestic product (GDP) comprised 4.9% (2.9% manufacturing and 2% retail).  As the largest manufacturing sector in the country’s economy, a substantial 21.7% of value-addition within the domestic manufacturing output was derived from vehicle and automotive component manufacturing activity, continuing to position the industry and its broader value chain as a key player within South Africa’s industrialization landscape. 

South Africa’s global vehicle production ranking is 22nd with a 0.65% global vehicle production market share.  The South African automotive industry’s growth strategies have been focused on becoming highly integrated into the global automotive environment on the back of increased foreign direct investment and trade. Under the South African Automotive Masterplan (SAAM) 2021-2035, the objective is to produce 1% of global vehicle production, or 1.4 million vehicles, per annum in South Africa by 2035 which will substantially improve the country’s status and global vehicle production ranking.

Foreign direct investment is critical to propel growth and create jobs in the domestic economy. The automotive sector continues to remain one of the most visible sectors receiving foreign investments, with the seven Original Equipment Manufacturers (OEMs) investing R8.8 billion in 2021, the second highest annual figure on record, while the component sector also invested a significant R5.7 billion in 2021.

The automotive industry therefore represents an increasingly important strategic and catalytic role in the overall South African economy by impacting directly on many important economic policy goals, such as contribution to GDP, employment, skills development, economic linkages, technology, and innovation.

The South African automotive industry incorporates the manufacture, distribution, servicing, and maintenance of motor vehicles and components. Original equipment manufacturers (OEMs), official dealers, and repair specialists work closely together to provide maintenance and repair services.  They cooperate to ensure warranty service, driver safety, environmental protection, spare parts availability, and information about technical improvements.  

Automotive Policy

The Automotive Production Development Program (APDP) replaced the export-oriented Motor Industry Development Program in 2013 with the aim of stimulating local production of automotive components while maintaining the incentives for OEMs to manufacture passenger cars and light commercial vehicles in the country for export and the local market.  One of the attractions of South Africa’s automotive policy over the past two decades has been its long-term vision and consistency.  The APDP has reinforced policy certainty, which is critical for the industry to make long-term investment decisions.  The APDP’s focus is on raising local value addition to enhance the automotive industry’s manufacturing output and export competitiveness.  The automotive sector relies heavily on the additional economies of scale provided by exports and competitiveness is critical to its success. The growth in variety of vehicles in South Africa is a direct result of government’s automotive policy regime whereby manufacturers earn duty credits with which they can cost-effectively import other low volume models not manufactured in the country.

Imports of automotive products into South Africa remain a function of the success of the APDP, domestic market demand, and currency movements. Under the APDP, the level of imports remains a function of the success of the program, as the benefits can only be used to rebate the import duties on vehicles and eligible automotive components that are imported. Imports of vehicles to complement the domestic market mix, imports of original equipment components not sourced in South Africa, as well as replacement parts imports for a vehicle parc of 13.30 million vehicles at the end of 2022, remained high.

Market Trends

The profound impact of the COVID-19 pandemic was felt by several sectors in the domestic economy, from stalled supply chains, to softening demand, to diminishing business, and international leisure. The impact had a very direct and detrimental effect on the South African economy. These developments have forced businesses to entirely rethink how they operate and to reimagine how to exist in the new normal.

While disrupting the automotive markets in terms of sales and profitability, the pandemic has ignited the minds of many to enable the rapid transformation of particularly the e-mobility landscape and allowed it to take center stage in the global automotive environment, as well as in South Africa. The demand for new energy vehicles (NEVs) is driven largely by government incentives and the imperative to combat climate change. The economic scars of the crisis are profound, and the South African economy experienced its deepest economic contraction in a century, with a significant slump to the country’s GDP in 2020.

In 2021, passenger car imports accounted for 78.3 percent of total passenger car sales of 340 340 units in 2021, and light commercial vehicle imports accounted for 18.1 percent of total light commercial vehicle sales of 133 078 units in 2021. The country’s consumers benefit from access to a wide variety of new models and a highly competitive pricing environment as new vehicle demand in the country is met by a range of imported and domestically manufactured vehicles.

Top five countries (in order of import value) of origin for vehicles and automotive component imports into South Africa include: India, Germany, Japan, China, and the USA.  The countries of origin for vehicles and automotive components imported into South Africa generally reflect the global linkages with the head offices of parent companies. The notable exceptions amongst the top countries of origin in 2021 were Thailand, where over 82.8 percent of imports comprised original equipment components for light commercial vehicles, and China, where over 64 percent of the imports comprised aftermarket parts.

Several top U.S automotive component suppliers are represented in South Africa, including Johnson Controls, Lear, TRW Automotive, Tenneco, Federal Mogul, Delphi, Visteon, and ArvinMeritor, amongst others.  All these companies have built strong business links between their South African operations and other international stakeholders.  These established business links enhance the potential for mutually beneficial trade between the United States of America and South Africa.

Aftermarket

The independent aftermarket is responsible for the manufacturing and sales of automotive replacement parts and accessories through independent retailers and repair shops directly to the consumer, rather than to the OEMs themselves. The aftermarket also re-manufactures, distributes, retails, and installs motor vehicle parts and products, other than the original equipment components. The aftermarket has been more resilient and has not been as adversely affected by COVID-19 as the new vehicles and original equipment component market. In 2021, the import of replacement parts increased by 18.6 percent, to R68,3 billion ($4.3 billion), up from the R57,6 billion ($3.6 billion) in 2020. A weak macroeconomic outlook, along with the global shortage of semi-conductors, the latter affecting vehicle production, and the subsequent limited stock availability or increasing waiting periods for specific models, has resulted in consumers and fleets holding onto their vehicles for longer.

The countries of origin for the aftermarket parts imported into South Africa, except for China, were aligned with the main countries of origin for passenger cars and commercial vehicles. Imports from the traditional markets such as Germany, the U.S., and the UK have declined over recent years, while imports from China have increased, indicating the country’s dominant influence and cost competitiveness in the global automotive environment.

Specialty Equipment and Accessories

There has been a rapid growth in demand for automotive aftermarket specialty equipment and accessories in South Africa. In the last decade, accessorizing and improving performance of vehicles has transformed from a hobby to a fully-fledged culture of fierce competition.  In the race to individualize and distinguish their vehicles from others, enthusiasts constantly seek innovative, authentic specialty components and accessories with little regard to price.  In this lucrative segment, South Africans are highly receptive to U.S. brands and often follow trends set in the United States. A constant need to distinguish and individualize vehicles creates opportunities for U.S. suppliers of automotive performance parts and interior/exterior accessory products.  Products in demand include racing or performance fuel pumps/filters; braking systems; ignitions; clutch kits; turbos and diagnostic equipment.

Opportunities

South African specialty equipment and accessory wholesalers and retailers constantly seek to expand their product range and welcome opportunities to establish distributor/agent agreements with U.S. firms.  Most of the performance products are imported directly from the United States, United Kingdom, Italy, and Germany. However, these imports may not necessarily be purchased from the manufacturer or with any exclusivity and/or distributor agreements. This scenario leads to “rogue distributors” and fierce competition amongst wholesalers and smaller retail-customizing and performance shops. South African companies are interested in acquiring U.S. distributorships, but often cannot accept the U.S. company’s minimum quantity requirement to ship. This leaves the South African importers without much choice but to engage U.S. agents who consolidate and ship U.S. automotive specialty products that are purchased from “third parties.” 

 South African aftermarket importers and wholesalers often attend international exhibitions such as SEMA, AAPEX, Performance Racing Industry (PRI), and Automechanika to meet and partner with foreign companies not represented locally.

Emerging Opportunities in the South African Electric Vehicle Market

There are several emerging opportunities in the South African electric vehicle (EV) market for foreign companies and investors looking to enter the South African electric mobility market.  South Africa has a well-developed automotive assembly industry that will need to transition towards the manufacturing of EVs in the years to come. 

 The four key market opportunities that have been identified as attractive sectors for investment in the EV industry in South Africa are: 

1. local manufacturing and electrification of public transport
2. electric micro-mobility for last-mile delivery
3. local manufacturing of electric private passenger vehicles
4. local lithium-ion cell manufacturing.

The vehicle market segments which have been identified as market opportunities for investment with regards to EV uptake include public transport, micro-mobility, and private passenger vehicles. The electric minibus taxi industry has a total addressable market size of 356,485 vehicles that is valued at approximately $27 billion.  The unit cost of an electric minibus taxi has been estimated at $75,000 including import taxes. The electric bus industry has a total addressable market size of 65,329 vehicles that is valued at $23 billion. A unit cost of $350,000 per bus has been estimated to calculate this market size. The South African electric private passenger vehicle market size is approximately 7.8 million vehicles with an estimated value of $390 billion (assuming $50,000/vehicle)

New energy vehicle (NEV) sales reflected a significant year-on-year increase of 421.7% from 896 units in 2021 to 4 674 units by 15 brands in 2022.

Moreover, sales of battery electric vehicles breached the 500-units-a-year mark in South Africa for the first time ever, with sales of 502 units in 2022. However, despite the large increase, NEV sales still only comprised 0.88% of the total new vehicle market in 2022.

Exhibitions

Automechanika Johannesburg

Futuroad Expo (Africa’s International Commercial Vehicle Show)

Venue: Johannesburg Expo Center - NASREC

September 5-7, 2023

Resources

National Association of Automobile Manufacturers of South Africa

National Association of Automotive Component and Allied Manufacturers

For More Information, the U.S. Commercial Service, South Africa can be contacted via e-mail at: Jaisvir.Sewpaul@trade.gov; Phone: +27 21 702 7379; or visit our website at https://www.trade.gov/south-africa