Could South Africa lose its motor industry, its biggest manufacturer, and half a million jobs? Could SA repeat the sad experience of Australia, which lost its car industry a decade ago?
It’s too early to draw a conclusion. But alarm bells are ringing. Martina Biene, CEO at Volkswagen in the Eastern Cape, says VW’s Kariega plant’s future is on the line.
“2026,” she says, “will be a make-or-break year for Volkswagen in South Africa.”
She wants lower taxes, reduced subsidies for partially assembled Chinese vehicles, incentives to produce electric vehicles, improved transit and port operations, and predictable supplies of electricity and water. Thus far, she continues, government talks but does nothing.
Cars have been made locally for nearly 100 years and SA has been the undisputed auto industry leader in Africa. But last year SA was outproduced by Morocco, which didn’t even have a car industry 15 years ago. Morocco built a million vehicles in 2025 compared to 600,000 in SA.
The South African motor industry is geared to exports with over 60% of 2025 production shipped abroad. Volkswagen in the Eastern Cape exports more than half of its production to Europe and the UK. But it is struggling because consumer preference in Europe has shifted to EVs which are not produced in SA. Concerning the US, because of Donald Trump’s tariffs, SA shipments have already fallen precipitously.
Surging imports from China and India are another problem. Ominously for SA’s seven domestic manufacturers, imports – mostly from China and India – now account for over 60% of SA vehicle sales. And the Chinese are expanding aggressively. Nissan, the weakest of the Japanese producers, is selling its Pretoria operations to China’s Chery. Chinese firms are building for an EV future, putting in place an extensive charging network. In the industrial zone outside PE China’s FAW is producing trucks from components imported from China.
Recently Goodyear closed its tyre factory the Eastern Cape, eliminating 800 high-paying jobs. Goodyear’s exodus is a wake-up call against Chinese dumping of multiple brands of low-priced tyres onto the SA market.
There are multiple factors responsible for the collapse of Australia’s auto industry. Its small home market was protected with high tariffs, but that changed. Labor costs were high. A decade-long commodity and mining boom led to a doubling of the currency’s exchange rate from 2001 to 2011. Imports surged, government subsidies were slashed. Mitsubishi in 2004 was the first to leave. By 2016 the collapse was complete as Ford, Holden and Toyota all closed down.
Importantly, car exports from Australia were minimal. Australian auto production never exceeded 500,000 units per year, a number equal to the output of a single BMW facility in Spartanburg, South Carolina. By comparison, South Korea’s Hyundai’s plant in Ulsan – the world’s biggest car factory – has an annual capacity of 1.5 million vehicles.
Pretoria has been ambivalent about the auto industry. There’s a history of promises that weren’t kept. In 2014 President Jacob Zuma pledged to double vehicle production and create half a million new jobs by 2020. Instead, jobs were lost. At least 200,000 manufacturing jobs disappeared over the past decade. Some say the situation is dire. Among them is Pretoria University finance professor Adrian Saville who says SA is becoming an industrial graveyard.
A recent industry master plan speaks of increasing auto production to 1.4 million units annually while boosting employment to 224,000. Good luck with that.
But the trends aren’t all bad. Car sales were up 20% in 2025. Domestic vehicle production expanded to 602,000. Among producers, Toyota is doing well, recording record SA sales in 2025. Domestic production, says the company, is a major reason for success.
Government has to make up its mind. Will it facilitate BRICS partner China’s ascendance in the domestic market, or will it respond positively to the needs of its existing car producers?
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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