‘SA to be new car importers’

South Africa will become a new vehicle importing country and will no longer be a new vehicle production hub in the longer term, a doyen of the country’s motor industry has predicted.

Manny de Canha, chair of C2 Technologies Group and a former CEO of Associated Motor Holdings and director of Imperial Holdings prior to its unbundling, also believes vehicle dealers and dealership groups need to continue to focus on internal combustion engine vehicles because it will possibly take 50 years for electric vehicles (EVs) and new energy vehicles (NEVs) to take over the local market.

He told a National Automobile Dealers’ Association (Nada) conference last week that 80% of new passenger cars sold in SA in 2022 were imported. “So the question you have to ask yourself is [new vehicle] manufacturing relevant in South Africa?

“There are going to be more and more importers of vehicles and I’m not sure that, long-term, we’re going to produce cars in South Africa. I know everybody says we export but I say that is with government subsidies. Can government afford those subsidies in the long term? I doubt it very much. It’s not in play now but it is probably in five years’ time.”

However, De Canha stressed the domestic new vehicle market is not going to die but will switch from local manufacturing to imports. “More and more cars will be imported because they are cheaper to manufacture because they [overseas manufacturing plants] have scale. We don’t have the [economies of] scale in South Africa.”

He said this will be a challenge for original equipment manufacturers and anticipates local sales of imports “just growing”.

Attempts to obtain comment from automotive business council Naamsa on De Canha’s views were unsuccessful. However, EY SA tax partner Duane Newman disagrees with De Canha.

He believes there’s likely to be more new vehicle manufacturing in SA within the next five years, considering the plans of new entrants like Beijing Auto Industrial Corporation (Baic) and Stellantis.

This is a reference to reports this month that production at the Baic manufacturing plant in the Coega Industrial Development Zone (IDZ) had commenced following the announcement of the joint venture with the Industrial Development Corporation (IDC) in August 2016.

In addition, multinational automotive group Stellantis confirmed last year its intention to invest R3 billion in SA to establish a state-of-the-art greenfields automotive plant, also in Coega, Eastern Cape.

Newman stressed that the SA government has clearly shown there’s a long-term commitment to the automotive industry through the SA Automotive Masterplan to 2035 and expects the government to extend its commitment beyond 2035.

He said the announcement of a 125% additional tax incentive for the electric and hydrogen value chain in the 2024 Budget is also a clear indication government wants to support the transition to NEVs.

He said there were other major factors that will impact the industry, including:

The speed of the switch to NEVs in export markets, particularly in light of a view that the enthusiasm for NEVs is slowing down;

The impact of the African Continental Free Trade Area and African auto strategy on regional value chains;

The critical minerals drive across Africa and how the automotive value chain can localise by leveraging off this; and

Carbon border adjustment developments across the world.