Transitioning SA's Petrochemical Value Chain

South Africa has a strong automotive manufacturing industry, with an ICE vehicle sector that makes up approximately 4.3% of the country’s GDP, and 17.3% of the country’s manufacturing market in 2021 . The automotive industry currently employs around 509 000 people across a support system of ancillary industries and indirect jobs.  South Africa’s vehicle production ranked at 22 globally in 2019, accounting for 0.7% of global production, supplying both import and export markets with a broad range of vehicles including, passenger cars, commercial vehicles and buses. The bulk of production is light passenger and commercial vehicles, 63% of which are exported across the world. Of the exports, 77% are to the UK and the EU. Exports of vehicles and components represented a record R208 billion in 2021, equating to 12.5% of South Africa’s total exports. 

Seven Original Equipment Manufacturers (OEMs) operate in South Africa, concentrated in three manufacturing regions: Gauteng, Kwazulu-Natal and the Eastern Cape. Toyota has the largest market share for light vehicle sales in the country, followed by Volkswagen, Ford and Nissan. Automotive manufacturing is complemented by a large number of importers and distributors that contribute to local vehicle sales, for example Fiat Group, Hyundai, Kia, Renault and Isuzu. Minibus manufacturing is dominated by Toyota and BAW (Beijing Automobile Works), with approximately 80 000 taxis having been assembled locally since 2012. 

The global decarbonisation imperative is driving disruptive change in South Africa’s major vehicle export markets. In the EU, a reduction of 55% in passenger vehicle emissions by 2030 has been made a legal obligation, and all new cars and vans sold must be zero emissions by 2035. The European commission is also seeking to have at least 30 million EVs on their roads by 2030, which is a significant increase from the current levels of 1.7 million EVs in 2021. A number of South Africa’s other international markets have already announced their intentions to ban new ICE vehicle sales from as early as 2025.

Despite having an existing automotive manufacturing capability, with a long-term opportunity to develop an EV manufacturing hub for passenger vehicles supported by increased exporter demand in the medium term, local manufacturers are yet to shift existing operations to EVs. This observation is in part due to the limited growth in local demand – manufacturers’ profitability is dependent on both the local and export markets, and any major shifts to EVs would thus require parallel development of a local market for products to complement changing global markets. 

South Africa’s automotive manufacturing has been supported by ongoing collaboration with key global OEMs, component manufacturers and organised labour, in line with the Automotive Production and Development Programme (APDP) of 2013. The APDP is an incentive scheme that was aimed at supporting local manufacturing by increasing customs duties of imported vehicles and components, establishing rebate mechanisms for OEMs and supply chains, and facilitating investment grants. The APDP does not make any provisions for EV manufacturing as it focuses mainly on traditional automotive manufacturing. As the global transition towards EVs accelerates, the existing incentive structures maintaining the local production will become increasingly inefficient unless they are updated to align with global trends.