South Africa’s automotive industry has called for quicker decisions on changes to the Automotive Production and Development Programme (APDP) as imported vehicles take a growing share of the domestic market and component manufacturers face pressure.
Industry representatives said, during a Creamer Media webinar on September 1, that imported vehicles accounted for 69% of domestic new vehicle sales in 2025 while local content remained at approximately 38% to 40% against a policy target of 60%.
National Association of Automotive Component and Allied Manufacturers (NAACAM) CEO Renai Moothilal said localisation made little progress during the APDP period.
“Localisation has effectively been stuck in the mud for as long as there’s been an APDP period,” Moothilal said.
Vehicle assembly volumes remained relatively stable, at between approximately 500 000 and 600 000 units a year, but recorded local content levels have declined, he added.
According to NAACAM, 15 component plants have closed over the past two years while 7 500 direct jobs have been affected by plant closures and reductions in component production lines.
Moothilal said the current policy framework has not adequately rewarded higher levels of localisation. NAACAM wants policy to establish clearer localisation requirements and provide stronger incentives for the use of locally produced components and raw materials.
However, Toyota Wessels Institute for Manufacturing Studies Executive Director Justin Barnes cautioned against interpreting the decline in the local content percentage as evidence of widespread delocalisation.
He said the value of locally produced content per vehicle may have increased even when its percentage of the finished vehicle declined. This could occur, for example, when a locally assembled export model uses a higher-value imported engine.
“The actual local content per manufactured South African vehicle has gone up but the percentage has gone down,” Barnes said.
The APDP is broadly supporting automotive exports as intended but requires adjustments to address weaknesses in the domestic market, he added.
Under the programme, vehicle exporters can earn rebates against duties on imported vehicles. Manufacturers that do not use all their rebates can sell them to independent importers.
Barnes said importers that acquire these rebates could reduce their exposure to duties and the ad valorem tax, making their vehicles approximately 4.5% cheaper in the domestic market.
“That is a major problem that needs to be corrected,” he said.
Vehicle taxes suppress demand
Barnes also identified the tax burden on new vehicles as a constraint on domestic demand.
He estimated that the average amount of tax levied on each vehicle sold in South Africa is approximately R130 000. This includes ad valorem tax, value-added tax, the environmental levy on carbon emissions and the tyre levy.
“If government wants more vehicles to be consumed in the country, it needs to think about how much it taxes our vehicles,” Barnes said.
Adjustments to the tax structure could stimulate local vehicle production for the domestic market, he added.
Metair Investments CEO Paul O’Flaherty said component manufacturers also face pressure from declining production volumes and South Africa’s structural inefficiencies.
Component suppliers often invest in plants on the basis of production volumes forecast by vehicle manufacturers. When actual production falls substantially below those projections, the viability of the investment comes under pressure.
O’Flaherty said manufacturers are also contending with high electricity costs and continuing port and logistics challenges.
“The longer the discussion goes on about the next incentives, and how we fine-tune this, is not helpful,” he said.
He called for policy certainty to give manufacturers clearer direction on future investment.
Moothilal said the industry should conclude the current round of policy discussions within a year and secure certainty on any changes to the APDP.
O’Flaherty said the industry’s priority is to protect existing employment and create additional jobs.
“We obsess about all these enablers that we have spoken about in this session: protecting and growing those jobs.”
