South Africa under siege, warns Toyota CEO

South Africa’s car industry is facing a major challenge due to the rise of Chinese vehicle imports in the local market.

Toyota South Africa Motors (TSAM) CEO Andrew Kirby has raised concerns about the impact this trend is having on local manufacturers, warning that it threatens to disrupt the industry’s stability and growth.

While competition is generally welcomed, Kirby argues that the surge in Chinese imports is creating an uneven playing field and encouraging de-industrialisation.

Chinese vehicle brands have made remarkable inroads into South Africa, driven by economic conditions that favour affordability over brand loyalty.

Local production has declined, with the share of domestically produced vehicles in the market falling from 46% in 2018 to 43% in 2023.

Meanwhile, the combined market share of Indian and Chinese vehicles surged from 18% to 37% over the same period.

Among these, Chinese brands have shown significant growth, with their market share increasing from just 2% in 2019 to 9% in 2024.

This growth is underpinned by the significant affordability of Chinese vehicles, which are particularly appealing to price-sensitive South African consumers.

Kirby highlighted the structural changes in vehicle sourcing during his keynote at the State of the Motor Industry event on Thursday (23 January).

He pointed out that South Africa’s production has been severely affected.

In the past, South Africa’s factories assembled cars using parts from local suppliers, a process called Completely Knocked Down (CKD) production.

This method is important for creating jobs and boosting the local economy. However, since 2018, CKD production has dropped by more than 11%.

Instead, more cars are being imported as completely built units that are ready to sell, especially from Asia.

This trend is exacerbated by the free trade rebates and semi-knocked-down options available under Chapter 98 of the Automotive Production Development Programme (APDP), which make imports more attractive than local production.

If this continues, Kirby warns that South Africa’s car industry could become entirely dependent on imports.

The rapid rise in Chinese imports is partly due to beneficial government subsidies, which allow them to price their vehicles competitively.

In South Africa, this translates into aggressive market penetration, with 13 Chinese manufacturers now offering 34 different vehicle models, ranging from hatchbacks and SUVs to sedans and bakkies.

Brands like Haval, Chery, Great Wall Motors (GWM), BAIC, Foton, and JAC Motors have become household names, with Haval and Chery each selling over 1,500 units monthly.

The affordability of Chinese vehicles has been a key factor in their success. The average price of a new vehicle in South Africa dropped from R501,901 in 2023 to R490,478 in 2024, reflecting the pressure on consumers amid tough economic conditions.

Used car sales also rose by 9.4% year-on-year to over 54,000 units, while banks reported a decline in successful financing applications for new vehicles.

These factors underline the financial constraints faced by South Africans, making Chinese vehicles an attractive option.

Despite the affordability of Chinese cars, local manufacturers still hold some advantages.

After-sales service and customer support, along with established brand trust, give traditional players like Toyota and Volkswagen a competitive edge.

However, the gap is closing as Chinese brands continue to improve and gain more customers.

According to Naamsa, the number of Chinese cars imported to South Africa grew from 11,000 in 2019 to 39,000 in 2023. By 2024, Chinese cars made up 21% of all light-vehicle brands sold in the country.

The rise of Chinese brands has coincided with a broader decline in the South African automotive industry.

Total vehicle sales in 2024 fell by 3% to 515,712 units, marking the lowest level since the COVID-19 pandemic.

Vehicle exports also dropped by 22.8% to 308,830 units, impacted by weaker demand in the European Union, stricter emission regulations, and growing competition from Chinese electric vehicles.

Kirby stressed that for South Africa’s car industry to succeed, it needs to focus on growing CKD production and using more locally made parts.