Major announcement about car prices in South Africa

BMW South Africa’s CEO has announced a plan that aims to reduce production costs, lower retail prices, and curb the influx of inexpensive new vehicles entering the country.

South Africa’s automotive industry is facing a new challenge as an influx of low-priced vehicles, particularly from China, disrupts the local market.

In response, local car manufacturers are preparing to approach the government with a bold proposal to reduce production costs and make locally manufactured vehicles more competitively priced.

Speaking with Business Live, BMW South Africa CEO Peter van Binsbergen said that local automakers plan to request that the government allow them to convert billions of rands in unused import duty credits into cash.

These credits, which are earned through high-volume vehicle production, currently enable manufacturers to offset import duties on non-local vehicles and components.

By converting them into cash, automakers hope to lower production costs and, ultimately, slash the retail prices of domestically produced cars.

The proposal is set to be presented to Trade, Industry, and Competition Minister Park Tau as part of discussions to revise South Africa’s automotive policy.

Van Binsbergen’s comments come in the wake of similar concerns raised earlier this year by Toyota South Africa Motors (TSAM) CEO Andrew Kirby, who warned about the growing impact of Chinese imports on the domestic industry.

Kirby highlighted that while competition is generally welcomed, the rapid influx of Chinese vehicles is creating an uneven playing field that threatens local manufacturers and encourages de-industrialisation.

Since 2018, the share of locally manufactured vehicles in the South African market has declined from 46% to 43% in 2023.

Meanwhile, the combined market share of Indian and Chinese brands has skyrocketed from 18% to 37% over the same period.

Much of this growth is attributed to the incentives and rebates under the Automotive Production and Development Programme (APDP), particularly Chapter 98, which allows semi-knocked-down (SKD) imports to enter the country at lower costs.

Additionally, generous government subsidies in China allow manufacturers to price their vehicles aggressively, making them more attractive to South African consumers.

Chinese brands have made significant inroads into the local market, with 13 manufacturers now offering 34 different vehicle models, ranging from hatchbacks and SUVs to sedans and bakkies.

Names like Haval, Chery, Great Wall Motors (GWM), BAIC, Foton, and JAC Motors have become household staples. Haval and Chery alone each sell over 1,500 units per month.

According to Naamsa, the number of Chinese cars imported into South Africa surged from 11,000 in 2019 to 39,000 in 2023, and by 2024, they accounted for 21% of all light-vehicle sales in the country.

At the same time, sales of entry-level vehicles from European manufacturers—many of which are locally produced—have stagnated or declined.

Their prices, however, have soared.

The Audi A1, for example, now costs R523,200, an 18.6% increase from its 2021 price of R441,000. BMW’s 1 Series has climbed from R553,220 to R713,395, a 29% jump.

The Mercedes-Benz A-Class has experienced the most dramatic rise, with its price surging 41% from R585,960 in 2021 to R826,024 in 2024.

These increases far outstrip the 20% inflation rate over the same period, putting locally manufactured premium cars further out of reach for many consumers.

Van Binsbergen has also stressed that any revised automotive policy must include provisions for manufacturing electric vehicles (EVs), which were not covered in the original master plan.

This aligns with President Cyril Ramaphosa’s recent commitments to improving South Africa’s infrastructure and his October announcement that the government would consider expanding EV incentives.

At present, the proposed incentives only apply to fully electric vehicles, but there is ongoing debate about whether hybrids should be included, as well as whether consumer incentives should be introduced to make EVs more affordable and stimulate local demand.

“We are waiting for details of exactly what [Ramaphosa] meant in October,” Van Binsbergen said, underscoring the industry’s uncertainty over how the government plans to support local carmakers amid these market shifts.

As the battle for market share intensifies, South Africa’s car manufacturers are urging swift government intervention to protect local production, ensure competitiveness, and secure the long-term sustainability of the country’s automotive sector.