Alarm bells for one of South Africa’s biggest employers
For years, major car brands have been sounding the alarm over South Africa’s slow transition to new energy vehicle production, and new data is starting to paint a bleak picture for one of the country’s main sectors if it doesn’t heed the warnings.
Toyota, Ford, and Volkswagen have voiced increasing concerns about South Africa’s sluggish transition to new energy vehicles (NEVs) amid a global shift toward electric vehicles (EVs).
With over 110,000 direct employees and around 500,000 people engaged within the broader automotive value chain, the industry is a crucial part of South Africa’s economy.
However, as the international market progressively adopts EVs, the country risks falling behind.
The slow adoption rate could severely affect the automotive industry’s relevance, especially as major markets like the European Union move toward stricter environmental regulations and transition deadlines.
A significant shift in global regulations, notably the European Union’s planned ban on internal combustion engine (ICE) vehicles by 2035, has accelerated the demand for innovation and new energy vehicles.
Yet, South African manufacturers remain reluctant to invest in or produce EVs at scale.
Analysts warn that this hesitation mirrors past industry failures, likening it to cases such as Kodak and Nokia, companies once dominant but ultimately overtaken by competitors because they failed to adapt quickly to technological advancements.
Without proactive measures, South Africa’s automotive industry could see its share in major export markets dwindle, ultimately impacting the sector’s long-term sustainability.
Recent data from Naamsa underscores these concerns.
Domestic vehicle sales for October 2024 showed a modest increase, with 47,942 units sold—up by 2,506 units or 5.5% from October 2023’s 45,418 vehicles.
Yet, the data paints a different picture when it comes to exports.
Export sales dropped sharply, with only 23,342 units shipped in October 2024, a decrease of 17,324 vehicles or 42.6% from the 40,666 vehicles exported in the same month the previous year.
Cumulatively, for the first ten months of the year, South Africa’s vehicle exports are now 23.1% lower than the corresponding period in 2023, a substantial decline that hints at deeper challenges.
Mikel Mabasa, Naamsa’s CEO, points to several key factors behind this export slump.
South Africa’s primary export market for vehicles, the European Union, has ramped up emissions regulations, putting pressure on ICE vehicle exports.
Additionally, an influx of cheaper EV models from China is also reshaping the competitive landscape, particularly in Europe.
Europe, which accounts for nearly 75% of South Africa’s vehicle exports, has seen sluggish economic growth, with projections indicating that Germany, one of South Africa’s key trading partners, is expected to end 2024 with a slight economic contraction of 0.2%.
Such an environment increases the challenges South African exporters face, making it even more difficult to retain their foothold in the region without a robust transition to EV manufacturing.
Mabasa remains cautiously optimistic, however, that easing monetary policies in key export markets could eventually help reinvigorate vehicle export growth.
In the medium term, such economic shifts could encourage consumer spending, potentially creating a more favourable environment for South African vehicle exports.
Nevertheless, the country’s automotive manufacturers will need to accelerate their adaptation to new energy vehicle production if they aim to capitalise on future demand shifts and retain competitiveness.
The current export data clearly illustrates the consequences of lagging behind in the global EV transition, signaling that if South Africa’s automotive sector hopes to remain relevant, timely adaptation is essential.
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