Major South African CEO’s warning about plans to double one of the country’s taxes
South Africa’s motor industry is warning that government plans to potentially double import duties on vehicles from China and India could have far-reaching and unintended consequences.
This is the message from BMW SA CEO Peter van Binsbergen and other stakeholders in the motor industry, who noted that it could hurt car prices, consumer affordability, and even local manufacturers themselves.
The Department of Trade, Industry and Competition is currently conducting an internal review to assess measures to protect local vehicle manufacturing from a growing influx of imported cars, particularly from China and India.
One option under consideration is amending South Africa’s tariff schedule to raise import duties on completely built-up passenger vehicles from the current 25% to as much as 50%, which is the maximum allowed under World Trade Organisation (WTO) agreements.
Ayabonga Cawe, commissioner of the International Trade Administration Commission (ITAC), told lawmakers in Cape Town that South Africa still has room to increase duties within its WTO commitments.
“For completely built-up passenger vehicles, the bound rates there are at 50%, our duties at the moment are at around 25%,” Cawe said.
“On components, there is some room to manoeuvre—depending on what the origin market is—of between 10% and 12%.”
However, leading vehicle manufacturers are urging the government not to use tariffs as a blunt instrument.
Van Binsbergen warned that simply hiking import duties to the maximum level could disrupt the entire market and make cars significantly more expensive for South Africans.
Van Binsbergen said local manufacturers do not want tariffs used as a “big hammer” against cheaper imports.
He warned that a blanket move to a 50% duty could have serious unintended consequences.
“A 50% maximum tariff would make all imported cars radically more expensive,” he said, adding that affordability is already a major challenge for consumers.
Over R50,000 blow to car prices
He also highlighted that higher tariffs would not only affect foreign brands but also local manufacturers. BMW, for example, only produces the X3 locally and imports the rest of its model range.
“If you went up to 50% duties, I would have to use double the incentives to import my cars and probably run out of offsetting mechanisms for the import duties on those cars as well,” Van Binsbergen said.
“That is the unintended consequence; it would affect all of us, and it would hurt the consumer as well, as it would make cars more expensive for everybody. That’s not what we want. That’s a blunt instrument.”
Labour union Solidarity has echoed these concerns, warning that doubling import tariffs would not strengthen the local motor industry and could instead place further pressure on the market.
According to Theuns du Buisson, an economic researcher at the Solidarity Research Institute, the biggest impact would be felt in the entry-level segment.
“By raising the tariff from 25% to 50%, the prices of the cheapest vehicles on the South African market could increase from around R180,000 up to approximately R225,000,” Du Buisson said.
He added that this could push some vehicles into the luxury tax bracket, making them even less affordable.
Du Buisson also challenged the idea that inexpensive imported vehicles directly compete with locally manufactured models.
“Ironically, the cheapest locally manufactured vehicle costs about R100,000 more and is therefore beyond the reach of many entry-level buyers,” he said.
He warned that higher tariffs could create the perception that all cars are unaffordable, which would harm the entire industry.
Solidarity believes alternative solutions should be explored, including encouraging manufacturers already assembling vehicles locally under semi-knocked-down models to expand to full manufacturing.
However, Du Buisson said this alone would not solve the problem. “Manufacturers already complain that the local motor market is too small. Either cars must become cheaper, or people must become wealthier.”
He added that high electricity costs, failing logistics infrastructure, and heavy taxes are already weighing on manufacturers.
“There must be an urgent review of the taxes imposed on local manufacturers, as well as incentives to ensure that this remains in the best interests of taxpayers, consumers and manufacturers.”
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