South Africa's Automotive Industry

On The Road To Recovery But Navigating Headwinds

By Jessie Taylor

South Africa’s automotive sector shows renewed vigour after several years of pressure. The domestic market is gaining momentum, new players are reshaping competitive dynamics, and export ambitions remain alive.

The domestic market has benefited from a favourable interest-rate environment, relatively low newvehicle inflation and liquidity released via “two-pot” pension reforms. New passenger car sales leapt through the long-standing 35,000-unit ceiling for the first time in years, with July and August marking the strongest volumes since 2014. In the second quarter, new passenger car sales grew 22.5% year-on-year, driven by aggressive incentives from original equipment manufacturers (OEMs) and the growing presence of value-oriented brands. Chinese automakers, in particular, are transforming competition. Their share in South Africa’s market now hovers near 15% in Q2 2025 - up sharply from just 3.1% in 2022 - thanks to affordable, technologically enriched models and expanding dealer networks. That forces incumbent OEMs to rethink pricing, features and cycle strategies.

Export Disruption and Tariff Shock

However, the domestic recovery is still fragile. Affordability constraints, tightening credit conditions, and looming export headwinds may temper growth, especially in 2026. The export front has become a key vulnerability. The imposition of US tariffs has had a marked impact on South Africa’s vehicle exports. Exports to the United States fell by 73% in the first quarter of 2025, followed by further declines of 80% and 85% in April and May. Meanwhile, the South African Reserve Bank cautioned that as many as 100 000 jobs across the automotive and agriculture sectors could be at risk if tariffs persist.

To cushion the impact of tariffs, South Africa is considering expanding its Automotive Production and Development Programme (APDP) incentives. The aim is to retain manufacturing investment, preserve jobs, and reduce the shock of lost export revenues. While exports to the US have taken a blow, South Africa’s automotive industry is not standing still. A promising counterbalance lies in Africa itself. Africa’s automotive sector is projected to grow from US$21.07-billion in 2024 to US$33.14billion by 2033 (CAGR ~5.16%). South Africa accounted for about 28.4% of that market in 2024, positioning it as a key supplier within the continent.

If intra-African trade, underpinned by AfCFTA, is fully realised, South African component and vehicle exports could gain new momentum. In this context, South Africa’s industrial ecosystem - its strong supplier base, accumulated skills, infrastructure and manufacturing scale - remains an asset. The automotive sector contributes around 5 to 6% of GDP and supports over 100,000 jobs across vehicle assembly, parts manufacturing and trade. Even amid external headwinds, such depth gives the sector a fighting chance to pivot and reorient.

Towards Sustainability

Beyond market shifts and export volatility, global trends demand that South Africa’s automotive industry adapt to environmental, social and governance (ESG) imperatives. As European markets tighten emissions and regulatory standards, South African exports - 64.3% of which go to Europe - must meet increasingly stringent environmental thresholds.

The integration of sustainability is not just a cost burden; in many cases, it is a source of innovation, operational efficiency and brand differentiation. Sales of new energy vehicles (NEVs) in South Africa have risen: in 2023, they passed the 1% threshold, reaching about 1.45%, up from 0.88% in 2022. This early traction, though modest, marks the start of the transition. Some OEMs are investing in local EV assembly, battery systems and low-emissions technologies. Aligning incentives, infrastructure (notably charging networks), and regulatory frameworks will be key in turning the transition into industrial and employment growth.

There is scope for the public sector to amplify this shift. Thoughtful incentives, research and development support, and alignment with green industrial strategies can help firms internalise ESG transitions. South Africa’s reserves of platinum group metals, used in catalytic converters and hydrogen technologies, offer strategic linkage to the clean mobility shift.

Overall, the state of South Africa’s automotive sector in 2025 may best be characterised as resilient with vulnerabilities. Domestic recovery is real: consumers are responding to better financing, incentives and new market entrants. Export disruption is harsh, but the sector retains depth, institutional foundations and a capacity to pivot. South Africa’s automotive industry is not merely a legacy manufacturing anchor. It is a dynamic industrial base at the intersection of global shifts in mobility, regulation, trade and sustainability. Its path forward is unlikely to be linear, but strong leadership, reform-minded policy and strategic diversification can help steer it through the turbulence.

Sources: Engineering News | FastCompany | IOL | CNBC Africa | Reuters | Standard Bank | The NewsMarket | Moneyweb | Daily Maverick