By JD GLOBAL MEDIA
South Africa’s automotive industry is facing a critical transition as international vehicle manufacturers decide where to build the next generation of electric vehicles, with industry executives warning that the country could lose future production to lower-cost and increasingly competitive manufacturing centres in Asia.
The issue has become increasingly urgent because the automotive industry is one of South Africa’s most important manufacturing sectors and is deeply integrated into the country’s export economy. Industry representatives estimate that about 113,000 jobs could be exposed if South Africa fails to secure new vehicle production programmes as manufacturers shift investment towards electric and other new-energy vehicles.
South Africa already has an established automotive manufacturing base, with major international manufacturers operating production facilities and a large network of component suppliers. However, the transition from internal-combustion vehicles to electric vehicles is changing the investment decisions facing manufacturers.
The central challenge is whether South Africa can persuade vehicle companies that it remains a competitive location for future models while also developing the domestic capabilities required for electric vehicles, batteries and related components.
Automotive Industry At A Turning Point
South Africa’s automotive industry has historically been built around manufacturing vehicles for both the domestic market and international export markets.
The sector’s export orientation means that production decisions made by global vehicle manufacturers have consequences far beyond individual factories. When an international manufacturer allocates a new model to a particular plant, the decision can influence component suppliers, logistics companies, dealerships, engineering firms and other businesses connected to the manufacturing chain.
The country exported vehicles and automotive components worth R268.8 billion in 2024, according to the Department of Trade, Industry and Competition. The department has also described the sector as supporting nearly 500,000 direct jobs and about one million jobs across the broader value chain.
The industry's future therefore depends partly on its ability to remain connected to international production programmes.
But the global automotive market is changing rapidly.
Electric vehicles require different manufacturing processes and components from conventional petrol and diesel vehicles. Battery technology, software, electronic systems and charging infrastructure are becoming increasingly important to manufacturers.
Countries competing for these investments are therefore attempting to provide manufacturers with competitive costs, infrastructure, incentives, supply chains and access to major consumer markets.
Competition From Asia
Global manufacturers are increasingly comparing production locations across Asia and other emerging manufacturing regions.
Industry executives have warned that South Africa risks losing future production if it cannot compete effectively with countries offering attractive investment conditions and rapidly developing electric-vehicle manufacturing ecosystems.
The challenge is not necessarily that South Africa lacks an established automotive industry.
Instead, the concern is that existing production capacity may not automatically translate into future electric-vehicle investment.
A manufacturer deciding where to produce a new electric model can consider factors including the cost of components, electricity, labour, logistics, local content, government incentives, export arrangements and the availability of suppliers capable of meeting the technical requirements of the new vehicle.
Asian manufacturers have expanded their presence in global electric-vehicle supply chains, while Chinese vehicle companies have also become increasingly visible in the South African market.
This creates pressure on established manufacturers and policymakers to respond to changing technology and competition.
Government Introduces A New EV Investment Incentive
South Africa has already introduced a major tax incentive aimed at encouraging investment in electric and hydrogen-powered vehicle production.
From 1 March 2026, qualifying manufacturers can claim a 150% investment allowance on qualifying spending on production capacity for battery-electric and hydrogen-powered vehicles. The incentive applies to qualifying buildings, machinery, plant and other assets used mainly in the production of these vehicles.
The measure is intended to make local production more attractive at a time when manufacturers are deciding where to allocate capital for future vehicle programmes.
The incentive operates alongside the existing Automotive Production and Development Programme, which remains an important part of South Africa’s automotive support framework.
The government has also allocated funding to support the transition of the industry towards electric vehicles.
The policy objective is not simply to increase the number of electric vehicles sold in South Africa. It is also to establish the country as a manufacturing location for new-energy vehicles and their components.
That distinction is important because importing electric vehicles without developing domestic manufacturing would provide consumers with access to the technology but would not necessarily protect the country's industrial employment base.
Why The 113,000 Jobs Matter
The warning about 113,000 jobs highlights the potential consequences of failing to secure future production allocations.
The jobs affected would not necessarily all disappear at once. The risk relates to the future sustainability of employment connected to vehicle production if factories lose models and manufacturers reduce or relocate production.
Automotive employment extends well beyond workers directly employed on assembly lines.
Component manufacturers supply everything from electrical systems and interiors to metal parts and specialised equipment. Logistics companies transport vehicles and components, while engineering and technical businesses provide specialised services.
A reduction in vehicle production can therefore affect businesses throughout the supply chain.
For this reason, a decision by an international manufacturer to allocate a new vehicle programme elsewhere can have effects across multiple provinces and industries.
South Africa Already Has A Manufacturing Base To Build On
The country does not have to establish an automotive industry from scratch.
South Africa has decades of experience in vehicle assembly and component manufacturing. Its existing automotive incentive framework includes production rebates, investment support and measures designed to increase local value addition.
The Department of Trade, Industry and Competition describes the Automotive Investment Scheme as a programme intended to encourage investment in new or replacement models and components, increase production volumes, sustain employment and strengthen the automotive value chain.
The country's existing production infrastructure therefore provides a foundation for the transition.
The question is whether that foundation can be adapted quickly enough to compete for the next generation of manufacturing investment.
Electric Vehicles Require New Capabilities
The move towards electric vehicles changes the skills and industrial capabilities required by manufacturers.
Traditional automotive production relies heavily on mechanical engineering, internal-combustion powertrain components and associated supply chains.
Electric vehicles place greater emphasis on batteries, electric motors, power electronics, software, electronic control systems and advanced manufacturing.
South Africa has been developing programmes intended to address these requirements.
The Department of Trade, Industry and Competition has previously reported work on EV-related skills development involving universities and technical institutions. The department has also identified battery value-chain development as part of the country's broader industrial strategy.
The availability of skilled workers will be important because manufacturers need technicians and engineers capable of working with new technologies.
Training and research capacity will therefore become increasingly important alongside traditional manufacturing infrastructure.
The Battery Question
Another major issue is the availability of competitive battery supply chains.
Batteries represent one of the most important components of electric vehicles and can account for a substantial share of the vehicle's production cost.
South Africa has mineral resources relevant to battery and clean-energy technologies, but possessing mineral deposits is different from having a complete industrial battery supply chain.
The country therefore faces a broader industrialisation challenge: how to move from supplying raw materials to developing processing, component manufacturing and other higher-value activities.
Government has previously identified the development of battery value chains and critical minerals as part of its new-energy vehicle strategy.
If battery-related industries develop alongside vehicle manufacturing, the economic benefits could extend beyond vehicle assembly.
If they do not, South African manufacturers may remain dependent on imported components, potentially increasing production costs.
Export Markets Are Critical
South Africa's automotive sector is particularly exposed to international market conditions because a substantial portion of its production is exported.
The industry therefore has to remain competitive not only for South African consumers but also for international buyers.
The country's ability to maintain access to export markets is influenced by trade agreements, vehicle standards, production costs, logistics and the types of models manufactured locally.
A factory producing vehicles that are no longer competitive in major export markets could face pressure even if domestic demand remains relatively stable.
This makes future model allocation one of the most important issues facing the industry.
Chinese Automakers Add Another Layer Of Competition
South African consumers have increasingly encountered Chinese vehicle brands offering competitively priced vehicles and rapidly expanding product ranges.
That competition affects the domestic market while also highlighting the speed at which Chinese manufacturers have developed electric and technologically advanced vehicles.
In May 2026, Deputy Trade and Industry Minister Zuko Godlimpi said South Africa needed to restructure production and improve competitiveness as Chinese vehicles gained ground because of pricing and technology. He also called for greater investment in innovation and research and development.
The development means South Africa's traditional manufacturers face pressure on two fronts.
They must compete for consumers against increasingly competitive imported vehicles while simultaneously competing internationally for future production investment.
Government And Industry Face A Narrower Window
The new 150% investment allowance gives manufacturers an additional financial reason to consider South Africa, but industry executives say incentives alone may not determine future production decisions.
Manufacturers also consider electricity reliability and cost, logistics performance, port efficiency, infrastructure, labour costs, skills availability and the competitiveness of the supplier base.
South Africa has been working to address several of these structural challenges, but the automotive industry's transition is occurring while manufacturers globally are already making long-term investment decisions.
A vehicle production programme can remain in operation for many years. Losing a new model can therefore affect a factory long after the immediate investment decision has been made.
What Happens Next
South Africa's immediate challenge is to secure future vehicle programmes while accelerating the development of the electric-vehicle ecosystem.
That will require cooperation between government, vehicle manufacturers, component suppliers, labour representatives, training institutions and investors.
The 150% investment allowance is one part of that effort. Existing automotive support programmes provide another layer.
But the longer-term question is whether these measures can translate into actual new production commitments.
The government has set a policy objective of moving the automotive industry towards a dual platform that includes electric vehicles alongside conventional vehicles, with the transition expected to progress towards 2035.
That timetable gives manufacturers and policymakers a clear direction, but the investment decisions determining the industry's future are being made now.
Protecting An Industry With A Wider Economic Footprint
The warning over 113,000 jobs is ultimately about more than individual employment positions.
South Africa's automotive industry connects manufacturing, engineering, mining, logistics, retail, exports, technical training and international investment.
A successful transition to electric vehicles could allow those connections to continue while creating new opportunities in batteries, electronics, software and other technologies.
A failure to secure future production could instead leave existing factories dependent on ageing vehicle programmes while new investment flows to competing manufacturing centres.
The country therefore faces a strategic industrial challenge: preserve its established strengths while adapting them to a rapidly changing global automotive market.
The coming years will show whether the new investment incentives, industrial programmes and skills initiatives are sufficient to persuade manufacturers to place their next-generation vehicles in South Africa.
For workers and businesses across the automotive value chain, the outcome will be closely watched because decisions made by global vehicle manufacturers today could shape the country's manufacturing employment base for years to come.
South Africa still has an established automotive industry, experienced manufacturers, export infrastructure and a network of component suppliers. It also now has a dedicated tax incentive for new-energy vehicle production.
But the global competition for future models is intensifying, and Asian manufacturing centres are presenting increasingly strong alternatives.
The central issue is therefore no longer whether South Africa can manufacture vehicles. It is whether the country can remain competitive enough to manufacture the next generation of vehicles at scale.
That question carries consequences for investment, exports, industrial development and potentially tens of thousands of workers whose livelihoods depend directly or indirectly on the automotive manufacturing ecosystem.
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