South Africa's automotive industry has emerged onto the world stage after increased investment from the likes of BMW, Mercedes and VW. Moreover, the country has now attracted the attentions of a Chinese OEM The automotive industry has played a central role in the economic and industrial strategies of successive South African governments in the post-apartheid era. While several vehicle manufacturers had operations in the country in the days of its isolation, these factories were glorified kit plants and served only the local market. Since 1995, first through the Motor Industry Development Plan and later the Automotive Production and Development Programme, the government has tried to provide a structured environment for automotive companies to invest and build a global position for their South African factories.
The industry’s emergence on the world stage has been driven by the expansion of BMW, Mercedes and Volkswagen (VW), whose South African plants make vehicles for Europe and other major markets. More recently, Ford and Toyota have allocated global roles for their factories in the country, while Nissan and Isuzu (which has acquired GM’s Struandale facility) still use their South African plants principally as national and sub-Saharan supply points. In addition, China’s BAIC is currently building a new factory to make up to 100,000 vehicles in Port Elizabeth – the country’s biggest single investment in the automotive industry. Significantly, this plant will be part-owned by the South African government, which will take a 35% stake through the Industrial Development Corporation.
South Africa’s vehicle plants collectively have the capacity to make over 900,000 vehicles a year but this total will soon exceed 1m, a volume that would make it comparable to European countries like the Czech Republic, Slovakia and Turkey, and put it well ahead of Poland, Hungary and Romania. The fact that some South African plants are fully integrated into global vehicle programmes and, in the case of the three German brands mentioned above, can also be seen as part of their European supply network, reinforces South Africa’s importance in the industry.
The South African market alone is not sufficient to absorb all the vehicles that could be made in the country, and the government certainly sees the industry as a significant generator of foreign exchange earnings; nearly 345,000 vehicles were exported in 2016 and a 10% rise is expected in 2017. Europe is the principal destination for South African output, with nearly 174,000 vehicles reaching Europe in 2016, a significant uptick from 116,000 a year earlier.
Currently, Mercedes exports over 90,000 C-Class sedans and estates per year to 80 countries, while VW exports around 60,000 Polos, many of which go to the UK. In fact, around two-thirds of the Polos sold each year in the UK are made in Uitenhage, with the remainder coming from Pamplona in Spain. In the pick-up market, European demand for the Ford Ranger and Toyota Hilux is now met from South Africa, rather than Thailand, which has long been the centre of one-tonne pick-up production for many vehicle companies.