Component makers are closing as Tau bets on localisation to save the auto industry
The trade and industry minister told South African Auto Week in Durban that the review of the APDP2 must reward manufacturing in South Africa, not assembly alone, while conceding that some component manufacturers have already shut.
Component manufacturers in South Africa’s automotive supply chain are under real pressure from imports, energy and logistics costs and weaker demand, and some have closed. That admission came from Trade, Industry and Competition Minister Parks Tau, in the same address in which he set out government’s localisation and transformation ambitions for the sector.
Tau was speaking at the opening session of South African Auto Week in Durban, a three-day event at the International Convention Centre led by the National Association of Automobile Manufacturers of South Africa and the Automotive Business Council, with the KwaZulu-Natal Provincial Government and the dtic.
“Some component manufacturers, black-owned and otherwise, are under real pressure from imports, energy and logistics costs and weaker demand. Some have closed,” Tau told delegates. “We cannot speak about transformation without also speaking about keeping this base alive.”
His answer to that pressure is localisation. “Every imported component that we learn to make here is an opportunity for a new supplier, a new investment and new jobs,” he said, arguing that an industry drawing on a broad and capable supplier base is more resilient to shocks and more deeply rooted in the country that hosts it. “Localisation is where transformation becomes real,” he said.
The instrument he named for that work is the Automotive Production and Development Programme 2, the sector’s primary industrial policy framework, launched on 1 July 2021 to succeed Phase 1 of the APDP and to guide the industry toward the South African Automotive Masterplan 2035. That programme is under review.
“I have been clear that the programme must reward manufacturing in South Africa, not assembly alone, and must support component manufacturers,” Tau said. He said a 150% investment allowance now applies to qualifying investment in electric and hydrogen vehicle production, and that the Automotive Investment Scheme, the Industrial Development Corporation, the National Empowerment Fund and other development finance institutions will continue to support investment in the supplier base.
On the transition to new energy vehicles, Tau framed batteries, electric drive units, power electronics, thermal systems and charging equipment as value chains still being built, and as an opening for black- and women-owned firms to enter as owners and partners rather than on the margins. “The transition to new energy vehicles is a chance to do things differently,” he said.
The minister also pointed to export markets as part of the answer to weak domestic demand. He said government is pursuing the Africa Automotive Pact through the Association for African Automotive Manufacturers and partners in Egypt and Algeria, a mechanism he said would give life to the African Continental Free Trade Area and support diversification into new markets.
According to the figures cited in his address, the South African automotive industry generated R270.8 billion in revenue from vehicle and component exports in 2023, growth of 19.1% on the previous year. Exports to African countries totalled 25 381 vehicles.
The Auto Week programme is a platform for dialogue between industry leaders and government policymakers on regulatory frameworks, local manufacturing and sector challenges. What the review of APDP2 will recommend, and when it will conclude, is not stated in the government’s account of the opening session.
Credit: SAnews (South African Government News Agency), https://www.sanews.gov.za/south-africa/localisation-still-chief-sas-auto-industry-transformation-ambitions
