Donald Trump’s presidency and how it could affect the auto industry - are there positives for SA?

Newly inaugurated US President Donald Trump has 'hit the ground running', making a slew of executive orders within hours of taking office, including a clampdown on undocumented immigrants and withdrawing from both the Paris Climate Agreement and World Health Organisation.

But the changes under his leadership promise to be far more sweeping and have the potential to affect industries around the world, including the automotive sector.

Trump’s promise of higher tariffs could affect production bases around the world, while his pull-back on electric car incentives and mandates will also disrupt the current motoring landscape.

From a vehicle production perspective, US neighbours Mexico and Canada appear particularly vulnerable at present, with Trump threatening to impose 25% import tariffs on both countries from February 1.

Numerous international car manufacturers currently use Mexico as a base for exporting cars to the US, taking advantage of its lower labour rates. Some, such as Honda, export as much as 80% of their output up north. European and Asian manufacturing bases also stand to lose export business.

South Africa exports a significant quantity of cars to the US and our industry’s biggest risk is the potential loss of the African Growth and Opportunity Act (AGOA), which provides duty-free access to that market. This policy is up for renewal in 2025 and even if it receives an extension, there is no guarantee that South Africa will remain a beneficiary. 

Pretoria’s international relations with Russia and China, as well its legal stand against Israel’s war on Palestine, have proven controversial among US lawmakers and with the Republicans now in charge of both houses of Congress, free access to the US market is no longer something that can be taken for granted.

The upside is that South Africa’s vehicle manufacturing industry is not heavily reliant on the US market, which was the sixth biggest export destination for local manufacturers in 2023. 19,590 vehicles were exported to the US that year, which is just under 5% of that year’s total of 399,594.

However, with South Africa’s total vehicle exports having fallen by 22.8% in 2024 it stands to be argued that the country’s manufacturers cannot afford to lose any further business.

Potential advantages for South Africa?

There is an upside scenario, in the event that South Africa does manage to retain AGOA membership.

Trump has indicated that he plans to undo electric vehicle (EV) mandates put in place by the Joe Biden administration, which had aimed to achieve a 50% market share for zero emissions vehicles in the US by 2030. Reduced EV incentives are also said to be on the cards for the Trump 2.0 automotive landscape.

This could present an opportunity for South Africa’s vehicle exporters, which are still reliant on the production of internal combustion powered vehicles - once again, assuming that AGOA doesn’t disappear.

Trump’s move away from incentivising EVs could however cause headaches for many car manufacturers in the US, given the extensive investments that have already been made in ramping up production of battery vehicles. 

According to the Center for Automotive Research, the US ‘Big Three’ (GM, Ford and Stellantis) have in the past three years invested around $146 billion in the development and manufacturing of electric vehicles.

Given the market’s lukewarm reaction to EVs thus far, it’s not surprising that  lobbyists from numerous carmakers have indicated that they want the Biden regulations to remain in place, as reported by the New York Times.

Hopes that Trump’s close ties with Tesla owner Elon Musk could lend support to the EV industry don’t hold much weight, especially given the SA-born tech mogul appears to be more focused on pushing self-driving tech. 

The new President’s focus remains very much on fossil fuels, with him pledging to declare a “national energy emergency” to support the local energy industry. “We will drill, baby, drill," Trump said during his inauguration speech. "We will be a rich nation again and it is the liquid gold under our feet that will help us do it.”

It's little surprise that the oil industry was said to be the Trump campaign's fourth biggest source of funding, according to reports.

Regardless of any effects that it may have on South African and global automotive exports, it appears that US citizens can look forward to another four years of easy access to gas-guzzling pick-up trucks and SUVs. Rumours that Stellantis plans to dust off that ol’ Hemi V8 might not be too far-fetched after all.

IOL