Three Chinese brands considering vehicle production in South Africa, Naamsa CEO says

At least three Chinese car manufacturers are considering setting up CKD vehicle production facilities in South Africa, according to Mikel Mabasa, CEO of Naamsa | the Automotive Business Council.

Speaking at the State of the Motor Industry (SOMI) event hosted by Toyota South Africa recently, Mabasa said that Chinese automakers were currently taking their international expansion plans to greater heights.

These comments came in the wake of Toyota SA CEO Andrew Kirby's warning of the slow ‘deindustrialisation’ of the South African vehicle manufacturing industry as well as the “unequal playing field” created by imports from Chinese manufacturers, which are subsidised by the Chinese government.

“You’ll be pleased to hear in regard to that (levelling of playing fields) the Chinese are definitely interested in setting up CKD operations in South Africa.

“We currently have three that are firmly looking at CKD operations in South Africa, and we are working with them to see whether that would be practical for them.”

Mabasa said these manufacturers were currently asking all the relevant questions on the South African market and its policy environment.

The Naamsa CEO did not mention which Chinese brands were considering setting up local production facilities. However, Chery Automobile is surely among the top prospects.

In late 2023, Chery South Africa’s executive deputy general manager Tony Liu said that a local assembly operation was certainly under consideration, however the company would need to look at overall sales volumes and balance that against manufacturing policy, regulations and overall cost, as a first step.

Chery sold 20,376 vehicles in South Africa last year, ranking eighth among all manufacturers. GWM is also likely among those considering local assembly, given that it ranked ninth last year with 18,927 sales.

South Africa technically already has a Chinese manufacturer in the form of BAIC, however the much-hyped R11 billion facility in Koega has yet to transition from SKD (semi-knocked down) to the far more comprehensive CKD (completely-knocked down) assembly process that reaps the true economic benefits of local production.

Access to Europe: The big motive

A major motivating factor for local production is Southern Africa's duty-free access to the European market. 70% of the country’s automotive exports are directed to this region, largely as a result of this trade agreement.

Mabasa said some Chinese manufacturers were keen to take advantage of trade scenarios such as these, particularly given the EU’s punitive tariffs on Chinese-built cars. However, he warned that the local industry would have to compete with other African countries such as Morocco, which recently overtook South Africa in terms of vehicle production, and which has already attracted Chinese automotive investment.

Deindustrialisation remains an existential threat to the South African vehicle manufacturing industry, Toyota’s Andrew Kirby warned, with average local content for locally produced vehicles now falling below the 40% mark.

In the five years from 2018 to 2023, the South African market share for vehicles built locally fell by 6.5% to 43%, while China’s share grew by 645% to 7%.

Kirby said the local vehicle market would need to grow its annual sales to over 600,000 units to provide the scale needed to attract more foreign direct investment. Just 515,712 vehicles were sold in 2024, down from 531,775 in 2023.

While the government’s newly announced incentivisation policy for battery electric vehicles was a step in the right direction, it was currently insufficient to secure the country’s future as a vehicle production base, Kirby added.

IOL