South Africa’s automotive industry: Securing the next investment cycle

SA's automotive industry faces a fresh test of its competitiveness. While the country has an established automotive manufacturing base and strong domestic vehicle demand, the global environment in which the industry competes is changing quickly.

Electrification, shifting trade patterns, rising protectionism and growing competition from imported vehicles are changing the economics of automotive manufacturing. At home, infrastructure and logistics constraints continue to add cost and complexity.

These pressures make securing future investment more urgent. South Africa has an established manufacturing base, but we need to adapt quickly to attract the next generation of vehicle production.

At NAAMSA Auto Week, I heard from manufacturers and suppliers about where they see opportunities and what is holding them back. Five themes stood out.

Localisation demands predictable scale

Strong vehicle sales do not automatically translate into local production, jobs or industrial value.

Local content in South African manufactured vehicles stands below 40%, missing the government’s Automotive Masterplan target of 60% by 2035. It is clear that South Africa needs deeper localisation, but suppliers need sufficient and predictable production volumes to justify investment in tooling, equipment and capacity.

The opportunity extends across traditional components, including specialised glass, tyres, brake components and bus bodies, as well as batteries, high-voltage systems, electronics, thermal management and other technologies required for new-energy vehicles (NEVs).

The NEV transition is now an industrial imperative

As demand shifts towards cleaner vehicle technologies, South Africa needs to secure a share of their production. With Europe and the UK enforcing stricter carbon measures and zero-emission requirements, failure to gear local production towards NEVs risks eroding established export markets while increasing reliance on imported vehicles.

A pragmatic path will likely require flexible manufacturing across internal combustion engine, hybrid, plug-in hybrid and electric vehicle (EV) technologies while the market evolves.

Tangible progress is already under way, with four local original equipment manufacturers (OEMs) building hybrid variants, and Chery intending to commence hybrid production at Rosslyn in 2027 with an initial capacity of 50,000 units.

Infrastructure is part of industrial competitiveness

Unreliable electricity, water and freight services raise production costs and can deter investment. Municipal water supply interruptions have cost individual manufacturers up to 30 production hours annually, forcing single-plant investments in on-site water security.

Meanwhile, shifting freight from rail to road between Durban and Johannesburg increases operational complexity and freight costs.

As manufacturers and suppliers invest in their own resilience, this also creates financing opportunities across renewable energy, water infrastructure, logistics and industrial assets.

Financing needs to follow the automotive ecosystem

Perhaps the most interesting takeaway is that the financing opportunity is changing too; it is no longer simply about financing vehicle manufacturers. Capital requirements have shifted from standalone OEM plant funding to multi-tiered supply chain support, covering tooling, automation and working capital for Tier 1 and Tier 2 suppliers.

OEMs and component suppliers are also prioritising infrastructure investments to protect production continuity and cost structures.

The transition will require capital across the value chain: OEMs, component suppliers, advanced manufacturing, energy and water resilience, logistics, NEV infrastructure and businesses expanding into African markets.

Financing the whole supply chain

For financial institutions, this creates an opportunity to think about the automotive sector as an interconnected ecosystem. OEM investment creates demand for supplier investment. Localisation requires tooling, machinery and working capital. NEV production brings new energy and infrastructure requirements.

Better logistics strengthens manufacturing economics. And African expansion requires trade, treasury, distribution and financing solutions. Coordinating this investment could help manufacturers and suppliers expand production.

I left Auto Week convinced that South Africa has the manufacturing capability to compete. Securing the next round of investment will depend on giving manufacturers and suppliers the confidence to commit capital: reliable infrastructure, clearer demand for locally-made components and support for the shift to NEVs.