DURBAN, South Africa – South Africa is moving to withdraw government support for vehicle assembly operations that rely heavily on imported kits. The policy shift aims to protect domestic manufacturing, increase local production and strengthen employment in an industry facing growing international competition.
Trade, Industry and Competition Minister Parks Tau announced the decision at South African Auto Week in Durban on Thursday, 15 October. The move forms part of a wider review of automotive incentives, as the government seeks to direct more investment towards manufacturers that produce vehicles and components locally.
Under the proposed changes, South Africa will phase out existing semi-knocked-down (SKD) assembly operations. New facilities using this production model will no longer qualify for government support. However, authorities have yet to announce an implementation timetable or explain how the transition will affect existing manufacturers.
SKD assembly involves importing vehicle bodies and major components before completing assembly locally. While these operations generate some employment, established manufacturers argue that they contribute less to domestic production than full-scale manufacturing. They also contend that the current incentive system gives imported assembly operations an unfair advantage.
The government wants to encourage complete-knock-down (CKD) manufacturing, which involves assembling vehicles from individual components. This approach can create more opportunities for local suppliers and strengthen the industry’s manufacturing base. Authorities also plan to tighten the definition of CKD production to ensure companies undertake substantial manufacturing activities in South Africa.
The changes support the South African Automotive Master Plan 2035, which aims to increase local content in domestically produced vehicles from approximately 38% to 60%. The strategy also seeks to double automotive employment and raise South Africa’s share of global vehicle production to 1% by 2035. These remain long-term industry targets rather than guaranteed outcomes of the latest announcement.
South Africa’s automotive industry plays an important role in the economy, supporting jobs across vehicle assembly, component manufacturing, engineering, logistics and exports. However, rising production costs and competition from imported vehicles continue to place pressure on local manufacturers. The industry must also respond to changing emissions regulations and growing demand for electric vehicles in major export markets.
Manufacturers including BMW and Toyota have previously called for changes to the incentive system. They argue that companies investing in full-scale vehicle production face competition from businesses importing nearly complete vehicles under more favourable tariff arrangements. Toyota South Africa Motors Chief Executive Officer Andrew Kirby has warned that continued growth in SKD assembly could discourage investment in established manufacturing facilities.
The policy announcement comes at a time when South Africa is trying to protect its position in global automotive supply chains. Europe and the United Kingdom remain important destinations for locally manufactured vehicles, but the transition towards lower-emission transport is changing market requirements. Tau has stressed the need for manufacturers to remain competitive as these changes accelerate.
The government also plans to examine whether the country’s ladder-frame light commercial vehicle industry needs additional protection. This segment includes pickup trucks and bakkies, which form an important part of South Africa’s automotive production.
The International Trade Administration Commission (ITAC) will investigate the sector before the government decides whether to introduce further measures. Any additional protection would depend on manufacturers meeting commitments on local production, investment, employment, exports and economic transformation. Medium and heavy commercial vehicles fall outside the announced SKD policy changes.
The broader review of the Automotive Production and Development Programme involves the government, Naamsa, the Automotive Business Council, component manufacturers and organised labour. It could reshape how South Africa distributes incentives across the industry, particularly as policymakers seek stronger links between public support and domestic production.
Greater emphasis on local manufacturing could create opportunities for component suppliers and smaller businesses seeking to enter established automotive supply chains. However, the transition may also place pressure on companies that depend on imported assembly kits. The impact will depend on the final policy framework, the pace of implementation and the ability of affected businesses to adapt.
The decision also carries implications for Africa’s wider manufacturing ambitions. Under the African Continental Free Trade Area (AfCFTA), governments are seeking to develop regional production networks and increase trade in manufactured goods. Stronger automotive supply chains could create opportunities for African countries to supply components, materials and finished vehicles across borders.
South Africa is pursuing an Africa Automotive Pact with industry partners and countries including Egypt and Algeria. The initiative reflects growing interest in building a more connected continental automotive industry, although progress will depend on investment, infrastructure and market access.
The latest policy shift signals South Africa’s intention to place greater emphasis on domestic manufacturing rather than imported vehicle assembly. Its success will ultimately depend on whether the revised incentives attract investment, increase local sourcing and support sustainable employment without weakening the industry’s competitiveness.
