Today, South Africa is recognised as the largest producer of automobiles on the African continent, with the industry playing a crucial role in economic growth, employment and international trade. The sector has emerged as an advanced and highly competitive player in the global marketplace. This article provides an overview of the current state of South Africa’s automotive manufacturing, its prospects and challenges, with a closer look at whether it is ready to transition to battery electric vehicle (BEV) production.
The South African automotive industry is dominated by subsidiaries of major OEMs including BMW, Ford, Toyota and Volkswagen. These companies have established manufacturing facilities in South Africa, making it a major manufacturing hub, exporting vehicles and components to over 150 countries. Light vehicle production in South Africa grew by a massive 14% year-on-year (YoY) in 2023, with 5% YoY growth expected in 2024.
Several key factors are driving output growth in the South African automotive industry in the coming years. For example:
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Robust infrastructure and skilled workforce: Advanced infrastructure, including modern ports, railways and roads, supports efficient logistics and supply chain management, coupled with a well-educated workforce and numerous technical training programs focused on automotive engineering and manufacturing.
Challenges and opportunities
Despite its strengths, the South African automotive industry faces several challenges, including economic volatility, strikes and global supply chain disruptions. However, these challenges also present opportunities for innovation and growth, such as upskilling workers, research and development, strategic partnerships and local expansion into new markets.
Expansion into these markets, particularly within Africa, offers significant growth potential. More recently, the African Continental Free Trade Area (AfCFTA) agreement could play a crucial role in this expansion by reducing trade barriers and facilitating intra-African trade.
So…how ready is South Africa for BEV production?
South Africa is at a critical juncture in terms of its readiness to embrace BEV manufacturing. Several aspects affect the country’s ability to transition and establish itself as a major player in the battery electric equipment market. While South Africa has abundant resources of minerals such as lithium, cobalt and manganese, essential for battery manufacturing, it lacks a robust supply chain for BEV-specific components such as battery cells and electric powertrains. Developing local manufacturing capabilities and attracting investment in battery manufacturing would be crucial. Heavy reliance on imported components could also lead to supply chain disruptions and higher production costs.
Significant investment is required to establish BEV manufacturing facilities and associated infrastructure. The relatively high cost of electric vehicles compared to internal combustion engine vehicles may limit consumer demand. The South African government has implemented several initiatives to support the automotive industry, such as the Automotive Production and Development Programme (APDP), which provides incentives for local manufacturing and investment. However, the government needs to increase its support for the BEV sector through policies and incentives that encourage adoption, including subsidies for BEV manufacturers and buyers. There are also opportunities for strategic partnerships with global battery electric vehicle manufacturers to leverage existing facilities and expertise in the region.
Although South Africa is not fully equipped at this time, it has significant potential to develop its BEV manufacturing capabilities by addressing key challenges and embracing its opportunities. As the global automotive industry transitions to electric vehicles, South Africa could become the continent’s leader in BEV manufacturing. Investments in related infrastructure and manufacturing capabilities could position the country as a key player in this emerging market.
Zakia Subhan, Analyst, GlobalData
This article was first published on GlobalData’s dedicated research platform, the Center for Automotive Intelligence. For more information about the Global Light Vehicle Production Forecast module designated by GlobalData, click here
“Is South Africa ready to embrace electric vehicle production?” was originally created and published by Just Cara brand of GlobalData.
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