• South Africa’s auto industry is showing a cautious recovery, with $855 million in new investments focused on upgrades and capacity preservation. 
• Major OEMs, such as Toyota, Ford, and Mercedes, modernize their plants without adding capacity, maintaining an output of around 500,000 units per year. 
• Growth hinges on AfCFTA integration and a sub-$10,000 car; until then, the sector will modernise cautiously and depend on exports. 

South Africa’s automotive sector arrived at the recent 2025 South African Auto Week in Gqeberha with a renewed sense of optimism, backed by clear signs of recovery. Over the last eighteen months, vehicle manufacturers have confirmed R15.8 billion ($855 million) in capital expenditure, a figure that reflects sustained confidence in the nation's supplier base and industrial strength. However, much of this investment is defensive in nature, focused on modernising existing facilities and preserving capacity rather than on major production expansion.

Breaking down the investments, Toyota South Africa leads with a R6.1 billion ($330 million) commitment to upgrade its Durban plant for the next-generation Hilux and Corolla Cross, slated for production in 2026. Following suit, Ford South Africa is investing R5.2 billion ($280 million) in its Silverton facility to prepare for the introduction of a plug-in hybrid Ranger. Meanwhile, Mercedes-Benz is allocating R2.1 billion ($115 million) to its East London plant to extend the lifecycle of the W206 C-Class to 2030. Rounding out the major projects are Isuzu’s R1.4 billion ($75 million) paint-shop rebuild in Gqeberha and Nissan-Renault-Mitsubishi’s sub-R1 billion (under $55 million) retooling in Rosslyn. While these projects confirm that major OEMs are committed to their South African presence, they do not add new capacity beyond the existing ceiling of roughly 500,000 units per year.

The market context provides grounds for this optimism. According to Naamsa, September 2025 sales reached 54,700 units, marking the highest monthly figure in a decade and representing a 24 percent year-on-year increase. Export volumes are also up, with 308,613 units shipped year-to-date, a 6 percent rise from 2024. Despite this growth, these figures are still less than half of Morocco’s total shipments. Furthermore, domestic demand, at an annualised 436,854 vehicles, remains too small to justify large-scale production on its own, highlighting the sector's crucial reliance on exports.

The Auto Week event itself showcased both progress and prevailing constraints. In his opening address, Minister Parks Tau highlighted that the U.S. share of South African vehicle exports has dropped from 34 percent in 2019 to just 19 percent in 2025. He then announced an additional R2.5 billion ($135 million) for the Automotive Investment Scheme over the next three years. This funding targets projects that explicitly achieve at least 50 percent local content and 30 percent intra-African sales by 2028, signaling a strategic pivot by Pretoria away from the U.S. market under AGOA and towards the opportunities within the African Continental Free Trade Area (AfCFTA).

Rather than unveiling new megaprojects, automakers used the conference to confirm progress on their existing plans. Ford announced it will add a second shift for the Ranger PHEV at its Silverton plant in 2026, with all additional output destined for the EU and the Middle East. Volkswagen has confirmed that its Port Elizabeth facility will assemble the right-hand-drive ID.4 electric SUV starting in 2027—the first battery-electric vehicle to carry a “Made in RSA” VIN—at a rate of 12,000 to 15,000 units annually, with 45 percent local content. Elsewhere, Toyota reported that its Durban flex-line is 70 percent complete. Isuzu stated that its upgraded paint shop is ahead of schedule, and Mercedes-Benz reaffirmed that its East London plant will produce the C-Class until 2030.

Naamsa CEO Mikel Mabasa delivered a stark reminder to delegates that the national electricity crisis remains the industry's primary operational threat. He warned that a single summer of Stage-6 load-shedding could result in the removal of 28,000 vehicles from the 2026 production plan, effectively wiping out the forecasted 4 percent growth in exports. Mabasa urged manufacturers to urgently secure alternative energy sources and continue diversifying their export markets to mitigate such disruptions.

On the exhibition floor, a series of smaller yet meaningful developments reinforced the industry’s strategic repositioning. BMW showcased its first locally built X3 plug-in hybrid, destined for the European market. At the same time, Mahindra announced it will begin assembling the Scorpio-N pickup in Nairobi in 2026—its first such operation outside South Africa. Suzuki also confirmed it is evaluating a R3.5 billion ($190 million) engine plant in the Eastern Cape. In a key move for the supply chain, the National Association of Automotive Component Exporters signed an MOU to help 22 Tier-2 suppliers achieve EU homologation standards by 2027, signalling a clear strategic turn toward European and African markets.

From a regional perspective, South Africa’s new investments rank second in Africa, trailing Morocco, whose automotive and battery-related capital expenditure now exceeds R30 billion ($1.6 billion). Morocco's attractive policy incentives—including a five-year tax holiday and low industrial power costs—have helped it surpass 700,000 vehicles produced annually with a local-content ratio of 65 percent. While countries like Egypt, Kenya, and Nigeria are introducing frameworks to attract assembly projects, they lag in scale. South Africa’s R15.8 billion ($855 million) investment is significant, but Morocco’s integrated ecosystem keeps it firmly positioned as the continent’s dominant production hub.

On the trade front, the African Growth and Opportunity Act (AGOA) remains a central topic. The renewal proposal currently before the U.S. Congress would extend South Africa’s access until 2035, but with stricter terms. Draft bills propose a 15 percent cap on passenger-car imports, an increase in the local-content requirement from 35 to 45 percent, and new biennial labour and environmental reviews. Even if these conditions are softened, they will inevitably constrain export growth to the U.S., reinforcing the strategic necessity to diversify toward Africa and Europe.

Within the continent, the AfCFTA is emerging as the sector's most significant future opportunity—and risk. Currently, intra-African light-vehicle trade is modest, at around 120,000 units annually. Crucial negotiations on automotive rules of origin are expected to conclude in February 2026, with a 40 percent local-content threshold being the likely outcome. Analysts predict that if this rule is adopted, regional demand could double to 2.1 million units by 2035. However, a significant hurdle remains: no OEM has yet introduced a sub-$10,000 vehicle that meets both affordability and localisation targets, a key element for unlocking accurate regional scale.

Ultimately, with vehicle ownership across Africa still below 50 cars per 1,000 people, the growth potential is immense. Unlocking this potential will depend on developing an affordable, regionally compliant model that can be built profitably for under $10,000. Until that milestone is reached, South Africa’s automotive sector will likely continue to modernise cautiously, adapting to new trade realities while consolidating its role as the continent’s most mature manufacturing base.

Idriss Linge