South Africa will phase out support for car plants that rely on imported vehicle assembly kits.
Instead, the government wants carmakers to build more of their vehicles locally.
It’s a major shift for one of the country’s most important industries.
And it’s aimed squarely at creating more jobs.
Here’s what it means: the government wants to move away from plants that mostly bolt together imported parts, towards factories that manufacture more of each vehicle in South Africa, which typically creates more jobs.
Minister of Trade, Industry and Competition Parks Tau announced the change at SA Auto Week in Durban on Thursday, 15 October.
TAU PUSHES AUTOMAKERS TO BUILD LOCAL
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Trade, Industry and Competition Minister Parks Tau has called for deeper localisation and transformation in South Africa’s automotive industry, arguing that greater local production will create jobs, attract investment and strengthen the… pic.twitter.com/6ULkJ0Iv4q
WHAT ARE VEHICLE ASSEMBLY KITS?
The change targets a process called semi-knocked-down (SKD) assembly.
In SKD assembly, carmakers import vehicle bodies and most of their components in kit form, then put them together locally. Plants like these are sometimes called “screwdriver” plants.
That’s different from completely knocked-down (CKD) manufacturing, where much more of the vehicle is built and sourced locally.
SKD assembly typically creates fewer jobs than full manufacturing, and is usually used for tax efficiency.
WHAT THE GOVERNMENT HAS ANNOUNCED
According to Tau, the government has agreed to:
- Phase out existing SKD operations.
- Stop providing policy support for any new SKD facilities.
- Strengthen the legal definitions of what counts as CKD manufacturing.
“We will work to strengthen the legal definitions around what we determine as complete-knock-down manufacturing,” Tau said.
The changes won’t apply to medium and heavy commercial vehicles.
WHEN WILL THE CHANGES TAKE EFFECT?
That’s still unclear.
The Department of Trade, Industry and Competition (dtic) hasn’t given a deadline for the phase-out.
WHY THE CHANGE?
The announcement follows years of pressure from South Africa’s established carmakers.
Earlier this year, BMW Group South Africa chief executive officer (CEO) Peter van Binsbergen said the industry had urged the government to close what he called an SKD “loophole”.
Toyota South Africa Motors CEO Andrew Kirby said in July that the country’s car industry had moved beyond the need for SKD operations.
He warned that assembling vehicles from kits risked undermining larger investments in full-scale production.
WHAT IT MEANS FOR JOBS
The changes are part of the South African Automotive Master Plan, which sets out the industry’s goals for 2035.
The plan aims to:
- Raise local content in vehicles to 60%, up from the current average of 38%.
- Double employment in the sector.
- Increase South Africa’s share of global vehicle production to 1%.
Because full manufacturing involves more local work than kit assembly, the government hopes the shift will support more jobs over time.
WHAT ABOUT CAR PRICES?
Tau didn’t say how the changes could affect vehicle prices.
The dtic also hasn’t released any analysis of the possible impact on what South Africans pay for new cars.
WHAT ELSE IS CHANGING?
The government is reviewing the Automotive Production and Development Programme (APDP), the incentive framework for the car industry.
It’s working with the Automotive Business Council, as well as the National Association of Automotive Component and Allied Manufacturers and organised labour.
Tau also said the government would formally investigate the competitiveness of South Africa’s ladder-frame light commercial vehicle (LCV) segment, which includes pickups, or bakkies.
“We have agreed that the strategic competitiveness of South Africa’s ladder-frame LCV segment warrants formal investigation,” he said.
DO YOU THINK THE CHANGES WILL CREATE MORE JOBS IN SOUTH AFRICA’S CAR INDUSTRY?
Let us know in the comments below…