South Africa’s automotive exports to the United States nosedived by 82% in the first half of 2025 compared to the same period last year.
The severe drop is mainly due to the imposition of a 25% tariff on all automotive components imported to the USA.
These tariffs have been in place since April, even while several other duties were paused to enable other countries to negotiate a trade deal with the US administration.
The tariffs pose a considerable threat to South Africa’s automotive industry, which employs over 100,000 people and makes up a significant portion of all manufacturing in the country.
It is a major contributor to the country’s gross domestic product, generating a substantial amount of revenue in foreign exchange through the exporting of manufactured goods.
The chief economist at The Automotive Business Council (Naamsa), Dr Paulina Mamogobo, has warned that the decline in exports could create a socio-economic crisis in South Africa.
She warned that unless South Africa makes a breakthrough in its trade negotiations with the United States, some parts of the Eastern Cape could be rendered ghost towns.
This is not an issue that can be resolved simply by exporting cars to new markets, as cars are a complex good that is often tailored for specific countries.
Crucially, South African exports are classed as premium vehicles and generate significant profit when shipped off to America.
This means that local carmakers cannot simply turn to new markets in places like Latin America or Asia to export their vehicles, as the United States is one of the key regions that has a demand for the cars South Africa produces.
Nowhere is this more the case than with Mercedes-Benz, which produces the luxurious C-Class sedan at its factory in East London for export to America.
Shifting production to cater to new markets with less demand for premium vehicles would, therefore, incur substantial costs while netting a much smaller profit.
“These tariffs impact the competitiveness of South African-manufactured vehicles in the US market, resulting in less demand for our vehicles and, thus, less production in South Africa,” said Mamogobo.
Rising toll
In the first quarter of 2025, South African automotive exports to the United States declined by 75%.
This downward trend continued into the second quarter, which experienced an 84% year-on-year loss.
Mamogobo explained that these are predominantly premium vehicles, and South Africa is still relatively attractive as a manufacturing base for these types of cars.
“In terms of the impact on manufacturers, we will continue to see a decline in the export of these vehicles to the United States,” she said.
One issue is that car factories are facing increased competition from other facilities under the same brand overseas.
Ford South Africa, for example, previously stated that it is losing its competitive edge to its sister plant in Thailand, which also produces the Ranger bakkie.
Exacerbating this issue is the fact that these other countries are securing better trade deals with the United States, leading to more favourable prices.
The end result is that automakers will be incentivised to invest in their more profitable factories in other markets, while South Africa will see less and less support.
So far, South Africa has been relatively lucky in that a blanket tariff has been imposed on automotive imports, which does not result in a particular country having enhanced competitiveness, wrote Daily Investor.
Original equipment manufacturers like Ford, BMW, Mercedes-Benz, Toyota, Isuzu, VW, and Nissan have been relatively quiet on the issue thus far, as most have not commented on how their operations have been impacted by the tariffs.
However, BMW South Africa CEO Peter van Binsbergen stated that the company currently does not export any vehicles to the United States and their X3 factory is unaffected for the time being.
VW does export to the USA, but it is not a primary market for them as the Polo is mainly sold in Europe.
Mercedes, on the other hand, is reportedly worried about the impact of the tariffs on its C-Class exports.
Earlier this month, Eastern Cape Premier Mlungusi Mvoko, revealed that Mercedes indicated to him that it may close its factory, which would deal a devastating blow to the town and the province as a whole.
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