Chery’s new factory could threaten other carmakers in South Africa

Chery has officially opened its production facility in South Africa, potentially cashing in on two different subsidy programmes in the process.

The Chinese carmaker held the opening ceremony for its new factory on 3 July 2026, which it acquired from Nissan Africa through a deal that was finalized back in January.

While Chery’s transition from a vehicle importer to a manufacturer is expected to be a great asset to the local automotive industry, there are concerns that it could negatively impact the economy.

Speaking to BizNews, XA Global Trade Advisors CEO Donald MacKay said Chery’s unique position had enabled it to effectively “double dip” on subsidies.

“At the heart of manufacturing cars in South Africa is a subsidy programme,” MacKay said. “If you took away the subsidy, we would not make cars in South Africa.”

“Chery, just like all of the other producers, is going to take full advantage of that programme. Otherwise, they would never have done the deal to purchase the Nissan factory.”

This is in reference to the Automotive Production and Development Programme (APDP), which is valued at over R40 billion per year and supports seven major automakers in South Africa.

This includes BMW, Ford, Isuzu, Mercedes-Benz, Toyota, and VW. Nissan used to be part of the programme, but has now been replaced by Chery.

Taxpayers foot the bill for the APDP through the large premiums paid on vehicles, alongside tax breaks and direct cash subsidies granted to the carmakers.

Since Chinese car brands are also subsidised by their own government, MacKay said that Chery could gain an unfair advantage over other manufacturers because it is effectively being double-subsidised.

“My guess is that Chery will roughly fill the shoes that Nissan left empty,” MacKay said. “They’ll come in, and they will largely replace.”

“But again, there’s a lot of detail. The calculation of the actual subsidy is quite complicated. It doesn’t just flow as a cash payment to your account.”

A threat to other manufacturers

Chery receiving two different governments’ subsidies could pose a threat to South Africa’s other local automakers.

China’s subsidies have allowed its own auto industry to produce and sell cars at substantially lower prices than legacy competitors, allowing them to rapidly expand their market share overseas.

This is already happening in South Africa, as Chery and its sub-brands, such as Omoda, Jaecoo, and Jetour, are top sellers despite their short time on the market.

Meanwhile, legacy manufacturers like Nissan, BMW, and Mercedes-Benz are gradually being displaced by these newcomers.

MacKay said that if Chery wants to access the APDP funding as well, it would need to meet a certain local content requirement threshold.

“What Chery will probably be doing is procuring some goods from local component manufacturers, and some imported,” MacKay said.

“They could do the complete knockdown (CKD) model, where a substantial portion, around 38% of what you procure, is local, and the balance is imported. My guess is Chery will do something similar.”

Chery CEO Tony Liu explained that the plant will initially rely on CKD kits until it establishes a local supply base, and that the company aims to use 40% local content by 2028, which would allow it to access the APDP subsidy.

A double subsidy would not necessarily translate to lower prices on Chery’s cars, as manufacturing in South Africa is still considerably more expensive than in China.

However, it would allow Chery to cover these higher operating costs more easily than other carmakers, potentially widening the profitability gap.

What’s more, Chery’s success could pave the way for other Chinese car brands to do the same in South Africa.

MacKay pointed out that Mercedes-Benz’s plant in the Eastern Cape is struggling, and that GWM has been in talks with the company to share production at the facility.

“If you’re not producing vehicles at a profitable rate, the government is going to have to lift subsidies to a point that will never get through National Treasury,” MacKay said. “Or you close up, or find someone else who can make it work.”

“I would far rather not have the plant close than to concern myself with who purchased it. But we must be honest and say this is not a normal commercial transaction as you would have with any other acquisition from abroad.”