The South African city with a Mercedes factory at risk of becoming a ghost town

East London (renamed KuGompo City earlier this year) is at risk of becoming a ghost town if Mercedes-Benz South Africa (MBSA) decides to wind down or end operations at its local factory.

Located in the Eastern Cape, East London is one of the country’s oldest industrial cities, with a manufacturing plant that has been in operation since 1948.

However, the plant, operated by MBSA, has struggled over the last few years due to a challenging operating environment and a decline in domestic sales and exports.

The warning about East London and Mercedes’ factory comes shortly after the country’s automotive industry was dealt a fresh blow by the United States.

The US government recently announced that it would exclude South Africa from the African Growth and Opportunity Act (AGOA), which provided preferential access to the American market.

Economists have warned that the two industries most affected by this loss are the agricultural and automotive sectors.

While South African businesses still have access to the world’s largest economy, they no longer enjoy the preferential trade conditions that boosted profitability.

At the end of 2025, Mikel Mabasa, chief executive of the automotive business council Naamsa, warned that the consequences for East London could be devastating if the Mercedes-Benz factory stops operating.

“East London could potentially face the burden of being classified as a ghost town if the Mercedes-Benz plant, an anchor of that local economy, comes to a grinding halt,” he said.

Mercedes started producing vehicles at the factory in East London all the way back in 1962. Today, it stands as one of South Africa’s legacy original equipment manufacturers (OEMs) alongside Toyota, VW, Ford, Isuzu, and BMW.

It employs approximately 2,400 people and produces the fan-favourite C-Class sedan in East London. In 2024, it assembled 70,000 vehicles.

MBSA and its suppliers contribute an estimated 25% of East London’s economy, which means any reduction in operations could affect thousands of workers and businesses beyond the factory itself.

Historically, a large portion of Mercedes’ sales came in the form of C-Class exports to the United States, but this has been undermined by new tariffs and South Africa’s strained relationship with the White House.

MBSA took a massive hit when the Trump administration imposed a 30% tariff on South African imports in 2025.

South Africa’s exclusion from AGOA adds further pressure, though industry analysts have noted that tariffs have already reduced trade between the two nations considerably, meaning the loss of AGOA isn’t as severe as it initially appears.

That being said, South Africa’s automotive industry was the largest user of AGOA preferences, so the exclusion will still have a negative impact on carmakers.

Following the introduction of the tariffs, South Africa’s automotive exports to the US fell 29% from R28.67 billion in 2024 to R20.43 billion in 2025, according to BusinessTech.

Light vehicle exports declined by 31.7% to R16.57 billion, while direct component exports fell by 12.8% to R3.86 billion.

East London is the home of Mercedes-Benz in South Africa

Acting Eastern Cape Premier Mlungisi Mvoko previously warned that losing Mercedes-Benz would be devastating for the city.

“You cannot imagine East London without Mercedes-Benz. MBSA exports almost 90% of their cars to the US. In our interaction with them, they said that, given these tariffs, it would be difficult,” he said.

Renai Moothilal, chief executive at the National Association of Automotive Component and Allied Manufacturers (NAACAM), said that losing AGOA would add another cost to an already struggling industry.

“The direct cost of losing AGOA is modest next to existing tariff measures, but in a globally competitive industry every percentage point counts,” he said.

NAACAM has also recorded 15 company closures and more than 7,500 gross job losses among component manufacturers over the past three years.

Mercedes is also facing pressure on a global scale and has been adjusting its business strategy to align with global trends amid falling sales in North America and China.

Notably, sedans like the C-Class have seen a massive drop in interest as consumers are shifting towards SUVS.

BMW, another South African carmaker, pivoted from the 3 Series sedan to the X3 SUV in 2018 for this reason, while Mercedes is still making the C-Class.

As for MBSA, it has not made a final decision about the plant’s future. It’s worth noting the company invested roughly €600 million to upgrade and modernise the facility in 2022.

Business Unity South Africa said the loss of AGOA’s preferential access could affect several thousand jobs, particularly in agriculture and automotive manufacturing.