US President Donald Trump’s new 25% import tariffs on vehicles imported into the world’s largest economy could do significant damage to the domestic automotive manufacturing sector.
At present, automakers including BMW and Mercedes-Benz export thousands of vehicles a year from their South African factories to the United States.
Likewise, there are many automotive component producers in the country that rely on US exports to keep them afloat.
While the fallout of the new tariffs, if any, is still to be realised, the South African automotive sector is preparing itself for what’s to come.
Taking stock
Speaking on 702 radio station, Naamsa CEO Mikel Mabasa said that local Original Equipment Manufacturers (OEMs) and component makers are currently “taking stock” in an effort to understand the implications of the new tariffs better.
Naamsa represents the combined voice of the country’s seven OEMs comprising BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and VW; as well as a host of other automotive industry stakeholders.
Mabasa revealed that approximately 66% of all vehicles made within our borders are shipped to other countries, with 11.6% of the total going directly to the US.
“There are two main OEMs, Mercedes-Benz and BMW, who are the biggest exporters of vehicles into the United States,” said Mabasa.
He noted that BMW’s Rosslyn, Pretoria factory is the only one in the world that assembles the plug-in hybrid variant of the new X3, which is a popular export to Western markets.
“What this means, effectively, is if the United States imposes this 25% tariff on that particular vehicle, those citizens in the United States who are seeking to buy specifically that vehicle, will obviously now have to pay more,” said Mabasa.
“More often than not, it is the citizens who are going to be taking that particular additional tariffs, not necessarily the companies who are importing those vehicles into those markets.”
This may have a knock-on effect on the demand for those particular autos in the US market, which, in turn, may impact the domestic strategy of vehicle exporters.
This could potentially lead to job losses not only at the OEMs but also their suppliers further down the value chain.
While South Africa still enjoys a degree of protection under the African Growth and Opportunity Act (AGOA), this could soon change.
AGOA provides duty-free access to the US market for dozens of sub-Saharan African countries for items such as apparel and footwear, agricultural products, chemicals, motor vehicles and automotive components, steel, and wine.
The agreement is up for review in September and there’s no guarantee that South Africa will remain a part of it considering the souring relationship between the two economies.
The country isn’t completely defenseless against the whims and fancies of Trump, however.
“The challenge for the United States, that they need to carefully look at, is the fact that a lot of African countries including South Africa have a lot of mineral resources that they actually need in order for them to produce their vehicles,” said Mabasa.
“So, if they hurt us quite significantly, we are obviously going to lobby and appeal to our government in South Africa and the rest of the continent to reciprocate in kind.”
This may see the minerals being purchased by the United States subjected to equal or higher tariffs.
The real impact of the new US tariffs will only be felt in time, Mabasa concluded, but an impact they will indeed have.
Loading ...
