Car factory city at risk of becoming a ghost town in South Africa

East London is at risk of becoming a ghost town should Mercedes-Benz South Africa (MBSA) elect to scale back or halt its local operations.

The city is one of South Africa’s oldest industrial hubs, with one of its key pillars being the local MBSA plant, which currently employs over 2,400 people and in 2024 produced 70,000 cars.

This factory also contributes around 25% of East London’s economy, and in 2022, Mercedes-Benz invested roughly €600 million to modernise its capabilities.

However, recent global events have created a uniquely problematic situation for the facility and its owner.

This problem is rooted in the situation with the United States and the factory’s reliance on exporting C-Class sedans to the country, which was done under the African Growth and Opportunity Act (AGOA), which removed import duties for African-made cars.

The recent implementation of a 30% tariff on South African goods imported into the United States by the Trump Administration has severely impacted this arrangement.

This can be seen in vehicle export numbers from South Africa to the United States, which dropped 82% in the first half of 2025 compared to 2024.

Additionally, Mercedes-Benz reported that exports of its passenger cars fell by almost half, with the bulk of this shortfall being C-Class sedans built in East London.

Consequently, Mercedes-Benz is now considering its options, with closing the factory being a drastic but possible step.

Another carmaker could also be brought in to offset the losses and avoid this closure, though this would require substantial investments.

Mikel Mabasa, CEO of the Automotive Business Council, Naamsa, has warned that should the plant cease operations, East London could turn into a ghost town.

“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 at a recent industry conference in Sandton.

Mercedes-Benz, for the time being, has announced no final decision on the matter and has noted that it regularly reviews its plant network.

Hope for a deal

While the situation is unfortunate, Mabasa has noted that they remain hopeful that the negotiations between South Africa and the United States will be successful.

“We remain hopeful that a deal between the US and South Africa can still be negotiated to cushion and help insulate the impact of the tariff increase on the livelihoods of towns like East London,” he said.

Along with this, Parks Tau, the Minister of Trade, Industry, and Competition, recently met with US Trade Representative Jaimeson Greer and members of Congress in Washington with an “intensive” three-day discussion by senior officials.

Following this, the Department of Trade, Industry, and Competition announced that the meeting was “cordial” and “constructive” and discussed matters of mutual interest.

Tau also said he is optimistic that South Africa and the United States will reach an agreement and settle on a new trade deal.

“In the nature of negotiations, these are tough discussions, so it’s very difficult to anticipate what the outcome would be,” he told Daily Maverick on Sunday, 21 September.

“But I am optimistic because there’s a sense that we’d want to [reach] an agreement, that we’d want to find each other, and that, I think, is a very good starting point.”