Gear Shift or Gridlock: Why South Africa’s Auto Industry Hangs in the Balance

The possible closure of a major German car plant in East London is not merely a corporate restructuring. It is a siren for an entire industryand a nationat a crossroads. Should that shutdown proceed, the loss of thousands of direct jobs would ripple through suppliers, logistics firms, and local services, threatening over 100,000 livelihoods nationwide. More chillingly, it would signal to global capital that South Africa is no longer a safe place to build things.

This is the defining moment for the country’s automotive sector. The question is whether it downshifts into irreversible decline or pivots aggressively toward the future of mobility: the electric vehicle (EV).

The Weight of Inaction

The Eastern Cape would bear the brunt. The auto sector drives roughly 25% of East London’s economy. A factory closure there would not merely cut paychecks; it would sever the region’s industrial spine. Unemployment, already entrenched, would deepen. Local businessesfrom spaza shops to parts distributorswould see their customer base evaporate. The province’s role as a training ground for artisans and engineers would be hollowed out.

Nationally, the damage would be reputational. Investors watching from Detroit, Shanghai, and Wolfsburg would take note. If a century-old manufacturing hub can be abandoned, why commit new capital to a country perceived as operationally risky and policy-inconsistent?

The EV Pivot: Real Opportunity, Daunting Hurdles

Yet the picture is not uniformly bleak. Chinese EV brands, already dominant globally and expanding their footprint in South Africa, represent a tangible opportunity. Instead of remaining a destination for finished imports, South Africa could position itself as a production base. Existing plants, a skilled workforce, and an established supplier network offer a foundation that few African peers can match.

Trade agreements amplify this potential. The African Continental Free Trade Area opens regional markets. Preferential access to Europe remains intact. With the right conditions, South Africa could emerge as a strategic export hub for EVs destined for both the continent and developed markets.

However, conditions are the operative word. South Africa’s production costs significantly exceed China’s. Labour, energy, and logistics are more expensive; productivity gains are slower. Recent tax incentives for EV and hydrogen vehicle investments are welcome but insufficient. They address capital equipment, not the structural cost disadvantage that undermines every bid for new investment.

A Policy Toolkit for Survival

To compete, government must move beyond gestures. Several levers are available:

• Tariff recalibration: Increasing duties on fully built imported EVs would create headroom for local assembly without punishing consumers indefinitely.

• Local content enforcement: Incentives should be explicitly tied to verified local procurement, incentivising a deeper supplier base.

• Regulatory streamlining: New entrants face bureaucratic labyrinths; a single-window clearance system for EV manufacturers would signal seriousness.

• Long-term policy certainty: The industry cannot plan around annual budget announcements. A 10- to 15-year EV roadmap, insulated from political churn, is essential.

The Human Element: Reskilling, Not Discarding

Recent layoffs have exposed a painful gap: there is no systematic mechanism to transition internal combustion engine workers into the EV value chain. This is not merely a labour issue; it is an industrial strategy blind spot.

Government, industry, and training authorities must urgently co-design reskilling pathways for battery assembly, software diagnostics, and advanced manufacturing. EV firms should be offered hiring incentives tied to the absorption of retrenched auto workers. Expertise developed over decades cannot be allowed to walk out the gate and never return.

A Verdict Still in Draft

South Africa’s automotive industry is not yet lost. It has survived sanctions, currency collapses, and policy zigzags. But the EV transition is different. It is structural, irreversible, and moving fast. Countries that hesitate will be left behind, their factories repurposed as warehouses for the cars they no longer build.

The choice is stark: accelerate or exit. The next few budgets, trade policy announcements, and investment decisions will write the verdict. If they are bold, coherent, and sustained, the industry may yet find its new gear. If not, East London will be only the first stop on a longer, sadder road.