SKD or Bust? Mahindra Defends Assembly as a Gateway for Major Auto Investment in SA

The debate over semi-knocked-down (SKD) vehicle assembly in South Africa is heating up, with Mahindra South Africa positioning itself as both a defender of the practice and a critic of its abuse. While major domestic manufacturers have called for the closure of a duty-free loophole they claim gives SKD operators an unfair advantage, Mahindra argues that such assembly plants are a critical first step to lure the massive, billion-rand investments needed for full-scale manufacturing.

Speaking exclusively to Moneyweb, Mahindra SA CEO Rajesh Gupta defended the model. “SKD is a mechanism to create interest among the rest of the OEMs to learn about the business, create a local vendor base, and get to a certain level so that they can convince their boards… of investing big,” Gupta said. He warned that “killing that idea” would stifle any chance of attracting new global manufacturers to South Africa.

The “Loophole” Controversy

However, Gupta’s support comes with a significant caveat. He strongly criticised any operator exploiting a regulatory gap that allows SKD manufacturers to import componentslike enginesduty-free under aftermarket categories, thereby operating “close to duty-free” without commensurate local investment or job creation.

“I will be the first person to be the whistleblower,” Gupta stated, emphasising Mahindra’s commitment to governance. His comments follow Naamsa president Peter van Binsbergen (also BMW SA CEO) confirming that established manufacturers have asked the government to close this loophole, arguing it creates an uneven playing field.

A Stepping Stone, Not an Endgame

Mahindra, which opened its purpose-built SKD assembly plant at Dube TradePort in KZN in August 2025 to assemble its Pik Up range, acknowledges that SKD accounts for less than 1% of industry volume. The company frames it not as a final destination, but as a vital proving ground.

Gupta argued that in a market where affordability is paramount, the industry’s collective focus should be on “how to create the possibility of attracting low-cost vehicle manufacturing to this part of the world.” For a global OEM considering a multi-billion-rand commitment, a smaller, lower-risk SKD operation can serve as a crucial testbed to understand the local supply chain, consumer base, and operational landscape.

The debate now sits at a policy crossroads. Established players want a level playing field, while new entrants see SKD as the only feasible entry point. The government’s response will signal whether South Africa’s automotive future is about protecting the existing industrial base or aggressively courting new investment, one assembled vehicle at a time.