SA car industry going through one of its biggest disruptions, says Toyota boss Andrew Kirby

A number of industry insiders, including various car brand CEOs, have sounded alarm bells about looming problems for the South African automotive industry. 

Andrew Kirby, CEO of Toyota SA — the country’s top-selling brand — is on a quest to get a clearer picture of the danger South Africa is heading towards.

The Gqeberha-born and raised Kirby said: “We are in a serious transition and we could argue we are going through one of the biggest disruptions in the sector because of what’s happening globally and in South Africa.

“The transition means the decisions we take over the next three to four years are going to affect what the future manufacturing footprint looks like in South Africa, its economic value, jobs, skills creation and the profile of vehicles sold.”

Expanding on the risks, he said the industry needs to look at where vehicles will be sourced from and the mix of imports vs locally produced vehicles.

With European markets, especially the UK where Toyota SA exports the Hilux, having implemented policies to slowly phase out non-zero emission vehicles, South African manufacturers are under pressure unless local assemblers are able to also start producing zero-emissions vehicles.

The new energy vehicle (NEV) white paper released by the government in December sets out policy goals to support the transition to cleaner cars and offers incentives for the local production of battery-powered and hydrogen electric vehicles (EVs) in which car manufacturers can claim 150% of investment spending on such vehicles in the first year.

Last week, at the Auto Week conference in Cape Town, President Cyril Ramaphosa said the white paper would include hybrids and plug-in hybrids and would have subsidies to accelerate consumer uptake of EVs.

Kirby has welcomed the announcement, saying scale is needed to develop the South African market. “It’s difficult to pivot to producing electrified cars when a handful are sold in South Africa, with no incentive to sell, drive or purchase new energy vehicles,” he said.

There are structures that can be put in place that are fiscally neutral and cost-free to accelerate the transition, he said. The South African automotive master plan from 2018, followed by the Automotive Production Development Programme 2 (APDP2) regulations of 2021, did not accurately forecast the rapid change to NEVs.

“These need to be enhanced with selective changes to accelerate the transition faster.”

Kirby said South Africa needs to produce more than 1-million cars a year to have the scale to sustain the industry.

“We produce 600,000 vehicles annually and now we must shift focus towards being more aggressive in establishing South Africa as a manufacturing base for exports across the continent instead of being reliant on European markets, though the region has its own challenges.”

He hopes short-term agreements on tariffs will be reached soon with the department of trade, industry and competition and the African continental free trade areas for South Africa to start benefiting from the export programme. Slow growth is part of the challenge and various African countries would need to put in place policies to restrict used-car imports (grey imports) if the region and the automotive value chain are to benefit. 

What’s the ultimate ambition, though? Kirby said the bigger picture should be a win-win for all.

“Not all African countries can manufacture vehicles, but there are countries that can benefit from participating in the value chain, such as component manufacturing, instead of importing from Asia.

“As an example, as Toyota SA we export the Hilux to Egypt and Egypt also builds a model it can supply to South African consumers. It’s what regional trade agreements are aiming towards, though still at the early stages,” he said.

Kirby said the APDP programme is a solid foundation. Additional mechanisms are needed, though, such as the government partnering with industry umbrella body Naamsa and the National Association of Automotive Component and Allied Manufacturers to collaborate on how to grow the size of the local market.

Existing structural issues such as high import duties and the ad valorem tax — a luxury excise tax that exponentially increases with the price of the vehicle and which has not been updated since 1995 — thwart the efforts, Kirby added.