Naacam 2025 | Government vows to stimulate growth of auto component sector

Key government officials vowed to play their part in supporting growth in the South African automotive components manufacturing industry.

Politicians took to the podium at the opening of the 2025 National Association of Automotive Component and Allied Manufacturers (Naacam) Show, expressing the collective undertaking to work with the sector to improve fortunes amid a challenging outlook.

The event is under way in Gqeberha this week and sees industry players and political stakeholders converging to discuss solutions for the future of component manufacturing, in addition to exhibition halls allowing suppliers to showcase their products.

In her opening remarks, Nelson Mandela Bay mayor Babalwa Lobishe said the region aims to support the sustainability of existing manufacturers while striving to attract further business activity.

Eastern Cape MEC for economic development, environmental affairs and tourism, Nonkqubela Pieters, described the province as a strategic anchor of the country's automotive industry, accounting for more than 50% of the country's vehicle exports.

She referenced long-standing manufacturing operations which supported the component sector, including the Isuzu, Volkswagen and Mercedes-Benz plants, welcoming the prospect of an imminent production facility by Stellantis.

However, the MEC acknowledged threats to businesses and jobs, including increased tariffs, energy supply constraints and logistical impediments.

Pieters outlined areas where improvements would be made to create a more enabling environment for enterprise.

On the agenda is the expansion of freight capacity at the Gqeberha port, finalisation of a hydrogen strategy for the Eastern Cape and exploring new skills development programmes with Technical and Vocational Education and Training (TVET) colleges and universities to meet evolving demands of the new energy vehicle (NEV) era.

“Electricity supply is the decisive factor in attracting and attaining investment. The province is diversifying its energy roots, this includes the proposed development of liquefied natural gas infrastructure, as well as the deployment of wind and solar energy projects,” she said.

Minister of employment and labour Nomakhosazana Meth believes global crises affecting the sector present opportunities, suggesting potential to tap into new frontier markets in Asia, Latin America, and the rest of Africa.

Meth remarked on troubling developments such as ArcelorMittal's closure of steel operations in Newcastle and Vereeniging.

“We are looking at the loss of more than 3,500 direct jobs in the steel sector, with ripple effects across the automotive supply chain that could easily push the total job losses above 13,000 in the short term.”

She said the government has not stood by idly, noting a R380m lifeline through InvestSA and the Industrial Development Corporation.

“Reactive measures are not enough, we need a steel master plan — anchored in public-private collaboration — that secures a one-year buffer stock, upgrades mini-mills to produce OEM-certified steel locally and tackles the structural barriers of energy, logistics and infrastructure that have weakened our competitiveness.”

To support the shift towards NEV production, Meth noted the allocation of R1bn to kick-start local manufacturing projects, with the view to attracting R30bn in private investment.

Minister of trade and industry Parks Tau described the “stuck narrative” of declining domestic sales.

In 2024 new vehicle sales in South Africa totalled 515,712 units, which Tau contrasted against the goal of more than 780,000 units targeted in the South African Automotive Master Plan (SAAM) 2035.

“Sixty-four percent of vehicles sold here are imports, eroding local production. Compounding this, local content remains stagnant at 39%, well short of the 60% target, while US tariffs now affect our R28.7bn automotive exports,” he said.

“These pressures have triggered 12 company closures and more than 4,000 job losses in the past two years. The erosion of industrial value in the sector is exemplified by recent suspensions at Mercedes-Benz and other manufacturers.”

The minister noted that a 5% increase in local content would unlock R30bn in new procurement, dwarfing the prospect of losing the R4.4bn US export market.

Tau outlined various efforts under way to support the industry, such as reforms to the Automotive Production Development Programme Phase 2 (APDP2) regulations.

“Some of these reforms include incentive structure, shifting duty credits to reward manufacturing, instead of assembly credits.

“Our critical minerals and metals strategy will prioritise benficiating platinum group metals, copper and manganese for high-value new energy vehicle components like fuel cells and batteries,” he said.

Stronger incentives to produce NEV models locally are also set to take effect.

“The Taxation Laws Amendment Act, gazetted on December 24 2024, introduces a 150% capital allowance, for qualifying investments in EV and hydrogen vehicle production. It covers assets such as buildings, plants and equipment brought into use between March 1 2026 and March 2036.”

On the EV manufacturing skills development front, Tau confirmed that new curricula and certification programmes are being developed with the Tshwane University of Technology, the Cape Peninsula University of Technology and Unisa, which will culminate in a pilot project involving 100 students next year.

“We have walked a long journey with the automotive sector on transformation, inclusion drives growth, the SAAM 2035's target of 130 new black-owned manufacturers, is advancing.”

Tau said the government was working to eliminate compliance burdens and reduce red tape which inhibits investments into the sector.

“Our policy response is accelerating our plan to introduce a general laws amendment bill which looks to fast-track high-impact investments and projects within 90 days.”

He said a study through the International Trade Administration Commission (ITAC) would explore the effect of imports into South Africa and the impact on local production.

“We want to grow the sector — so our first option must not be to wield the stick, but rather offer the carrot to companies, to attract more investment into the country, increasing the value-add of our component manufacturers.”