By Siyabonga Mthembu

The announcement by the Minister of Trade, Industry and Competition, Parks Tau, that South Africa will phase out existing Semi-Knock-Down (SKD) operations and no longer support new facilities, while excluding medium and heavy commercial vehicles, is an important and necessary step.

This is because future automotive investment in South Africa must deliver more than assembly activity. It must also deepen local manufacturing, strengthen domestic supply chains and deliver measurable outcomes in production, localisation, employment, transformation, exports and long-term investment.

Our research supports this direction. Completely Knocked Down (CKD) manufacturing creates far greater value for South Africa than SKD assembly because it supports component manufacturing, tooling, logistics, technical capability and supplier development. Without clear progression requirements, SKD operations risk remaining dependent on imported kits, with limited benefits for local content and jobs. Strengthening the definition of CKD manufacturing, closing incentive loopholes and linking support to firm localisation commitments will be critical. New entrants must contribute to long-term industrial depth, not only short-term assembly volumes.

The timing of this announcement is significant. South Africa’s automotive production remains below the trajectory set out in the South African Automotive Masterplan, while local content remains well below the 60% target for 2035.

Imported vehicles and components continue to gain market share, established Original Equipment Manufacturers (OEMs) are under growing pressure, and component manufacturers are dealing with lower volumes, rising operating costs and infrastructure constraints. This is particularly concerning for automotive hubs such as Nelson Mandela Bay and East London, where manufacturing supports a much wider ecosystem of suppliers, logistics businesses, retailers, training institutions and service providers.

The impact also extends well beyond vehicle assembly. South Africa’s automotive aftermarket was estimated at approximately R197 billion in 2025, supported about 317  000 direct jobs and included roughly 23 000 employers, around 80% of which were small, medium and micro enterprises. The Automotive Production and Development Programme (APDP2) review must therefore consider the full automotive ecosystem, including dealerships, independent workshops, component specialists, body repairers, tyre retailers, logistics providers and township-based businesses.

We support the principle that any additional protection for the ladder-frame light commercial vehicle segment must be matched by clear and enforceable commitments. Trade protection cannot be provided without reciprocal value. It should be linked to measurable milestones for local production, localisation, supplier development, employment, transformation, exports, investment and technology transfer.

The ITAC investigation should therefore assess not only the level of protection required, but also the quality and sustainability of the commitments made by those who benefit. Those commitments should include proper after-sales support, adequate local parts availability, access to repair information, technician training and sustainable dealer and independent-repair networks. This is becoming increasingly important as Chinese brands reached 19.1% of South African passenger and light commercial vehicle sales in Q1 2026. The growing number of brands and models is widening the parts, skills and technical support requirements across the market.

The minister’s focus on New Energy Vehicles, critical-minerals beneficiation and battery recycling is equally important. South Africa needs a practical and technology-neutral transition that includes hybrids, plug-in hybrids, battery-electric vehicles and appropriate alternative-fuel technologies. This approach will help protect existing production and export markets while building new capabilities in battery-pack assembly, charging infrastructure, mineral beneficiation, diagnostics, maintenance, remanufacturing, recycling and second-life battery applications. The proposed end-of-life vehicle policy also creates an opportunity to build a circular automotive economy from the outset, with meaningful participation by local manufacturers, SMMEs and township businesses.

However, we must prepare the aftermarket to service these vehicles throughout their life cycle. New Energy Vehicle sales reached approximately 16,700 units in 2025 and have more than tripled since 2022, yet technical capability remains constrained. Approximately two-thirds of surveyed automotive businesses reported specialist shortages and skills gaps, while more than 80% indicated insufficient hybrid and e-mobility coverage in technical and vocational training. Investment in high-voltage safety, diagnostics, ADAS calibration, software access, and practical workshop training must therefore keep pace with incentives for vehicle and component production.

The key issue now is execution. The APDP2 review should provide clear transition arrangements for existing SKD operations, firm timelines for progression to CKD manufacturing, consistent enforcement and policy certainty for investors. This must be supported by reliable energy, efficient ports and freight corridors, targeted industrial finance, stronger Tier 2 and Tier 3 supplier development, and practical skills programmes in advanced manufacturing, electronics, software, ADAS and electrified powertrains.

Supply-chain resilience must also be treated as a clear industrial-policy priority. South Africa imported R107.5 billion of replacement parts in 2025, 57.4% more than in 2021, increasing our exposure to shipping disruptions, port congestion, exchange-rate volatility and long repair lead times. Selective localisation, dual sourcing, strategic safety stock and better use of data in inventory planning will be essential if stronger local manufacturing is to translate into reliable and affordable mobility for consumers.

This announcement is a significant step towards protecting South Africa’s industrial base and positioning the automotive sector for its next phase of growth. The real measure of success will be whether it delivers higher local content, stronger suppliers, sustainable jobs, meaningful transformation and globally competitive production.

Government, industry, organised labour, training institutions and development-finance partners must now work together to turn this policy direction into measurable investment and production outcomes. That collaboration must include aftermarket associations, independent repairers, insurers, parts distributors, technical colleges and township operators so that localisation, skills development, data access, repair affordability and safe mobility advance together. If implemented with urgency, consistency and accountability, the phasing out of SKD operations can move South Africa from assembly-led participation towards deeper industrialisation and help secure our position as a leading automotive manufacturing hub in Africa.

Siyabonga Mthembu is a Partner (Audit) at BDO South Africa