South Africa’s auto industry and jobs market hit by imports, tariffs

South Africa’s automotive industry and broader labour market are under mounting pressure as a combination of low domestic sales, high import penetration, stalled localisation efforts, and new US tariffs threaten jobs and investment. Trade Minister Parks Tau said on August 13 that 12 companies in the sector have shut down over the past two years, leading to more than 4,000 job losses. Speaking at an auto parts conference, he revealed that 64 per cent of vehicles sold in South Africa are imported, while localisation, the share of local assembly, labour and components, remains stuck at 39 per cent, far short of the 60 per cent target under the South Africa Automotive Masterplan 2035.

Last year, sales of locally produced vehicles stood at 515,850, well below the target of 784,509. The sector also faces a fresh blow from the 30 per cent US tariff on automotive imports imposed in April, which threatens South Africa’s 28.7 billion rand ($1.64 billion) export market to America. Some manufacturers have already lost US contracts, raising fears of further layoffs in an industry that directly employs 115,000 people.

To address the slowdown, the government has expanded its manufacturing incentive scheme to include electric vehicles and related components. Tau argued that a 5 per cent rise in localisation could unlock 30 billion rand in procurement, surpassing the value of the US export market. Automakers such as Stellantis and China’s Chery are exploring local production, with Stellantis preparing to break ground in the Eastern Cape.

Jobless rate among highest in the world

The auto industry’s troubles come against the backdrop of a worsening national unemployment crisis. According to Statistics South Africa, the official jobless rate rose for a second straight quarter to 33.2 per cent in April-June 2025, placing the country among those with the highest unemployment globally. The number of unemployed reached 8.367 million, up by nearly 140,000 from the first quarter. While the expanded unemployment rate, which includes discouraged job seekers, saw a marginal drop, analysts warn this reflects a shift from active job hunting to giving up entirely.

Structural challenges and tariff risks

Economists say the problem is deeply entrenched, driven by slow growth, extreme inequality, and a mismatch between workforce skills and modern industry needs. Sectors such as community services, agriculture, and finance saw notable job losses, with agriculture hit by disease outbreaks and erratic weather and finance undergoing automation-driven restructuring. The new US tariffs could worsen the picture, particularly for automotive and agricultural exporters, prompting Pretoria to submit a revised trade offer to Washington this week.

With the year-old coalition government pledging to tackle unemployment as a top priority, analysts say success will hinge on boosting local manufacturing, diversifying exports, and implementing policies that bridge the skills gap while attracting investment.

(With inputs from agencies)