South Africa has secured commitments from Chinese and Indian car companies to upgrade their semi-knocked-down (SKD) vehicle assembly operations to full-scale manufacturing, the trade minister said on Thursday as industry leaders call for more domestic production.
The government is in talks with multinational carmakers who have South African factories, including Toyota and Ford and their suppliers, on ways to safeguard the industry’s future as it navigates declining production volumes, stiff competition from China, tariff uncertainty and an expensive shift to electric vehicles.
Auto leaders warned on Wednesday at an annual auto conference that if South Africa does not protect its industry from imports, it risks driving deindustrialisation in the country.
Speaking after recent engagements with industry players in China and India, trade minister Parks Tau told delegates at the conference “in both those markets, the companies that have SKD operations in South Africa have committed to transition to CKD (complete knocked down).”
The SKD manufacturing technique involves turning partially assembled kits into finished vehicles, while CKD puts together cars from parts delivered to the site.
Chinese brand Beijing Auto Industrial Corporation (BAIC) has an SKD assembly of its Beijing X55 crossover model in Gqeberha, home to Isuzu and Volkswagen. The plant is designed to eventually shift into a CKD assembly.
India’s Mahindra assembles semi-knocked-down pick-up trucks in Durban. Earlier this year, Mahindra partnered with the Industrial Development Corporation to launch a feasibility study into building a full-scale manufacturing plant in the country.
Tau said the government’s role would be to support the companies in reaching full production capability, which would not only strengthen South Africa’s industrial base but also position the country as a manufacturing hub for the continent.
The minister said discussions with other investors in China and India had also yielded interest in either partnering with existing car manufacturers to use excess capacity or building new factories in South Africa.
Over the past 19 years, the percentage of CKD vehicles sold in South Africa has declined significantly from 56% to 33% in August, according to Toyota South Africa CEO Andrew Kirby.
“What this means is that we are flooding the market with imports,” he said.
“Sustaining CKD volumes is critical to preserving the domestic auto industry, local value creation and economic benefits.”
South Africa has been the dominant vehicle producer on the continent for the past 100 years.
“We are facing the risk of losing the position as the top dog on the continent (to Morocco) as early as this year,” said Neale Hill, president of Ford Africa.