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Reports in the past week on the South African automotive industry’s disappointing localisation performance should concern all invested in the future of the industry. With the average local content of vehicles produced in the country remaining at just more than 38%, virtually unchanged from a decade ago, trade, industry & competition minister Parks Tau is justified in raising concerns. The question is not whether localisation outcomes are stuck but whether the automotive policy toolkit reflects the realities of today’s industry and is able to deliver the desired local value-addition outcomes. In classic trickle-down economics, South Africa’s automotive industrial policy has expected success to flow through the number of vehicles assembled. Automotive original equipment manufacturers (OEMs) producing more volumes locally create economies of scale that can unlock localisation for local component manufacturers supplying these factories. The data is pointing to a different outcome.At the start of the Automotive Production and Development Programme in 2013, about 514,000 vehicles were produced domestically, with an average local content of 43%. In 2025, production totalled 577,000 but average localisation was slightly above 38%. Of that, it is estimated that more than 60% of that content originates from within OEM operations, leaving few actual local content opportunities within the supplier base. Even within a limited production growth environment, it is clear there is a blockage within the stream of trickle-down benefits. South Africa’s automotive component sector already demonstrates what is possible. It contributes more than R100bn in gross value addition annually, employs 80,000 people and exported components worth R61bn last year. Local manufacturers produce globally competitive products ranging from wiring harnesses and safety systems to metal stamping, castings and advanced filtration technologies. So why has local content not progressed? It is not supplier capability that has changed, but rather a South African automotive industrial policy mechanism that is overweight on the reward of vehicle assembly at the expense of deep localisation. When the second phase of the Automotive Production and Development Programme (APDP2) replaced the first in 2021, it was designed for a different global environment. It assumed growing domestic demand, expanding production volumes and a relatively stable international trading system. None of those assumptions fully hold today.So why has local content not progressed? It is not supplier capability that has changed, but rather a South African automotive industrial policy mechanism that is overweight on the reward of vehicle assembly at the expense of deep localisation. Global vehicle production has slowed. Competition from new manufacturing centres has intensified. Countries are using increasingly interventionist industrial policies to protect their industries and attract investment. Electrification is reshaping supply chains, while geopolitical tensions have reinforced the importance of resilient regional manufacturing networks.The consequences are increasingly visible. Over the past three years, the component sector has recorded more than 7,500 job losses, 13 plant closures and declining component export performance. Local vehicle production has remained largely stagnant, while imported vehicles capture a growing share of the domestic market.These outcomes are not simply the result of global market conditions. They are also symptoms of a policy framework that turned from being virtuous to vicious. The incorrect calibration of incentives has led to excess generation of OEM duty rebate credits, reducing the need to localise. The excess credits are in turn sold to independent importers, facilitating cheaper entry of imports into the domestic market. Latest data points to independent importers being the users of 84% of production rebate credits. This means the policy programme is supporting OEMs and importers at the expense of localisation and the associated employment benefits. This year’s review of APDP2 is far more than a routine policy exercise. It is an opportunity to modernise South Africa’s automotive industrial strategy. The objective should not simply be to preserve assembly operations. It should be to grow domestic value addition throughout the automotive value chain. The automotive component manufacturing sector is not a constraint; it is the unrealised engine of localisation and must be at the heart of the review.As a starting point for the next phase of automotive policy, along with tackling incentive calibration issues, conditional localisation to qualify for policy incentives must be put in place. Thailand offers an instructive comparison. As a manufacturing hub, once a similar size to South Africa’s own industry in the early 2000s, Thailand has benefited from much higher growth levels and supply chain development, not through trickle-down incentives but by tying incentives to minimum production volumes and mandated local content. OEMs are naturally reluctant to duplicate tooling and component investment across multiple markets when one location will do. Thailand’s policy removes that choice, making localisation a condition of market access rather than a discretionary extra.The effect has been to direct component investment towards Thailand and away from competing markets, including South Africa, regardless of whether suppliers elsewhere are equally capable. South Africa and the continent, through African Continental Free Trade Area-scale market access, need comparable binding conditions of our own, not as punitive measures but to have the domestic value chain compete on equal terms.This becomes important as the sector transitions towards new-energy vehicles. South Africa and its neighbours possess significant mineral resources. The country has an established supplier base and decades of advanced manufacturing experience. These strengths position us to participate in emerging value chains for batteries, high-voltage wiring harnesses, thermal management systems and other new-energy vehicle components. But these opportunities will not materialise automatically. They require a policy environment that encourages long-term investment in manufacturing rather than greater reliance on imported technologies.South Africa and the continent, through African Continental Free Trade Area-scale market access, need comparable binding conditions of our own, not as punitive measures but to have the domestic value chain compete on equal terms.Crucially, the review must consider tools that simultaneously support the growth of OEM volumes, attract new OEM entrants to broaden the manufacturing base, encourage direct component exports into global markets and grow production for the replacement market. These goals are complementary to, rather than in competition with, local content outcomes: volumes anchor economies of scale, new entrants widen the demand base, exports build resilience beyond the domestic market and replacement-market supply sustains component capacity across the life of a vehicle. The debate on localisation, ultimately, must move beyond whether 38% is acceptable. The important question is why, despite decades of industrial capability, the sector has struggled to move beyond it. The answer lies not in the capabilities of South African manufacturers but in ensuring that industrial policy creates the right environment for localisation to become the obvious business decision.The review of APDP2 provides an immediate opportunity to reset that trajectory.If South Africa wants to remain a globally competitive automotive manufacturing country over the next decade, policy must shift its focus from simply assembling more vehicles to creating more value within every vehicle we build. Localisation is not an outcome of good intentions. It is an outcome of focused industrial policy and implementation.• Moothilal is CEO of the National Association of Automotive Component and Allied Manufacturers (Naacam)
