MOTOR INDUSTRY: Chery picks up Asian carmaker baton from

South Africa's automotive manufacturing sector faces an inflection point as Chinese carmaker Chery accelerates plans to establish production operations in the country. This move crystallizes a decade-long structural decline that has transformed Africa's largest economy from a regional automotive hub into a contested battleground for global manufacturers seeking African market access.

The numbers tell a sobering story. South Africa's vehicle production has contracted from over 600,000 units annually in the mid-2000s to approximately 480,000 units in 2023—a 20% decline despite population growth and rising continental demand. Export volumes have stalled. Employment in the sector has shed over 50,000 jobs since 2015. Meanwhile, the automotive manufacturing value chain that once attracted €2+ billion in annual foreign direct investment now struggles to compete on cost, technology, and supply-chain resilience.

## Why is Chery choosing South Africa now?

Chery's expansion strategy reflects a calculated bet on three factors: tariff-advantaged access to Southern African Development Community (SADC) markets through existing trade agreements; lower labor costs than established Asian manufacturing hubs; and the perception of political stability relative to other African manufacturing corridors. For Chery—China's fifth-largest automaker by volume—South Africa represents a springboard to capture market share across sub-Saharan Africa without the regulatory friction of competing in established Western markets. The company has already signaled interest in electric vehicle (EV) production, positioning itself ahead of legacy manufacturers still managing internal combustion engine (ICE) transition.

## How does this reshape local industry dynamics?

The Chery announcement exposes a critical vulnerability in South Africa's automotive ecosystem. Legacy manufacturers—Toyota, Volkswagen, BMW, Mercedes-Benz—have maintained production footprints largely through government incentives and existing supply-chain relationships, not competitive advantage. Chery's entry, coupled with rising Chinese EV competition in African markets, creates a three-way squeeze: legacy OEMs face margin compression as Chinese competitors capture price-sensitive segments; local component suppliers lack scale to serve both legacy and new-entrant production models; and government industrial policy remains fragmented between protecting existing employment and attracting next-generation manufacturing.

The immediate risk: a bifurcated automotive sector where Chinese OEMs capture EV and lower-cost segments while legacy manufacturers defend premium/mid-range positions through cost-cutting that further erodes local employment and supplier viability. Job losses could accelerate across the supply chain if domestic content requirements—currently 55% for local assembly—aren't strategically enforced.

## What's the continental opportunity?

Chery's strategy also signals where African automotive manufacturing *can* compete: the EV transition, where legacy supply chains don't dominate, and where cost-of-capital and labor arbitrage matter. South Africa has rare advantages—existing industrial infrastructure, skills base, and logistics networks—that could position it as Africa's EV production hub if policy aligns manufacturing incentives with technology adoption targets. However, this requires coordinated investment in battery assembly, semiconductor localization, and workforce retraining that currently lacks political urgency.

The Chery moment is a warning: South Africa's automotive sector will either modernize or marginalize. Incremental reforms no longer suffice.

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