Dark clouds over South African carmakers — with bad news for prices

South African motorists hoping to buy locally made models may want to consider buying soon before the price of their desired set of wheels surges.

The impending shutdowns of ArcelorMittal’s Vereeniging and Newcastle long steel mills are expected to not only have a devasting impact on direct jobs but also cause major supply chain disruptions for automotive manufacturers.

The plants provide dozens of kilotonnes of speciality long steel every year, much of which is used in engine parts and structural components.

With the plant out of the picture, several local carmakers will be forced to import their steel, increasing production lead times and costs.

The result will be delayed production and higher operating expenses — something local vehicle assembly plants can hardly afford as things stand.

Associations representing local carmakers, including Toyota and Volkswagen, have written to ArcelorMittal, begging the company to delay the closures.

All of South Africa’s carmakers have already had their hands full in dealing with an onslaught of competition from imported cars in recent years.

A plethora of Chinese brands — including Haval and Chery — have disrupted the status quo of the locally present German brands in the higher-end market.

These companies have captured significant market share in a short period by offering the same or better features as many BMW or Mercedes-Benz models but at a fraction of the price.

While Chinese cars also compete in the budget segment, Indian brands are the ones that dominate when it comes to cash-strapped consumers.

All Suzukis, Mahindras, and many budget Kia, Hyundai, Nissan, and even rebadged Toyota models come from Indian plants.

In 2023, over 157,000 cars were imported from India to South Africa, accounting for over 53% of imported models. That compared to roughly 39,000 Chinese imports.

Combined, these countries’ products accounted for about 38% of new cars sold in 2023.

Due to various factors, both China and India are able to undercut South African car prices in spite of high import tariffs.

These include greater economies of scale, cheaper labour, substantial government subsidies (in the case of China, at least), and operating environments that are generally more conducive to business growth.

India-made Suzuki models

It only takes comparing the top 10 cars sold in South Africa in 2024 with five years ago to see the impact the Indian and Chinese models are having.

In 2019, eight out of the top 10 cars sold in South Africa were assembled locally, while India and Romania accounted for one car each.

By last year, that number had dropped to six, with India adding three more to its top 10 tally and China climbing into the top 10.

Once popular South African models like the Toyota Fortuner, Toyota Hi-Ace Ses’fikile, and the discontinued Nissan NP200 are out of the top 10

The once sought-after VW Polo has also dropped from the fourth best-seller to tenth.

While Toyota continues to dominate in the top five, its total sales for the year were down 9.8%, worse than the 3% overall drop in the market.

Amid the slump, India’s Suzuki improved its sales by 20.5%, while China’s Chery surged 22.4%.

The table below shows the top 10 best-selling cars in South Africa in 2019 and 2024.

Delayed closure could limit impact — for now

The government is currently negotiating deals with ArcelorMittal to provide extra funding to defer the closures for six to eight months.

That could delay roughly 3,500 direct job losses.

ArcelorMittal is seeking R3 billion to keep its operations going for 12 months to build up inventory for carmakers including Volkswagen and Isuzu, before the shutdowns.

However, the Industrial Development Corporation has already bailed out the company twice in recent years — most recently in January 2025.

Ironically, the IDC has also provided funding to mini mills that process scrap metal at discounted prices, undercutting ArcelorMittal’s products.