The industry exports most of its vehicle production to countries that have committed to strict timetables to prohibit the import of petrol and diesel vehicles.
The UK, which accounts for more than 25% of South African vehicle exports, is among the countries that want to ban petrol and diesel vehicles from 2030 to meet environmental targets.
The National Association of Automobile Manufacturers of SA (Naamsa) predicts that the annual value of South African automotive exports will collapse from R201.7bn in 2019 to R40.3bn in 2040 if local manufacturers are unable to meet demand.
For now SA's exports are holding up. Naamsa said January's export sales, at 22,771 units, represented a noteworthy increase of 6,468 vehicles or 39.7% over January 2020, and this year is on track to be better overall than 2020.
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So Ford's plans to invest R15.8bn in modernising its SA operations, along with Toyota, who announced a R2.95bn investment on Friday, and Isuzu, who confirmed an upcoming investment of R1.2bn, might create jobs. Ford will hire an additional 1,200 people to support expanded production, bringing its workforce in SA to 5,500 employees.
But Norman Lamprecht, Naamsa executive for trade, exports and research, warns that, in the longer term, "the industry could face significant job losses at the plant level, in export revenue [and] a substantial drop in the automotive industry's contribution to GDP". The industry contributes about 4% to GDP at present.
The manufacturing segment of the industry employs more than 110,000 people. Combined with the industry's strong multiplier effect, it is responsible for about 457,000 jobs in the formal economy.
Naamsa CEO Mikel Mabasa said that by 2030, 40% of all new vehicle sales in Europe are forecast to be electric vehicles (EV). This is expected to rise to 80% by 2040. Globally, electric or hybrid vehicles are expected to have a 58% motor market share by then.
With the exception of a few hybrid C-Class cars built by Mercedes-Benz SA, using a combination of petrol and electric motors, all vehicles built in SA are powered by the internal combustion engine.
Electrification is shaking up the industry globally, and SA faces a stern test of its regulatory relevance and competitive advantages in a whole new area of production.
Lamprecht said three out of every four cars exported from SA go to the EU and the UK. In 2019, more than 100,000 cars built in SA were delivered to UK customers alone.
"We need to adapt and do it quickly," said Lamprecht. "For the South African automotive industry to remain relevant, it needs to be integrated into the global EV value chain.
"We need to react to that. We haven't factored this into the South African automotive master plan, which was supposed to launch in January but was postponed to July and is set to apply to the end of 2035."
The master plan calls for a major reappraisal of the industry's scale and operations. Targets include a doubling of jobs in vehicle and components manufacturing by 2035, from 120,000 to 240,000, and a more than doubling of vehicle production from 2019 levels, from 600,000 to 1.4-million.
A year ago the government, with Naamsa, finalised the extension of the Automotive Production and Development Programme (APDP), a scheme designed to incentivise the manufacturing and export of vehicles, and the development of a local supply chain.
The APDP target of building 1.4-million cars annually by 2030 was based on an expected rise in demand from African countries to offset falling demand in the EU.
The APDP was well received by the seven original equipment manufacturers operating in SA, and Toyota, Ford, Mercedes-Benz and Volkswagen have recently announced major investments in SA.
Yet the APDP does not talk about EVs at all, nor mention the fact that African motorists prefer second-hand cars primarily from high-income countries.
About 2.5-million used vehicles are exported from the EU, US and Japan annually, and about 48% of the stockpiles are destined for Africa, according to a report last year by the UN Environment Programme.
