Ford is the latest carmaker to voice concerns over South Africa’s challenging operating environment, which could risk the country’s position as an investment destination for vehicle manufacturing.

Ford Africa president Neale Hill has expressed concerns over South Africa’s ongoing infrastructure inefficiencies, particularly in transport and logistics, which are significantly impacting local carmakers and their ability to remain competitive. Speaking to Business Day, Hill pointed to the country’s struggling transport infrastructure, stating that Transnet’s inefficiencies are creating significant hurdles for automotive manufacturers.

“We’re still mostly moving vehicles by road, and we’re too heavily reliant on Durban as a port. The increased dependence on road freight due to unreliable rail services raises costs and slows production, making South African-made vehicles less competitive globally,” said Hill.

“Load shedding, while less frequent, has been replaced by another major concern – logistics bottlenecks. Years of underinvestment in Transnet’s rail and port systems have led to costly delays in moving vehicles and components. Despite some improvements in the rail corridor between Gauteng and Durban, Ford is still forced to rely on trucking its vehicles along the N3 freeway,” said Hill.

Ford’s Silverton plant produces approximately 640 to 660 Ranger units daily, with 65% destined for export. However, South Africa’s rail freight, which should be a cost-saving advantage, remains as expensive as road transport – unlike in other countries where rail is typically 30% cheaper.

Hill warned that these issues threaten future investments. “South Africa competes with plants around the world to assemble cars, and these factors come into play when multibillion-rand decisions are made about future investments in the country. If the country continues to struggle with transport logistics, foreign investors may start looking elsewhere for production opportunities.”

Ford is one of seven original equipment manufacturers (OEMs) producing cars in South Africa, contributing around 5% to South Africa’s GDP. The others include BMW, Mercedes-Benz, Nissan, Isuzu, Toyota, and Volkswagen, with Stellantis and Mahindra planning to establish local factories.

Other carmakers have similar concerns
Ford’s concerns echo those of Volkswagen Group Africa chair and MD Martina Biene, who also raised alarms over the deteriorating business conditions for car manufacturers in South Africa.

Speaking at a National Automobile Dealers’ Association (NADA) event, Biene highlighted how local carmakers are burdened with additional costs due to government failures while struggling to compete with cheap imports. Biene pointed out Volkswagen’s significant investment in backup power solutions at its Kariega facility to mitigate the effects of an unreliable power supply.

“We now have two generators that cost R130 million because we need quite a bit of power, but every day I run those generators, it costs R1.6 million. These expenses ultimately get passed on to consumers making locally produced cars more expensive. South Africa’s position as a competitive vehicle manufacturing destination is under threat,” said Biene.

“There are 117 Volkswagen plants in the world, and that is my biggest competition in the market. Infrastructure failures and high operating costs make it difficult for the local plant to secure future investment.”

Beyond electricity concerns, Biene also pointed to transport and logistics as significant deterrents to new investment. Like Hill, she criticised the inefficiencies in South Africa’s ports and rail systems, which drive up costs and cause significant delays.

“These challenges, coupled with an influx of cheap imports from Asia, put local manufacturers at a disadvantage. Volkswagen employs around 4 000 people in South Africa but faces increasing competition from brands that import vehicles at much lower costs, contributing little to the country’s economy.”

According to Biene, manufacturers in countries such as China benefit from heavy government subsidies, allowing them to price their vehicles more competitively. In contrast, South African carmakers must absorb additional costs caused by government inefficiencies, making it increasingly difficult to compete.

Toyota South Africa Motors (TSAM) CEO Andrew Kirby has also raised similar concerns, particularly about the surge in Chinese vehicle imports and its impact on local production.

“While competition is generally welcomed the rapid influx of imported vehicles creates an uneven playing field and accelerates de-industrialisation. As a result of the increase in cheap imports, he noted that South Africa’s vehicle production has been significantly affected in recent years.”

“Historically, local factories assembled cars using parts from domestic suppliers, a process known as Completely Knocked Down (CKD) production. This approach is critical for job creation and economic growth. However, since 2018, CKD production in South Africa has declined by more than 11%,” said Kirby.

“Instead, more vehicles are being imported as fully built units, particularly from Asia, which reduces local job opportunities and investment in the manufacturing sector.”

Kirby linked this trend to South Africa’s Automotive Production Development Programme (APDP), specifically Chapter 98, which provides free trade rebates and semi-knocked-down (SKD) options, making importing vehicles more attractive than local assembly.

“For South Africa’s car industry to succeed, we need to focus on growing CKD production and using more locally made parts,” said Kirby.