Driving through urban areas in South Africa, you might notice cars featuring unfamiliar logos, likely from the growing array of Chinese models popular among drivers.
Chinese automotive brands have made significant strides in the mid-range market, with vehicles typically priced under R600,000 ($33,000). Notably, in the crossover SUV segment, or “compact family cars,” two Chinese brands—Haval and Chery—ranked within the top 10 for new car sales in the first half of 2024, according to the South Africa’s Automotive Business Council.
These brands are also performing well in the SUV market, where prices exceed R600,000. Data from January to November 2023 shows that Haval and Chery were the top and third best-selling SUVs, respectively.
What factors contribute to their success in the South African market? Analysts point to two main reasons: affordability and perceived quality.
“The value proposition is exceptionally compelling—far superior to that of traditional automakers. Chinese brands take a unique approach; their cars come fully equipped from the start. What you see is what you get, and the technology is impressive,” explains Ciro De Siena, a journalist at Cars.co.za, in an interview with African Business.
“Traditional brands typically advertise their vehicles at a set price, but once you start customizing with features like a panoramic roof or 360-degree cameras, you could end up adding an extra R100,000. In contrast, many Chinese models may already include those features as standard.”
Auto journalist and expert Lance Braquinho notes that the appeal of Chinese cars extends beyond their prices, indicating substantial improvements since their debut in the late 2000s.
“Some of the offerings are genuinely impressive now. My visit to China in 2008 revealed cars that were subpar. Nonetheless, there were talented engineers keen on discussing Tesla and German brands; they clearly aimed to reach those quality benchmarks and are learning at an exceptional rate,” he mentions.
Braquinho asserts that Chinese automakers currently have an edge over competitors in technological advancements, especially regarding software integration.
“Modern car manufacturers must also be proficient software engineers to satisfy consumer demands for integrated phone applications and immersive experiences. The first iPhones were manufactured there, and many engineers have since launched their own companies. Meanwhile, legacy brands are falling behind in this area.”
Affordable Options
Chinese vehicles began entering the South African market around 2007, coinciding with a period of economic upturn. However, many withdrew after the global financial crisis, and it’s only recently that they’ve established a solid foothold.
De Siena points out that Chinese brands are making their comeback at a pivotal time, as consumers are increasingly on the lookout for affordable alternatives.
“Notably, the South African market once heavily prioritized brand reputation. Those with financial means typically opted for BMWs or Audis, resulting in strong brand loyalty. Nevertheless, over the last decade—amid rising inflation, soaring car prices, and a heightened cost of living—consumers have shifted their focus to value rather than prestige. South Africa has become increasingly price-sensitive, and the return of Chinese brands is perfectly timed as they don’t primarily need to market their brand; they offer what are perceived as quality products at significantly lower prices.”
Brandon Cohen, chairperson of the National Automobile Dealers Association (NADA), agrees that consumers are now more budget-conscious and open to exploring Chinese brands.
“Middle-class shoppers in South Africa are looking for vehicles priced under R300,000, and with enduring economic pressures, the appeal of competitively priced Chinese brands is very strong.”
Though the South African automobile market hasn’t experienced substantial growth since the pandemic—with new vehicle sales rising just 0.5% year-on-year in 2023 to 532,098 units, compared to 529,556 units in 2022—investors remain hopeful due to the newly formed, business-friendly coalition government. Should the IMF’s forecast of 1.1% economic growth materialize, consumers may be more inclined to invest in vehicles again.
Tariffs
Nevertheless, several challenges face Chinese manufacturers interested in the South African market. Currently, light vehicles incur a 25% tariff, while original equipment components are taxed at 20%. A preferential agreement allows vehicles imported from the EU to face only an 18% tariff. Medium and heavy commercial vehicles attract a 20% ad valorem import tax, while EU manufacturers enjoy a mere 12% rate.
To circumvent these tariffs, manufacturers would need to establish local production.
However, setting up local manufacturing “would require a long-term commitment and substantial investment,” Cohen explains.
Chinese firm BAIC partnered with South Africa’s Industrial Development Corporation to open a manufacturing plant in Gqeberha (Port Elizabeth) in 2018. This R11bn ($604.3m) facility was heralded as China’s largest investment outside of Europe; however, reports suggest it has produced only 300 cars since opening. In contrast, Ford’s Silverton assembly plant in Pretoria has a daily manufacturing capability of 720 vehicles, and the American automotive giant has announced plans to invest $281m to produce hybrid vehicles in South Africa by late 2023.
Other non-Chinese brands have already committed significant investments in the country. In April, German automaker Volkswagen disclosed plans to invest $220m in its Eastern Cape facility to prepare for new SUV manufacturing by 2027. Franco-Italian manufacturer Stellantis also inked a preliminary agreement with South African authorities in 2023 to establish its first plant in the country by the end of 2025. Japan’s Nissan has also made considerable investments in recent years.
Great Wall Motors, which owns Haval, P-series, and Tank brands, has informed local media of its ongoing discussions with stakeholders regarding vehicle production in South Africa. However, local manufacturing is a costly endeavor, and manufacturers would need to expand their customer base beyond South Africa for profitability.
At present, South African auto manufacturers export to the US, Europe, the Middle East, and other African nations, and Chinese brands will likely need to enhance their appeal in similar markets to justify launching a plant in South Africa. Nonetheless, De Siena anticipates that the African market for internal combustion engine vehicles will become increasingly crucial for South African manufacturers, who have generally fallen behind in adapting to produce electric vehicles thus far.
“Demand for internal combustion engines is diminishing in Europe and the US, while South Africa has yet to pivot toward producing NEVs (new electric vehicles). It’s highly expensive to retrofit factories for this production, prompting manufacturers to focus on Africa instead.”
De Siena believes this could be the strategy for Chinese automakers: “The business goal would be to establish a footing in South Africa, sell as many vehicles as feasible, and then begin production for exports to Africa, a region that seems to offer substantial growth potential.”
After 80,000km
Another potential hurdle for Chinese car brands in South Africa is the public perception of their reliability. As Chinese models are relatively new to the market, there is limited understanding of their long-term performance and durability in a country with challenging road conditions and long travel distances.
“The real test will be when these vehicles are out of warranty, especially regarding durability past 80,000km. If maintenance becomes excessive, these brands may encounter difficulties. Importing requires significant parts warehousing to ensure future serviceability. If heavy maintenance cycles begin after 60, 80, or 100,000km, manufacturers will need specialized components. A lack of availability could lead to customer dissatisfaction if vehicles cannot be serviced for extended durations,” cautions Braquinho.
Chinese brands are proactively addressing this perception through generous warranty offerings. Recently, GAC Motors became the first in South Africa to offer a lifetime engine warranty.
Resale value is a vital factor for consumers, and De Siena acknowledges that this has historically posed a challenge for Chinese brands, although trends are shifting.
“Purchasing a Toyota typically ensures a solid return upon resale or trade-in, while Chinese vehicles have depreciated more rapidly compared to established brands. However, as demand for Chinese vehicles rises, resale values are beginning to recover, enabling customers to incur fewer losses upon resale, thereby increasing the attractiveness of Chinese cars.”
Electric Vehicles
Meanwhile, China continues to gain ground in the global electric vehicle arena. According to data from the China Association of Automobile Manufacturing, total EV output in China reached 8.3 million units in the first nine months of 2024, reflecting a 31.7% increase from the previous year. Moreover, the country’s EV exports hit 111,000 units in September, marking a 0.9% increase from the prior month and a 15.6% year-on-year rise.
In February, the Alliance for American Manufacturing warned that low-cost Chinese EVs entering the US market could constitute an “extinction-level event” for the American auto industry. In reaction, the Biden administration escalated its tariff on Chinese-made EVs from 25% to 100%, citing “extensive subsidies and non-market practices.” The EU mirrored this move in October by raising tariffs up to 45.3%.
BYD Auto, China’s leading EV manufacturer, entered the South African market last year and introduced the Dolphin model this year at R539,900, making it the most affordable EV available in the country.
The South African government has indicated its intention to promote local electric vehicle manufacturing. Currently, a 25% tariff applies to EV imports. However, Braquinho notes that “demand for purely electric vehicles is limited at present,” with importers facing numerous obstacles, including inadequate charging infrastructure and an unstable power supply due to frequent load shedding.
Braquinho foresees modest penetration of the EV market for Chinese and other manufacturers.
“Diesel remains the preferred fuel for 99% of bakkies [pickup trucks], and for valid reasons. It’s widely accessible, provides high power density, and performs consistently with proper maintenance. Chinese manufacturers are recognizing that the market leans towards diesel vehicles,” he elaborates.
Breaking into the Premium Segment
Another potential growth area may be the premium vehicle market. Breaking into this sector, which emphasizes features and brand prestige over price, could present a significant challenge for Chinese automakers.
A similar situation unfolded when Korean automakers entered the South African market in the mid-1990s. Brands such as Kia and Hyundai initially offered budget-friendly vehicles but gradually increased their prices as they built a solid reputation for quality.
Today, Kia and Hyundai manufacturers cars that exceed the million-rand mark and maintain a strong customer base in the country.
“Chinese brands may encounter additional obstacles when trying to penetrate the premium vehicle market, which typically demands unique features, specifications, and elevated brand prestige,” concludes Cohen.
