Production Volumes, Localisation, and Technological Upgrading: South Africa in the Global Automotive Value Chain

Despite several decades of commitment by the South African government to foster industrialisation through the automotive sector, results in terms of local supply chain development, increasing value addition in relative terms and technological spillovers in the industry and in the rest of the economy have been disappointing. This chapter illustrates the combined findings from almost 100 interviews collected between 2016 and 2022 across different segments of the automotive sector in South Africa, with specific reference to localisation of automotive manufacturing and technology adoption. Such interviews revealed that volume, understood as the number of cars produced in the country, and here specifically the production volumes per vehicle model, play a critical role for both deeper localisation and further technology adoption. In other words, further localisation and upgrading of domestic suppliers, as well as technology localisation and domestic investment in technology, are constrained by the fact that vehicle assembly volumes are not higher than 600,000 cars per year. Indeed, South Africa is a unique case both for its geographical position, far from major markets, and for the lack of a domestic/regional market that could be attractive for higher volume production. This chapter illustrates the playing field a remote country without strong regional economic dynamics and a growing domestic market like South Africa finds itself in when engaging with the automotive GVC. Ultimately, by engaging with South Africa’s auto policy decisions and development trajectory, the chapter discusses existing structural constraints and available policy options to overcome them.