Chinese SUVs are big in SA - but govt urged to protect local manufacturers

Government has been urged to protect local manufacturers against increasing Chinese car imports as the country's vehicles continue to gain popularity in South Africa.

Brands like Chery, Great Wall Motors (GWM) and Beijing Automobile International Corporation (BAIC) SA have started to disrupt the local car market, with sales of their Tiggo 4, Jolion and X55 models outpacing some traditional manufacturers.

As they struggle with the high cost of living, consumers have turned to these cheaper Chinese imports for luxury SUVs in particular.

According to the South African automotive business council, Naamsa, SUV sales for Chery and Haval have resulted in both brands regularly being featured in the top six for passenger vehicle sales in 2024, only behind Toyota, Volkswagen, and Suzuki.

GWM entered the SA market in 2007 and introduced its Haval range in 2017 with the H2 and H7 Coupé models. Currently, the brand offers the Haval Jolion and H6 models, which sold more than 5 700 units between January and June this year.

This year, 6 102 units of Chery's Tiggo 4 model were sold between January and June, while sales for the Tiggo 7 and Tiggo 8 reached 1 295 and 1 030, respectively. The brand has also recently released its Oomada and Jaecoo J7 luxury SUV ranges.

Chery spokesperson Verene Peterson said the Tiggo 4 has become the company's "volume driver" and it's currently the second-best-selling SUV in the country. "Tiggo 7 and Tiggo 8 have been well received in their respective segments, but we would like to see them gain the same segment recognition as Tiggo 4 has done."



Affordable

Peterson said the success of the Tiggo range is due to its high-value proposition and after-sale promise compared to competitors, as well as its 10-year and 1 million-km engine warranties. With the increasing popularity and demand for its models, Peterson has also said the brand is looking into building a factory in South Africa in the future.

This would make it only the second Chinese car company to assemble locally, besides BAIC. "Feasibility studies are underway and a decision will be made once more insights are available on the topic," she said.

Chinese government-owned BAIC opened its factory in the Coega Special Economic Zone in the Eastern Cape in 2018. BAIC sold nearly 1 000 of its X55 SUVs between January and June this year. The model is also set for an "eyelift" later this year.

Mikel Mabasa, CEO of Naamsa, said a weakening economic climate has pushed South African customers to more affordable brands from China and India.

"Customers are under a lot of pressure and have less disposable income because of the economic climate in the country, including rising interest rates and the general cost of living [...]. As a result, when people want to buy a new car, they end up looking at cheaper options on the market that still have all the frills [of a luxury car]. Chinese brands and other new disruptors have been successful in offering competitive vehicles with features you would traditionally get from [more expensive] luxury vehicles."

He added: "The brands that have been disrupting the market have been very strategic to identify customers who did not want to focus on luxury only, but customers who were middle-income earners who wanted practical vehicles with improved safety and advanced technological amenities.

However, Mabasa said while there are positives to take away from the aggressive competition in the luxury SUV car market, there is no clear indication that there will be a fundamental shift away from the popularity of traditional car brands.

"The traditional brands are not sleeping on the job; they are carefully watching these trends and they are responding accordingly. They are equally innovating and improving their value proposition to their customers, many of whom are brand-loyal customers. One thing about South African customers is that they are brand loyal. A person who drives and who has been driving a German car for the longest time will continue to buy that specific German brand, irrespective of what other vehicles are introduced in the country."



Protecting local manufacturers

Mabasa said with the increasing popularity of Chinese car imports, there was a need to protect and improve the sustainability of the local automotive market and long-standing investments by traditional car brands.

"We have companies that have invested in South Africa for more than 100 years and they have supported our industrialisation story and they have helped us to create meaningful jobs [and support families]. We have a collective duty to protect them and to make sure they continue to invest in our country's growth," he said.

This year, the US and the European Union announced their intentions to implement tariffs against Chinese EVs to support their domestic EV industries' development and manufacturing capabilities.

The US said it would increase tariffs against EVs by 100%, while EU tariffs are expected to be between 17.4% and 38.1%.



Remains to be seen

In June, Turkey announced that it would impose a 40% duty of at least US$7 000 (R127 598) levied on all cars imported from China after it had already implemented a tariff against its EV vehicles the previous year.

Mabasa says the SA government has already "fired its first warning bullet" when the industry met with former department of trade, industry and competition minister, Ebrahim Patel before the elections in May. He said that Patel had expressed concern about the growing disruption of Chinese brands within the SA market.

"It remains to be seen how the new [dtic] minister Parks Tau will posture on this topic when we meet with him soon. We cannot afford to be silent on this topic because Chinese imports increased by 243.5% between 2019 and 2023 and growing," he said.

"Every market that produces vehicles has a responsibility and a duty to insulate and protect their own manufacturing base. If you look at the Chinese incentive programmes and how they are protecting their own local manufacturing companies in that country, you can clearly see that their government has made a very deliberate decision to make sure that those brands are actually protected, and are able to thrive and be globally competitive," he said.

He added: "South Africa is a leading manufacturer of fully-built vehicles and components in Africa and we should have conversations about how we should also protect our local base. It is our collective mission to make sure that we work with the government so that we don't lose the manufacturing and industrialisation of the automotive sector in the country."



Local economy

He said vehicle manufacturing contributed 5.3% to the GDP last year and contributes 21.9% to the country's manufacturing output.

"And we want to see that contribution grow even further beyond the next five years or so."

Mabasa said the trade protections on Chinese vehicles would also increase the likelihood of these brands establishing manufacturing and assembly to benefit the local economy and "level the playing field.

"If the Chinese are serious about South Africa, they should not just import their brands into South Africa. [Instead] they must come and establish their manufacturing and assembly plants locally to benefit our people, our local economy and support the country's industrialisation journey. This should be the trade-off, and we should not compromise because it will help us level the playing field."

Toyota, Ford and Volkswagen are among eight OEMs located in SA.

Dutch-headquarter Stellantis – which manufactures Alfa Romeo, Chrysler, Fiat, Jeep, Opel and Peugeot, among other brands – is the latest entrant. It recently announced that it would invest R3 billion, along with the Industrial Development Corporation, for a factory in Coega.

It will produce an estimated 50 000 units per year.