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Buffalo City business leaders have urged the national government to intensify negotiations with the Trump administration over punitive US automotive tariffs, warning that prolonged uncertainty could place further strain on the Eastern Cape’s already struggling vehicle manufacturing sector.
The US government imposed a 25% tariff on South African vehicle exports, along with a broader 30% tariff on goods, a move that reportedly contributed to Mercedes-Benz temporarily suspending its assembly line operations in KuGompo City.
In February, the US Supreme Court invalidated parts of the tariff system, reducing SA’s general tariff rate from 30% to 10%, while maintaining the 25% levy on vehicle exports.
Addressing trade, industry & competition deputy minister Zuko Godlimpi in Quigney on Tuesday, Border-Kei Business Chamber executive Lizelle Maurice questioned whether the national government had abandoned efforts to further reduce the automotive tariffs.
Maurice said the local automotive sector had previously pushed for the tariffs to be reduced to 15% so South African plants could compete on equal footing with European manufacturers.
“Towards the end of last year, the tariffs really impacted our automotive industry in particular,” Maurice said.
“At the time, the tariffs were 30%, and we were trying to negotiate so that they could be reduced.
“The industry wanted them brought down to 15%, because European plants are operating at that level and we are competing against those countries.”
We need to be very wise when engaging with the Chinese market
She said Buffalo City remained heavily dependent on the automotive industry across multiple levels of the economy.
“East London itself is very reliant on the automotive sector in the various tiers as well,” she said.
Maurice also warned against what she described as an over-reliance on the Chinese market, saying the government needed to ensure negotiations protected local industry interests.
“We need to be very wise when engaging with the Chinese market,” she said.
Godlimpi’s Eastern Cape oversight visit concluded on Wednesday with a tour of the East London Industrial Development Zone.
During the visit, which included industrial parks in Mthatha and Dimbaza, Godlimpi said the government’s objective was to build “a vibrant industrial economy so that its citizens can get jobs”.
He confirmed the government remained in negotiations with Chinese automotive manufacturers to potentially share unused production capacity at the Mercedes-Benz plant in KuGompo City.
“We are working tirelessly on the Mercedes-Benz question to try to bring other OEMs to the table that could jointly operate in that setting with Mercedes-Benz,” he said.
“Because our intention is to secure the value chain. We want to keep it alive.”
Godlimpi said discussions had already taken place with several Chinese manufacturers, including Chery, though previous plans shifted after Nissan exited its Pretoria plant.
“We’re still in talks with Mercedes to try and get someone else to co-occupy with them,” he said.
He also highlighted investment in the Mercedes-Benz plant, saying it had been developed to support significantly higher production volumes.
“We built that plant for 270,000 units per annum. Now it has been operating below 100,000 for a while, and that has depressed the performance of the region,” he said.
“Our intention is to push production as far as possible towards that 270,000 target.”
Godlimpi said stabilising the automotive sector remained critical to protecting jobs and the broader regional economy.
Eastern Cape premier Oscar Mabuyane confirmed that discussions were taking place around a possible multi-production arrangement at the Mercedes-Benz facility.
“Mercedes-Benz is negotiating with other business counterparts,” Mabuyane said on the sidelines of the Africa Agricultural Indaba at the ICC on Wednesday.
“I think they’ve accepted the principle of the multi-production system that they are opting for, where they will be able to create space available for others.
“But it’s a business arrangement and we would want to leave it there.
“It’s between Mercedes-Benz and the companies they are negotiating with. We are just aware that such discussions are taking place.”
It was previously reported that Mercedes-Benz South Africa had been in discussions with Great Wall Motors and Geely over possible co-manufacturing arrangements or sharing idle production capacity at the Buffalo City plant.
Mercedes-Benz recently announced that Taryn Woodbridge would assume the role of chief executive on June 1.
She succeeds Andreas Brand, who is moving into a global supply chain role at Mercedes-Benz AG in Stuttgart, Germany.
Woodbridge has spent more than two decades at Mercedes-Benz South Africa and served nearly four years as chief financial officer.
Daily Dispatch
Mandilakhe Kwababana
www.businessday.co.za