SKD phasing-out signals significant shift for automotive industry

By Siyabonga Mthembu The announcement by the Minister of Trade, Industry and Competition, Parks Tau, that South Africa will phase out existing Semi-Knock-Down (SKD) operations and no longer support new facilities, while excluding medium and heavy commercial vehicles, is an important and necessary step.

This is because future automotive investment in South Africa must deliver more than assembly activity.

It must also deepen local manufacturing, strengthen domestic supply chains and deliver measurable outcomes in production, localisation, employment, transformation, exports and long-term investment.

Our research supports this direction.

Completely Knocked Down (CKD) manufacturing creates far greater value for South Africa than SKD assembly because it supports component manufacturing, tooling, logistics, technical capability and supplier development.

Without clear progression requirements, SKD operations risk remaining dependent on imported kits, with limited benefits for local content and jobs.

Strengthening the definition of CKD manufacturing, closing incentive loopholes and linking support to firm localisation commitments will be critical.

New entrants must contribute to long-term industrial depth, not only short-term assembly volumes.

The timing of this announcement is significant.

South Africa’s automotive production remains below the trajectory set out in the South African Automotive Masterplan, while local content remains well below the 60% target for 2035.

Imported vehicles and components continue to gain market share, established Original Equipment Manufacturers (OEMs) are under growing pressure, and component manufacturers are dealing with lower volumes, rising operating costs and infrastructure constraints.

This is particularly concerning for automotive hubs such as Nelson Mandela Bay and East London, where manufacturing supports a much wider ecosystem of suppliers, logistics businesses, retailers, training institutions and service providers.

The impact also extends well beyond vehicle assembly.

South Africa’s automotive aftermarket was estimated at approximately R197 billion in 2025, supported about 317 000 direct jobs and included roughly 23 000 employers, around 80% of which were small, medium and micro enterprises.