South Africa Shifts Auto Policy: No More SKD Support

South Africa is implementing a significant policy shift for its automotive industry, ending support for the import of near-complete vehicles for local assembly. Trade Minister Parks Tau announced that existing semi-knocked-down (SKD) operations will be phased out, and new facilities of this nature will not receive policy backing.

The government's strategy, outlined in the South African Automotive Master Plan, aims to increase local content to 60% from the current 38%, double employment, and raise the country's global vehicle output share to 1% by 2035.

This new policy framework will not affect medium and heavy commercial vehicles. Additionally, the definition of complete knock-down (CKD) manufacturing, which involves building vehicles from a wider range of locally sourced parts, will be tightened.

Minister Tau also indicated an investigation into further support for the "ladder-frame" light commercial vehicle segment, which includes pickup trucks. This review, to be conducted by the International Trade Administration Commission (ITAC), will assess potential additional protection measures.

The government is collaborating with industry bodies like NAAMSA and NAACAM, as well as organized labor, to refine the Automotive Production and Development Programme. This review comes after industry calls to close the perceived SKD "loophole," which some argue allows duty-free imports without substantial local investment or job creation.

Automaker executives have supported this direction, with calls to phase out SKD operations and bolster CKD competitiveness for a more balanced industry structure. The focus is on ensuring reciprocal commitments for production, localization, employment, and investment alongside any protection measures.