South Africa intends to phase out semi-knockdown (SKD) vehicle assembly in its auto sector, says Trade, Industry and Competition Minister Parks Tau, delivering a speech on behalf of President Cyril Ramaphosa.

Speaking at the South African Auto Week, held in Durban earlier this month, he said government would no longer provide policy support for any new SKD facilities in the country.

Companies such as BAIC and Mahindra have SKD facilities in South Africa. The country also has six completely knockdown (CKD) manufacturers, with Chery set to join their ranks as number seven.

The decision on SKD assembly comes as government is busy reviewing the second iteration of its Automotive Production Development Programme (APDP2), in consultation with naamsa | the Automotive Business Council, the National Association of Automotive and Component and Allied Manufacturers (NAACAM) and organised labour.

Tau added that government’s plans around SKD assembly would exclude medium and heavy trucks.

“We will work to strengthen the legal definitions around what we determine as CKD manufacturing.”

CKD manufacturing has a high local parts content, while SKD has a much lower local parts content.

With SKD assembly, the major parts typically arrive pre-assembled (such as the painted body, engine and cockpit), and local workers perform only the final steps, such as fitting wheels, seats, bumpers and/or electronics.

“We have agreed that the strategic competitiveness of South Africa’s ladder-frame light commercial vehicle [bakkie] segment warrants formal investigation,” added Tau.

“There was also alignment that any additional protection should be accompanied by reciprocal commitments relating to production, localisation, employment, transformation, exports and investment.

“I will be instructing the International Trade Administration Commission of South Africa (Itac) to undertake this investigation to reach a final determination on the matter,” noted Tau.

Itac provides technical advice to the Department of Trade, Industry and Competition (dtic) on fair trade “through the efficient and effective administration of trade instruments”. These include import duties.

During his address, Tau acknowledged that the local auto sector was currently at the biggest turning point in its existence, with the way that vehicles are powered, built, owned and used all changing at once.

He also indicated that the manufacturing of new-energy vehicles (NEVs – hybrids and battery electric vehicles), South Africa’s Critical Minerals Beneficiation Strategy, as well as the country’s commitment to carbon emission targets, were all key focus areas in placing the local sector on a path to success through the APDP review.

“If we do not build the vehicles that markets such as Europe and the UK will buy, we will lose those [export] markets, and with them our plants and our jobs.

“At home, in the first seven months of this year, South Africans bought almost as many NEVs as in the whole of last year.”

“The automotive industry is where the beneficiation strategy meets our reindustrialisation programme,” added Tau.

“Every NEV sold today will one day reach the end of its life, and so will its battery.

“Government has begun work on an end-of-life vehicle policy, as part of the decarbonisation pathway in our Industrial Development Strategy.

“Recycling batteries and giving them a second life is a new industry in its own right. South Africa intends to build it from the start.”