Business Day

30 October 2026

A fortnight ago I reflected in this column on the South African Auto Week and the Paris Motor Show, which evoked a response from Tshetlhe Litheko, chief policy officer at motor industry body Naamsa. Some of his observations related to issues raised in the column, while others were ostensibly triggered by it, but all focused on whether the European destination market dependency of the local industry has created strategic vulnerabilities that policy ought to respond to.

Litheko makes three propositions:

• In accepting that changes in the European motor market expose us to external developments over which we have limited control, he encourages us to draw a distinction between reduced European demand and an appetite in Brussels to close its markets to South African manufactured vehicles. He suggests profitability and other challenges experienced by European carmakers do not translate to a narrowing of trade preferences under the bilateral relationship between Europe and Southern Africa.

• We need to distinguish the European impasse from policy considerations aimed at expanding the domestic market in a manner that widens the opportunity set for those who assemble locally for the South African market, Put simply. distinguish the existing margin of preference into the EU from a protective push (through tariffs) here at home to carve out a piece of demand for local manufacturers (making imports more expensive).

• The third concerns the “substitutability” of the European market for new markets. Whether in Africa (where he asserts low new vehicle affordability, funding. infrastructure and regulatory market failures make this difficult) or whether in relation to seeing Chinese motor activity “exclusively through the lens of import competition”. 

While I agree with Litheko on the point on Chinese trade, he understates the jitters being exhibited by the European mandarins in Brussels across product markets. He seems to suggest the bilateral agreements that give preference to South African assembled vehicles are inviolably durable.

Yet recent signals suggest this may not be the case. The introduction of an Article 28 process (to review preferences negotiated in the 19905 and introduce a 50% duty for steel products) and the early October read-out from a meeting between the EU trade commissioner and the Chinese trade minister earlier this month indicate a eurozone that is ready to reconsider its preferences.

To reassert the primacy of an export strategy that relies heavily on European sales without considering this context is a catechism rather than strategy. We cannot wish this away. nor. in the case of the domestic market, as Litheko suggests have a general aversion for tariffs save for bakkies.

To do so using the scarecrow of tariff enabled inefficiency overlooks the use of trade instruments as price normalisers, in instances where price formation is artificially distorted (due to subsidy enabled cutthroat price wars in key producer nations. for example). Nor are tariffs the proverbial blue pill. The aim is to provide well calibrated policy support to those who reveal a preference to assemble here at deepening levels of local content.

Thailand has announced an excise tax reform that provides cascading preference for those assembling in Thailand at higher levels of local content and relatively higher excise taxes for those importing fully built vehicles.

No instrument exhibits inherent deadweight losses. Economic theory informs us calibration and behavioural intent matter. While I may agree with Litheko that we need not abandon the relationships we’ve built with the eurozone, it is not a sufficient response when our “friends” consider. in the face of understandable diplomatic and geopolitical pressure in their own market. revising the preferences they afford us.

What to do when market conditions prompt others to reconsider their fidelity to you? We plan for such a likelihood today, rather than revert to hope or doctrine.

Ayabonga Cawe is chief commissioner at ITAC, he writes in his personal capacity.