The production of the thousands of components which make up a vehicle comprise the heart of the automotive industry. All host country governments seek to promote greater levels of localisation of parts production. These efforts have a long history in South Africa (SA). The recently announced South African Automotive Masterplan (SAAM) sets ambitious targets in this respect, aiming to raise local content to 60% by 2035. This would represent a substantial increase on current levels of local content which are below 40%.
The SA automotive value chain is currently largely concentrated around OEMs (original equipment manufacturers i.e. vehicle assemblers) and their Tier 1 suppliers, with Tier 2 and 3 activity significantly underdeveloped. This is represented schematically in the figure below. Of the total value addition in the South African auto value chain, it is estimated that 40% is produced by the multinational OEMs, 40% by Tier 1 component manufacturers and only 20% by upstream firms. Such concentration also suggests the industry is structured like an island, with OEM and Tier 1 activity weakly connected to the rest of the domestic economy.