Planning For The Worst

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Last year Q1 figures for car exports and if the stats are correct then all of these figures are down by 75% for this period. This is going to impact the bottom line and manufacturers will be questioning why are they even bothering with trying to do business in SA.

More news has trickled out with regard to Mercedes Benz in South Africa and the figures are worse than expected. The Mercedes plant in east London is currently shut down for the month from June 24th to July 30th. The National Union of Metal Workers South Africa said they are not worried and must be the only ones who are taking this lightly.

When we look at Mercedes figures for the first half of this year you start to wonder how long this can continue and pulling the plug permanently has to be the only solution. The newly imposed tariffs with the USA were not the main cause of this and have only just added fuel to the fire.

Last year in 2024 local car manufacturers exported 16,112 vehicles between January and June which Mercedes was the major exporter as very few other car manufacturers export from SA to the US. This year for the same period 2875 vehicles were exported resulting in an 84% decline. The first quarter was down 75% and the second quarter down a further 87% which would have been when the tariffs came into play. The decline was already happening and why this is not all about tariffs.

Mercedes has spoken to the local government in East London stating that 10% of production is for local consumption and the other 90% is for export to the US. The local government has travelled to Germany to discuss this issue with Mercedes trying to get them to stay and this will have no impact on a business decision. if the numbers are not there and the government is doing nothing about negotiating the tariffs then the factory has no choice, but to close it's doors.

The impact this will have on the East London region is unthinkable as there would be tens of thousands affected facing unemployment. The area would be a ghost town forcing everyone to seek work elsewhere even when there are no jobs elsewhere.

One has to wonder what the government plans to do as they have not been back after the first Trump meeting never went according to plan. Ramaphosa has another delegation being prepared except the leader of this delegation is now welcome either as he has previously made derogatory comments against Trump. talk about having a clue less idiot in charge as this speaks volumes about the standard of people they have to get this deal done.

This can easily be done and all it needs is some level head thinking with people who want to make it work. The other alternative is to reduce the taxes imposed on Mercedes and other exporters by 30% and with the weaker Rand the exporters will still remain on course. This is about saving the industry and economy whilst supporting your people by providing them with work. You are in power to look after your citizens and this should be the most important part of this deal.

This would also show foreign investors that the government is serious about doing business and this type of move would install more confidence in the economy. This we know will not happen as stealing the taxes is far more important knowing they will not likely be reelected in 2028/9 and the time is running out to fill their pockets. Who knows what state the economy will be in by then and if the government is not ousted before as the people in SA are not happy.

Another large factor that has not been mentioned is that only from 2026 will car manufacturers be offered a new tax incentive for producing “new-energy vehicles” which takes roughly 7 years for a new manufacturing model cycle. The manufacturing pants cannot wait this long and why this is no longer even feasible as a business for the future. SA is running out of time if they would like to stay relevant in the auto sector and the government is clearly holding everyone back.

Posted Using INLEO