Developing the South African Auto Industry: Lead Firm Sourcing Strategies and Local Productive Capabilities

The South African automotive industry has become integrated with the global value chains of the locally active foreign vehicle assemblers over the last 30 years. Exports, production volumes and absolute levels of domestic value added have gone up, but relative levels of local content have declined. This working paper takes a deeper empirical look at the sourcing strategies of the assemblers governing the global value chains on the one hand, and at the domestic component manufacturing base on the other hand. The empirical data stems from more than 50 semi-structured interviews conducted throughout 2021 with assemblers, large multinational component firms with subsidiaries in South Africa, local component manufacturers, policy makers and industry experts. The paper provides a thorough understanding of the sourcing strategies of automotive lead firms, and how they enable and constrain the extent of local value addition in component and materials production, and thereby the multiplier of having the industry in the country. Through a mapping of locally owned component manufacturers, it provides novel data that can complement quantitative indicators like absolute and relative local content data. The paper then discusses the set of structural, policy-related, market-dependent and capability-related issues that local component suppliers face with regard to deepening local value addition. Eventually, we argue that only by combining an understanding of lead firms’ sourcing strategies and local component suppliers’ perspectives is a proper assessment of obstacles and opportunities for localisation possible.