OVERVIEW In 2020, the broader South African automotive industry’s contribution to the gross domestic product (GDP) stood at 4,9% (2,8% manufacturing and 2,1% retail), down from 6,4% in 2019, reflecting the severe impact of COVID-19 on automotive manufacturing and retail because of the country’s lockdown restrictions during the year. As the largest manufacturing sector in the country’s economy, a substantial 18,7% of value-addition within the domestic manufacturing output was derived from vehicle and automotive component manufacturing activity, continuing to position the industry and its broader value chain as a key player within South Africa’s industrialization landscape. South Africa’s global vehicle production ranking is 22nd with a 0.58% vehicle production market share.  The South African automotive industry’s growth strategies have been focused on becoming highly integrated into the global automotive environment on the back of increased foreign direct investment and trade. Under the South African Automotive Masterplan (SAAM) 2021-2035, the objective is to produce 1% of global vehicle production, or 1,4 million vehicles, per annum in South Africa by 2035 which will substantially improve the country’s status and global vehicle production ranking. The automotive industry therefore represents an increasingly important strategic and catalytic role in the overall South African economy by impacting directly on many important economic policy goals, such as contribution to GDP, employment, skills development, economic linkages, technology, and innovation. The South African automotive industry incorporates the manufacture, distribution, servicing, and maintenance of motor vehicles and components. Original equipment manufacturers (OEMs), official dealers, and repair specialists work closely together to provide maintenance and repair services.  They cooperate to ensure warranty service, driver safety, environmental protection, spare parts availability, and information about technical improvements. Automotive Policy The Automotive Production Development Program (APDP) replaced the export-oriented Motor Industry Development Program in 2013 with the aim of stimulating local production of automotive components while maintaining the incentives for OEMs to manufacture passenger cars and light commercial vehicles in the country for export and the local market.  One of the attractions of South Africa’s automotive policy over the past two decades has been its long-term vision and consistency.  The APDP has reinforced policy certainty, which is critical for the industry to make long-term investment decisions.  The APDP’s focus is on raising local value addition to enhance the automotive industry’s manufacturing output and export competitiveness.  The automotive sector relies heavily on the additional economies of scale provided by exports and competitiveness is critical to its success. The growth in variety of vehicles in South Africa is a direct result of government’s automotive policy regime whereby manufacturers earn duty credits with which they can cost-effectively import other low volume models not manufactured in the country. Imports of automotive products into South Africa remain a function of the success of the APDP, domestic market demand, and currency movements. Under the APDP, the level of imports remains a function of the success of the program, as the benefits can only be used to rebate the import duties on vehicles and eligible automotive components that are imported. Imports of vehicles to complement the domestic market mix, imports of original equipment components not sourced in South Africa, as well as replacement parts imports for a vehicle parc of 12,70 million vehicles at the end of 2020, remained high. Market Trends The global pandemic rocked the world to its very foundations, and ultimately there are no easy solutions to reigniting COVID-19 affected economies, with South Africa no exception to this. The economic scars of the crisis are profound, and the South African economy experienced its deepest economic contraction in a century, with the country’s GDP slumping to -7,0% in 2020. It seems indisputable that the first and further waves of the pandemic, the country’s lockdown restrictions, and whatever will come after that will have a lasting and devastating impact on South Africa’s economy and its automotive industry. What promised to be a high point for the domestic automotive industry in 2020, with the APDP reaching the peak of its eight-year path, was annihilated by the global pandemic. COVID-19 has also resulted in the postponement of the South African automotive industry’s journey to 2035 under the South African Automotive Masterplan (SAAM) by six months, from 1 January 2021 to 1 July 2021. Much of the South African automotive industry’s recovery will depend on the recovery of its main trading partners and the pace at which the lockdown measures are phased out, considering that well over 60% of the country’s vehicle production is exported. In 2020, passenger car imports comprised 75,7%, and light commercial vehicles 15,3% of total light vehicles sold in South Africa. The country’s consumers benefit from access to a wide variety of new models and a highly competitive pricing environment as new vehicle demand in the country is met by a range of imported and domestically manufactured vehicles. Top five countries (in order of import value) of origin for vehicles and automotive component imports into South Africa include: Germany, Thailand, Japan, China, and the USA.  The countries of origin for vehicles and automotive components imported into South Africa generally reflect the global linkages with the head offices of parent companies. The notable exceptions amongst the top countries of origin in 2020 were Thailand, where over 80% of imports comprised original equipment components for light commercial vehicles, and China, where over 70% of the imports comprised aftermarket parts. Several top U.S automotive component suppliers are represented in South Africa, including Johnson Controls, Lear, TRW Automotive, Tenneco, Federal Mogul, Delphi, Visteon, and ArvinMeritor, amongst others.  All these companies have built strong business links between their South African operations and other international stakeholders.  These established business links enhance the potential for mutually beneficial trade between the United States of America and South Africa. Aftermarket The independent aftermarket is responsible for the manufacturing and sales of automotive replacement parts and accessories through independent retailers and repair shops directly to the consumer, rather than to the OEMs themselves. The aftermarket also re-manufactures, distributes, retails, and installs motor vehicle parts and products, other than the original equipment components. The

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