Latest / Drive with John Perlman / Agoa's departure jeopardizes the car sector

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Agoa's departure jeopardizes the car sector · Drive with John Perlman

• 0:01
  Speaker 1: You're with John Pullman on 702.
• 0:03
  Speaker 2: Let's walk the talk. Right, let's focus our attention on
• 0:09
  Speaker 2: yesterday's big diplomatic news, big economic news as well. I
• 0:14
  Speaker 2: think it's fair to say South Africa no longer stands
• 0:17
  Speaker 2: to benefit from preferential access to American markets via the
• 0:21
  Speaker 2: African Growth and Opportunity Act. This will affect all sorts
• 0:25
  Speaker 2: of sectors of the economy. But what will the impact
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  Speaker 2: be on the motoring industry? Dr. Pauline Mamou-Khobo is the
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  Speaker 2: chief economist at NAMSA, the National Association of Automobile Manufacturers
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  Speaker 2: of South Africa.
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  Speaker 1: Dr.
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  Speaker 2: Mamahobo, welcome and thanks very much for giving us your
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  Speaker 2: time on 702 Drive. I know that our manufacturers of
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  Speaker 2: cars and other vehicles were already facing tariff pressure. Does
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  Speaker 2: AGOA make this significantly worse? Good afternoon to you.
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  Speaker 1: Good afternoon, John, and thank you so much for having
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  Speaker 1: us always. Interestingly, like you mentioned, that our automotive industry,
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  Speaker 1: particularly in the U.S. market, was already suffering the 25
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  Speaker 1: percent tariffs imposed by the Section 232 tariffs that was
• 1:13
  Speaker 1: actually imposed last year in 2025. So, of course, by
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  Speaker 1: virtue of that, we'd already lost significant competitiveness and access
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  Speaker 1: in the U.S. market. actually dropping full year by 84%.
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  Speaker 1: So with the announcement that came through last night and
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  Speaker 1: the removal of SA from AGOA, it does not necessarily
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  Speaker 1: have a significant impact. But of course, the impact then
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  Speaker 1: emerges by virtue of America still remaining an important market
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  Speaker 1: for us and to say, having actually been the second
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  Speaker 1: largest trading partner for us, it would have been important
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  Speaker 1: for us to see that by leveraging AGOA, could we
• 1:51
  Speaker 1: improve our U.S. and S.A. relations to be able to
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  Speaker 1: continue to trade with that market in particular.
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  Speaker 2: So what have we been making that we've been selling
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  Speaker 2: in the U.S.? Is it spread fairly wide across the
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  Speaker 2: entire industry or has it been particular firms that have
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  Speaker 2: found important niches?
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  Speaker 1: We've been making premium cars going into the U.S. in particular,
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  Speaker 1: passenger premium cars. And that actually accounted for almost 10
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  Speaker 1: percent of our export revenue in 2024, around about 26
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  Speaker 1: billion rands. So, of course, that also focuses largely on vehicles.
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  Speaker 1: But when we consider our components as well that continue
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  Speaker 1: to go into that market, it also has a significant impact.
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  Speaker 1: So interestingly to mention, of course, premium vehicles that we
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  Speaker 1: are making, passenger vehicles, would be made by particular brands
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  Speaker 1: in the domestic market. So the impact of losing that market,
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  Speaker 1: of course, then trickles down into the bottom line of
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  Speaker 1: those OEMs. So, of course, it has remained quite a
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  Speaker 1: significant market. But as the automotive industry, we have been
• 2:55
  Speaker 1: able to diversify, seeing that even with that impact, we've
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  Speaker 1: tried to see where do we send vehicles as well
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  Speaker 1: and how do we also sustain still some presence in
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  Speaker 1: the North American region, sending vehicles to markets like Canada.
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  Speaker 2: I want to ask this. I mean, there is a
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  Speaker 2: bit of a cliche, and it's often not true, but
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  Speaker 2: one door closes and another one opens. Is there an
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  Speaker 2: opportunity created by the fact that we no longer get
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  Speaker 2: the AGOA benefit to return and engage with the United
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  Speaker 2: States and say, okay, now that we're not getting that preference,
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  Speaker 2: can we look again at the 25% tariff, or is
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  Speaker 2: that door closed and bolted shut?
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  Speaker 1: So we have been working through business constituency as well
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  Speaker 1: to continue to knock on that door because, as mentioned earlier,
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  Speaker 1: America remains a significant market for us. We did acknowledge that,
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  Speaker 1: of course, Section 232 imposes that 25% tariff. But because
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  Speaker 1: we've seen examples of markets like the UK and the
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  Speaker 1: European Union actually being able to negotiate and get a
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  Speaker 1: tariff of around about 15%, meaning that they have 10%
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  Speaker 1: advantage over us. We have been trying to say, can
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  Speaker 1: we also look at having a culture of vehicles that
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  Speaker 1: are continuing to go into that market? Of course, we
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  Speaker 1: still have the 60-day period of negotiations that will be ongoing,
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  Speaker 1: but we keep our fingers crossed. To your point, when
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  Speaker 1: one door closes, maybe another opens. South Africa has an export,
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  Speaker 1: autos in particular, export-led industries. export markets remain quite significant.
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  Speaker 1: So sending cars to 109 markets, we've already continued to say,
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  Speaker 1: where do we leverage? Should maybe the door in the
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  Speaker 1: American market close quite fully? Like I said, Canada has
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  Speaker 1: opened up a market for us quite significantly. And for
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  Speaker 1: the North American region, we're hopeful that we'll be able
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  Speaker 1: to grow in that regard.
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  Speaker 2: Let's stay with the point you just made, Dr. Mamoukhobo,
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  Speaker 2: about Canada. I mean, and I suppose I'm sort of
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  Speaker 2: desperately looking for upside here, but if the United States
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  Speaker 2: was taking a significant number of high-end, presumably left-hand drive vehicles,
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  Speaker 2: was there ever interest being shown by, for example, countries
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  Speaker 2: like Canada, who were saying, boy, we'd like to get
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  Speaker 2: a piece of that particular action, and we were unable
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  Speaker 2: to supply because so much of it was going to
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  Speaker 2: the US. In other words, Does this create surplus around
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  Speaker 2: which there is already prior interest?
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  Speaker 1: So we have always been trading with Canada. And I
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  Speaker 1: think for us, it's a midst of all these globalization shifts.
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  Speaker 1: There has been increased appetite because, you know, under the U.S.,
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  Speaker 1: Canada and Mexico agreements, Canada has also actually looked at
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  Speaker 1: having other trade relations with markets like the EU, unlike Mexico, where,
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  Speaker 1: as an example, they imposed the 50% tariffs on non-FTA countries.
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  Speaker 1: So there has always been that interest. But to your
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  Speaker 1: point in terms of volumes, at the moment, we send
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  Speaker 1: year-to-date figures around about a third of what we've been
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  Speaker 1: sending to the US in a good year like 2024.
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  Speaker 1: So in terms of surplus, Of course, the volumes that
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  Speaker 1: we're sending to the US by virtue of the abroad
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  Speaker 1: market has been more significant. But we're looking at, can
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  Speaker 1: we leverage markets like Canada to say, can we start
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  Speaker 1: growing and increasing those volumes therein? So it's a different
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  Speaker 1: world altogether, we must admit. But we are hopeful that
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  Speaker 1: we will be able to still have that footprint in
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  Speaker 1: the North American region while we look at what relations
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  Speaker 1: we can restore with a market like the US.
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  Speaker 2: And finally, Dr. Mamakoba, I mean, the component manufacturers and
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  Speaker 2: allied producers have their own umbrella organization, but clearly you'll
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  Speaker 2: know substantially what each of you are actually doing. Are
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  Speaker 2: the component manufacturers very much dependent on producing for vehicles
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  Speaker 2: that then find their way into the U.S.
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  Speaker 1: Market?
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  Speaker 2: Or have some of them had their own relationships with
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  Speaker 2: U.S.-based car companies for whom they might be providing leather seats,
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  Speaker 2: for example?
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  Speaker 1: So when we have conversations with our counterparts in the
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  Speaker 1: component automotive association, NACIM, to be precise, We do have
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  Speaker 1: some companies that have continued to sort of supply the U.S. market,
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  Speaker 1: but of course they have also been lamenting the impact
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  Speaker 1: of the 25% tariff. But important to mention, when I
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  Speaker 1: mentioned 109 markets that we're sending, that's vehicles. When we
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  Speaker 1: combine it with components, we send to 154 markets in particular,
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  Speaker 1: meaning that they also are looking at which other markets
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  Speaker 1: can they actually be supplying into. Because, of course, business
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  Speaker 1: continuity becomes quite crucial. And especially the industrial investment that
• 7:57
  Speaker 1: has been made in South Africa needs to be sustained
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  Speaker 1: by virtue of market access as well.
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  Speaker 2: Thank you so much. Very, very comprehensive picture painted for
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  Speaker 2: us by my guest. We thank her for her time. Dr.
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  Speaker 2: Paulina Mamuchobo is the chief economist at the automobile manufacturer's
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  Speaker 2: umbrella body known as NAMSA. 27 minutes past five.