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Chinese Cars Gain Popularity in South Africa: The Blend of Technology, Value, and Opportunity

If you’ve recently noticed cars with unfamiliar logos on South Africa’s streets, there’s a good chance they belong to one of the growing Chinese car brands making waves in the local market. These vehicles, once unfamiliar to many South Africans, are now quickly gaining recognition and popularity.

Chinese carmakers like Haval and Chery are becoming increasingly competitive in the mid-range market, where cars are priced below R600,000 (around $33,000). These brands have successfully penetrated the “crossover SUV” category, which consists of compact family cars. According to South Africa’s Automotive Business Council, both brands were among the top 10 in new car sales in this category during the first half of 2024. They have also made their mark in the more expensive SUV segment, with Haval being the best-selling brand and Chery the third-best seller between January and November 2023.

Why Are Chinese Cars So Popular?

Analysts attribute the growing success of Chinese cars in South Africa to two main factors: affordability and perceived quality.

Ciro De Siena, a journalist at Cars.co.za, believes Chinese cars offer unmatched value. “The value proposition with them is just so, so good, so superior to legacy automakers. Chinese brands have a different strategy. The cars come fully loaded… and the technology is great,” he says. De Siena explains that, unlike traditional carmakers who charge extra for features like panoramic roofs or 360-degree cameras, many Chinese vehicles include these as standard.

Lance Braquinho, another auto journalist and expert, highlights how much Chinese cars have improved since their early days in the South African market. “Some of the products are very good now,” he says, recalling how, in 2008, Chinese cars were not up to global standards. However, he observed how Chinese engineers quickly learned from benchmarks like Tesla and German brands, raising their game significantly. Braquinho notes that Chinese automakers have become particularly strong in software integration, a growing necessity in modern cars, which need to connect seamlessly with apps and smartphones.

The Impact of Price on Consumer Choices

Chinese cars first entered the South African market in the late 2000s, following a period of economic growth. However, many manufacturers left during the global financial crisis. In recent years, they’ve made a strong comeback, offering vehicles at prices that appeal to increasingly budget-conscious consumers.

De Siena explains that the shift in South African buying habits has worked in the favor of Chinese brands. Historically, car buyers were loyal to prestigious brands like BMW and Audi. But rising living costs, inflation, and skyrocketing car prices have led many to prioritize affordability over brand loyalty. “The Chinese are offering what feels and looks like quality products at a much more affordable price,” says De Siena.

Brandon Cohen, chairperson of the National Automobile Dealers Association, agrees that affordability plays a significant role. “South African middle-class buyers increasingly look for options under R300,000, and with ongoing economic challenges, the appeal of accessible pricing from Chinese brands is particularly strong,” he says.

Challenges for Chinese Car Brands

Despite their growing popularity, Chinese automakers face several challenges in South Africa. One of the main hurdles is the high import tariffs imposed on vehicles. Light vehicles from China face a 25% tariff, while those from the European Union are taxed at a lower rate of 18%, thanks to a preferential trade agreement. This creates an uneven playing field, making Chinese brands less competitive compared to their European counterparts.

One way to bypass these tariffs is by setting up local manufacturing plants. Some companies have already taken steps in this direction. In 2018, BAIC, a Chinese car manufacturer, partnered with South Africa’s Industrial Development Corporation to launch a factory in Gqeberha (formerly Port Elizabeth). The plant was built at a cost of R11 billion ($604.3 million), making it one of China’s largest investments outside Europe. However, the plant has produced only 300 vehicles since its opening, compared to Ford’s Silverton assembly plant in Pretoria, which produces 720 vehicles daily.

Other global manufacturers like Volkswagen, Stellantis, and Nissan have also invested heavily in South African plants, underscoring the need for long-term commitment and substantial investment to make local manufacturing viable.

The African Market Opportunity

For Chinese carmakers, South Africa could serve as a gateway to the broader African market. While local production may be costly, exporting vehicles to other African countries could make the investment worthwhile. Currently, South Africa-based manufacturers export to regions such as the U.S., Europe, and the Middle East, as well as other parts of Africa.

De Siena believes the African market is key to future growth, especially for internal combustion engine (ICE) vehicles. With the global shift toward electric vehicles (EVs), demand for ICE cars is declining in developed markets like Europe and the U.S. South Africa, however, has been slow to adapt its factories for EV production due to high costs. This makes Africa an attractive market for traditional car models.

“The business play would be to get a foothold in South Africa, sell as many cars as possible, and then start building and exporting into Africa,” De Siena explains.

Reliability and Resale Value

One potential barrier for Chinese car brands is the perception of unreliability. Since these vehicles are relatively new to the South African market, their long-term performance and durability remain largely untested, particularly in a country known for long driving distances and uneven road conditions.

Braquinho points out that the real test will come once these cars exceed 80,000 kilometers and begin to require heavy maintenance. “When the heavy maintenance cycle starts… you will need specialised parts. If you don’t have it, people will start to hate you because their cars might be out of commission for weeks, or even months,” he says.

To address this, Chinese brands are offering generous warranty packages. For instance, GAC Motors recently introduced a lifetime engine warranty in South Africa, a first in the market.

Resale value is another area where Chinese brands have historically struggled. Vehicles from established brands like Toyota tend to hold their value well, while Chinese cars have depreciated faster in the past. However, this trend is changing as demand for Chinese cars increases, gradually boosting their resale value.

The Future of Electric Vehicles in South Africa

Chinese automakers are also making strides in the global electric vehicle market. For example, BYD Auto, the world’s largest EV manufacturer, entered South Africa last year and recently launched the Dolphin model, the country’s cheapest EV at R539,900.

However, the South African EV market remains small, primarily due to high import tariffs, limited charging infrastructure, and the ongoing issue of load shedding. While the government has shown interest in incentivizing local EV production, Braquinho believes demand for EVs will remain low in the short term.

Moving Upmarket

Another potential avenue for growth is the premium vehicle segment. This would require Chinese brands to transition from their current value-oriented approach to offering higher-end, luxury vehicles.

This trajectory mirrors the success of Korean brands like Kia and Hyundai, which entered South Africa as budget options in the 1990s but have since established themselves as reputable mid-range and even premium brands.

Cohen, however, believes this will be a tougher challenge. “Chinese brands may face greater challenges in penetrating the premium vehicle segment, which typically values unique differentiators, specifications, and brand prestige,” he says.

Conclusion

Chinese automakers are reshaping South Africa’s automotive landscape, offering a compelling mix of affordability, technology, and improved quality. While they face challenges such as tariffs, public perception, and competition, their growing market share suggests they are here to stay. Whether through local manufacturing, tapping into Africa’s potential, or entering the premium segment, Chinese car brands are poised to drive further growth and innovation in South Africa’s auto market.

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