[Letter] Motor industry needs more than subsidies

President Cyril Ramaphosa’s statement at the recent Auto Week conference that the government is committed to supporting SA’s motor industry is a welcome signal (“Ramaphosa commits to supporting SA motor industry”, October 17).

The industry’s contribution to GDP, job creation and adding value in various sub-sectors, and its potential for further growth, are well documented. However, the solutions to the sector’s substantial domestic and global challenges lie not in subsidies and tariffs (which is probably the path the government will continue to walk).

Assuming more consumers switch to electric vehicles, subsidies and other forms of support for production of these vehicles (and traditional ones) run the substantial risk of being used by recipient companies to only account for and plug the extra costs imposed when network industries (electricity and logistics especially) are not effectively managed by the government.

Value-add by subsidies is therefore lost. Coupled with SA’s capital- and job-deterring labour legislation, all the subsidies in the world will not assist or capacitate existing players in the motor industry. The extra protection they are afforded by tariffs also means the industry as a whole doesn’t receive the (often) harsh signals it needs to become competitive and innovative on a global level.

Targeted, well-timed and harshly calculated subsidies for crucial sectors can be a welcome boost to domestic manufacturing. But in the absence of real reform in network industries, only vested interests and large, established players will benefit. 

Letter originally appeared here: https://www.businesslive.co.za/bd/opinion/letters/2024-10-24-letter-motor-industry-needs-more-than-subsidies/