By Renai Moothilal, CEO, NAACAM
Carbon rules are reshaping global trade, and automotive component manufacturers must adapt or risk falling behind. Interim results from a new NAACAM-led readiness study reveal both the urgency and the opportunity: While many firms are already taking meaningful steps to decarbonise, sustained progress will require greater coordination, clearer guidance, and accessible finance. With the right support, the sector can lead in low-carbon manufacturing.
Across global markets original-equipment manufacturers (OEMs), investors, and customers are setting higher expectations for transparency, efficiency, and sustainability. For South Africa’s automotive component manufacturers this shift is not a threat, but a strategic opportunity, because manufacturers that can demonstrate low-carbon practices are increasingly viewed as more competitive, resilient, and future-ready.
Whether it is Scope 3 tracking, environmental, social, and governance (ESG)-linked procurement, or climate disclosure requirements, the pressure to decarbonise is coming less from government regulation and more from supply chain expectations: Buyers are expecting suppliers to measure and report their emissions and to demonstrate progress on reducing their environmental impact. Lenders and institutional investors are channeling funds towards companies with robust sustainability plans. In this context carbon performance is no longer a niche compliance concern, but is fast becoming a critical factor in maintaining and growing market share.
Fortunately, South African manufacturers are not starting from scratch. Recent findings from a NAACAM-led carbon readiness study, conducted in partnership with Nedbank Commercial Banking, show that many local firms have already begun laying the groundwork.
More than half of those surveyed reported having some kind of sustainability plan in place. Many are installing rooftop solar power to cut their Scope 1 (direct) and Scope 2 (utility) emissions and improve energy resilience. Others are launching internal audits to assess where emissions are generated and what can be done to address them.
It is clear that there is an awareness that early action brings real benefits. Companies that start now will be better equipped to respond to buyer requirements, access green finance, and secure long-term contracts. Some are already exploring the use of alternative materials, such as green steel, to prepare for a future where emission intensity may influence procurement decisions as much as cost and quality do.
That future is approaching fast. While green steel carries a premium today, that cost is expected to decline sharply over the next few years. By 2030 green steel may cost no more than conventional steel. When that happens, the advantage will lie with manufacturers who have already adapted their processes and supply chains. Those who wait may find themselves locked out of high-value markets, not because of price, but because of policy and performance gaps.
The good news is that South Africa has strong fundamentals. The country has a well-established and globally integrated automotive component industry. We have growing expertise in renewable energy and the potential to become a major player in green hydrogen production. These factors make it possible – with the right policy and financial support – to position South Africa as a leader in low-carbon, high-quality manufacturing.
But to do that there are structural issues to address. First, is the need for standardised emission reporting frameworks. Currently different OEMs, buyers and even countries use different criteria, making it difficult for smaller manufacturers to know what data to collect or how to report it. Without shared benchmarks, some firms may find themselves excluded from the conversation altogether.
Second, is better support for mid-tier manufacturers. While initiatives such as the Department of Trade, Industry and Competition (dtic)-administered Automotive Investment Scheme offer some assistance, there is no dedicated programme to help companies decarbonise their inputs, upgrade systems, or build emission reporting capacity. This leaves many of NAACAM’s members, particularly those below the carbon tax threshold, carrying transition costs with little support.
Third, is the carbon intensity of South Africa’s electricity grid. Even the most efficient manufacturer is penalised by the fact that most of the country’s power still comes from coal. Until the energy mix changes, South African exports will carry a built-in carbon cost that competitors in other countries may not face.
Finally, it is important to recognise that many businesses are still under significant financial pressure. Reduced vehicle production volumes, rising input costs, and global economic uncertainty have left firms in a state of strategic triage. For many the question is not how we decarbonise, but rather how we stay in business. That is why decarbonisation must be made practical, affordable, and aligned with broader competitiveness objectives.
Despite these challenges, the opportunity remains significant. South Africa has a chance to become a preferred supplier in future value chains, not by mimicking others, but by building a model of clean industrialisation tailored to our strengths. That includes expanding renewable energy adoption, developing regional battery value chains, and using trade policy to support localisation and sustainability.
What is needed now is clarity and coordination, moving the sector beyond strategy documents and into concrete implementation plans. More financial institutions must design green finance instruments that are accessible to industrial small and medium enterprises and not just to large corporates. Buyers must offer transparency and support to help their suppliers prepare. And, as a sector, we must continue sharing insights, scaling solutions, and working together to close the readiness gap.
Readiness is the entry ticket to tomorrow’s markets. Many of the tools already exist. What is needed is alignment. Because if South Africa gets this right, domestic manufacturers will not just survive, but thrive. Cleaner, more efficient production is not just good for climate outcomes. It is good business. And the time to act is now.
This and other matters impacting the South African automotive component sector will be unpacked at the biennial NAACAM SHOW 2025, hosted in partnership with the Automotive Industry Development Centre Eastern Cape (AIDC-EC) in Gqeberha on 13 and 14 August 2025. For more information or to book your seat please visit https://naacam.org.za/naacam-show-2025/.