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Market Entry
U.S. firms entering this market must contend with a typically mature and competitive market. The interests of American automotive corporations are well represented in South Africa. Ford Motor Company is one of the long established, leading U.S. automotive producing corporations in South Africa. Moreover, most of the top American automotive parts suppliers are represented in South Africa, including Johnson Controls, Lear, TRW Automotive, Tenneco, Federal Mogul, Delphi, Visteon, and ArvinMeritor, amongst others. All of these companies have built strong business links between their South African operations and other international stakeholders, including the United States. These established business links enhance the potential for mutually beneficial trade between the United States and South Africa.
Under the African Growth and Opportunities Act (AGOA) trade in automotive products between the United States and South Africa has grown substantially in recent years as American consumers benefit from the reduced import duties while imports of vehicles, original equipment components as well as replacement parts into South Africa have also increased substantially. The trade balance in automotive products, however, remains substantially in favor of South Africa. The United States has become one of South Africa’s biggest automotive export destinations and constitutes South Africa’s second largest automotive trading partner after Germany (total automotive export value and ranking by country).
There are considerable mutual benefits to be derived from two-way trade in vehicles and components,
for both the U.S. and South Africa. Moreover, growing two-way trade contributes positively to sustaining employment in the U.S. supplier and vehicle manufacturing industries, as well as that in South Africa and sub-Saharan African countries. The South African automotive industry is increasingly involved in regional integration and the building of capacity in other African countries. Both the U.S. and countries involved under AGOA have the potential of generating significant economic benefits from trade as AGOA countries continue to develop, modernize and industrialize.
South Africa’s free trade agreements with the European Union, the European Free Trade Area (EFTA), the Southern African Development Community (SADC) as well as the African Growth and Opportunity Act (AGOA) with the USA and the preferential trade agreement with Mercosur, enable the country to position itself as the privileged link between these regions and Africa.
Due to South Africa’s preferential arrangements with other countries, U.S. companies often face a disadvantage when exporting their products to South Africa, and many U.S. companies have cited differential tariffs as an impediment to doing business in South Africa.
Barriers
MArket Entry