The Eastern Cape government is in urgent talks with Mercedes-Benz SA and prospective foreign investors to secure additional tenants for idle production lines at the company’s East London plant.
This comes as concerns mount over job security and the long-term future of one of the Eastern Cape’s largest industrial hubs.
SA was hit with 30% tariffs by the US on August 1 — a move likely to have far-reaching consequences for the Eastern Cape.
Among the four original equipment manufacturers in the province, MBSA is the most exposed to US tariffs with the export of its C-Class.
Attempts to negotiate better trade deals by SA failed, resulting in US President Donald Trump’s tariffs taking effect last week, creating uncertainty in the automotive and agricultural industries.
Premier Oscar Mabuyane said the government was working to revive a multi-OEM manufacturing model, allowing other carmakers — including Chinese giants such as Chery — to produce vehicles using MBSA’s infrastructure.
He was speaking during a wide-ranging interview on Monday.
“We are introducing the concept into discussions of a multi-OEM model,” he said.
“You would understand at some point that when Mercedes was called Nash [Distributors Assembly], there were a lot of products that were manufactured there, such as Chrysler and others on the same production line.”
He said in the past decade, Mercedes-Benz SA invested about R10bn to expand the capacity of its East London plant.
However, he said the state-of-the-art facility stood idle, despite being fully equipped with the latest technology.
“So you needed to get other companies.”
Mabuyane said the government and Mercedes-Benz SA were engaging with Asian companies interested in investing in the province.
“Those are technical decisions that we cannot speak recklessly about.”
High-level talks with international investors and Mercedes-Benz SA’s German leadership are expected to intensify later in August.
“We are meeting the leadership towards the end of this month,” Mabuyane said.
“We are meeting a couple of other potential investors, like Chery and others, who are looking to invest in SA.
“Chery is looking at producing about five models in SA, and so we are looking at those options.
“That is how we can save the situation.”
Mercedes-Benz SA halted production for six weeks in June and July, a planned pause that was later extended as part of broader efforts to adjust overall output volumes.
SA vehicle exports to the US have dropped more than 80% — from 16,112 to 2,875 units — in the first half of the year, compared with 2024 after Trump imposed a 25% tariff on vehicles imported into the US in April.
Almost 90% of Mercedes exports are to the US.
Mercedes-Benz SA corporate affairs general manager Thato Mntambo said the company’s 67-year history in the country demonstrated its commitment to running a sustainable business in SA.
“Our valued stakeholders, suppliers, employees, customers and partners are here,” Mntambo said.
“We wish to clarify that as a part of our global business approach, we regularly assess our operations to ensure long-term sustainability and competitiveness.
“These assessments are part of ongoing internal processes.
“This includes the continuous evaluation of our structures and operations ...
“These evaluations are ongoing and form part of regular strategic discussions within the Mercedes-Benz Group AG.
“No decision has been made on the future of the East London manufacturing plant.
“To avoid speculation, we encourage stakeholders to rely on official company communications for accurate and up-to-date information.”
Chery SA marketing manager Verene Petersen did not respond to questions by the time of publication.
Mabuyane said the 30% tariffs came at a time when the country was grappling with the transition from combustion engines to electric vehicles.
“SA was still grappling with that as a developing economy competing with first-world economies such as China and Europe.
“So we were still grappling with that to protect what we have and try to incentivise, and you needed more money from the government as part of an incentive to create a conducive environment for the transition.”
Mabuyane said he had warned in 2024 that, should Trump win the elections, tariffs would be imposed.
“There’s been this negotiation, trade-offs and all that with them [US government], but my feeling is that the US hasn’t been negotiating in good faith,” he said.
“Listening to national ministers, we’ve been bending over backwards, perpetually, trying to accommodate them, but this was not reciprocal, or mutual negotiation where we are treated equally or seriously by our trading partner.”
The tariff disruptions have placed huge pressure on many businesses in the province.
Jendamark Automation managing director Siegfried Lokotsch said the company had lost contracts worth R750m overnight, according to City Press.
The company is a manufacturer of automated assembly lines and production software for global automotive giants such as Ford, BMW, Volkswagen and Mercedes-Benz.
Mabuyane said the situation now unfolding in the province was painful.
“I will be embarking on a global roadshow talking to investors so that we don’t get investors simply because they were not happy in Johannesburg, we get investors directly from their own countries of origin.”
He said it might seem only the Eastern Cape would suffer from the tariffs, but Gauteng and KwaZulu-Natal would also feel the situation.
On the Goodyear SA plant closing in Kariega, he said the government had tried its best to keep it open.
More than 900 direct jobs are on the line.
“I must indicate that these are international companies, so their investment decisions are not based on local or national economies of scale.
“So they look at their investment at a global level, but also how they treat matters that relate to investment are always very discreet and sensitive until they are sure about their final decision.
“It became clear that it is actually out of their serious global evaluation. It’s not only in SA.
“We did all that we could.
“I know very well, both national and provincial, we were looking at all we could offer to incentivise them to continue but it became clear that whatever we could do was not sustainable.”
He said there was also the aggressive encroachment by the Asian market — bringing in finished goods played a role.
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