Man holding gray steel frame
Image: Rob Lambert via Unsplash

Technological upgrade along the automotive value chain in South Africa

Sector-specific insights into the adoption of automation and digital production technologies

By Guendalina Anzolin

Adopting new technologies is crucial for productivity and economic growth; specifically, the recent focus on automation and digital production technologies (ADPT) offers the potential for significant benefits at both the firm and the country level.1 Despite the potential for technology upgrade, the adoption of ADPT adoption is uneven due to variations in cost, skills availability and organizational capabilities across countries.

Adopting ADPT faces particular challenges in emerging economies, since most firms are squeezed between developing foundational capabilities and integrating into global value chains (GVCs), which may require more advanced technology.2 To better understand this dilemma and provide grounded policy implications, it is important to look at technology adoption at the sectoral, firm and technology levels, as each of these shapes technology adoption along GVCs.

A relevant case for these industrial development pathways is the South African automotive sector, which has been part of the productive structure of the country for a long time, and which has successfully integrated into GVCs since the end of the apartheid regime in 1994. The findings here are based on multiple site visits and 39 interviews with key informants across six of the seven final assemblers present in the country, and 12 suppliers of various commodities.3

The automotive value chain in South Africa

Across both industrialised and emerging economies, the automotive industry played (and still plays) a pivotal role in driving economic growth and technological advancement. The sector is characterised by long and dispersed GVCs, where original equipment manufacturers (OEMs) play a key role in setting design and production specifications, and where inputs and intermediate goods are provided by both mega suppliers4 and smaller (local) suppliers. Small suppliers, in particular, have very little autonomy and must comply with demands – both on product and process – from further down the value chain.5

The South African automotive sector is relatively small from a global perspective, accounting for less than 0.7% of global vehicle output, but it is crucial to the national economy, contributing 4.9% to GDP in 2023 (down from 6.9% in 2019). The value chain in South Africa is notably OEM-centric, with such actors commanding a major share of value addition and maintaining strong control over suppliers.6 Despite numerous policy efforts to restructure the industry towards higher local content and value addition, mainly through expanding component manufacture at the local level, the sector remains heavily reliant on imported technology, foreign ownership (Figure 1), and by a lack of diversified local production (Figure 2).7 This dependency on foreign technology has persisted over time, underscoring the challenges of integrating into the global market while striving to develop local capabilities and innovation.

SA overall new vehicle market share (2019) & SA top automotive components export by value (2018)

Sources: Author’s own elaboration based on automotive industry export council (SARS data).

The adoption of automation and digital technologies

Drivers of ADPT adoption

Four main drivers of ADPT adoption were identified by key informants in South Africa’s automotive sector.

Volume – the number of vehicles to be produced – was unanimously reported as a crucial driver of ADPT adoption. For suppliers, which are more financially constrained than OEMs, this was the single most relevant driver, and was also identified as a bottleneck when there wasn’t the “right” volume of parts (and thus of vehicles demanded by OEMs). This confirms a strong link between technology adoption and scale.

Second, ADPT are adopted when firms need to upgrade the quality of their operations in ways that cannot be done manually. This might be the case, for example, in improving scrap rates and precision.

Third, ergonomics and safety are important drivers of technology adoption. These are strictly related to reorganisation at the shop-floor level, and they tend to be more common in Japanese OEMs and suppliers.8

Finally, the introduction of new materials may necessitate the adoption of new technologies. For example, one supplier had to invest in a laser welding robot because of the introduction of a new, lighter metal that is more heat sensitive, and therefore difficult to weld with older technologies.

Drivers for the adoption of ADPT differ along different segments of the value chain. For example, OEMs are largely driven by internal decisions, directed by their international headquarters in Germany, Japan and the United States. In contrast, suppliers’ adoption choices tend to be dictated by OEM requirements but are constrained by the high costs of technology acquisition and integration, including hardware, software and training expenses. The latter is relevant for an economy like South Africa’s, where there are no national OEMs and suppliers form the focus for development.

Some policy implications

Two key policy recommendations emerge from the firm-level work conducted in South Africa. First, when designing policies for technology adoption, it is important to acknowledge that some digital production technologies may be more critical than others; for example, in the current South African automotive sector, automation machines, industrial robots and programmable logic controllers (PLCs) may be more relevant (i.e., they have greater scope for increasing productivity) than 3D printing and AI. Second, policies targeting technology adoption need to address the specific gaps and bottlenecks – financial, technological, organisational or skill-related – that apply to the firm, the sector, and even the specific GVC structure.


  • Guendalina Anzolin is Research Associate at the Institute for Manufacturing at the University of Cambridge. 

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

Read next