Mercedes-Benz faces closure threat in East London

The city of East London, renamed KuGompo City earlier this year, faces a potential crisis as Mercedes-Benz South Africa weighs the future of its local manufacturing site.

History and scale of the operation

The Eastern Cape facility has operated since 1948 and is one of the country’s oldest industrial plants. Mercedes began production there in 1962, establishing it as a legacy manufacturer alongside Toyota, Volkswagen, Ford, Isuzu, and BMW. Today, the plant produces the C-Class sedan and employs approximately 2,400 people. In 2024, the factory assembled 70,000 vehicles. The facility is not merely a factory but a central pillar of the city’s identity, where the brand has been synonymous with local industry for over six decades.

Mercedes-Benz South Africa and its suppliers contribute an estimated 25% to the local economy. A reduction in operations would ripple through thousands of workers and businesses connected to the factory, rather than affecting just the plant itself. The economic impact extends far beyond the factory gates, as the supplier network relies heavily on the stability provided by the primary OEM.

Trade barriers and export shifts

A significant portion of Mercedes’ sales previously went to the United States. However, the Trump administration imposed a 30% tariff on South African imports in 2025, and the US government recently excluded the country from the African Growth and Opportunity Act (AGOA). AGOA had provided preferential market access to American buyers. This exclusion removes a key layer of protection that previously allowed South African manufacturers to compete more effectively against rivals in other markets.

South Africa‘s automotive exports to the US fell 29% from R28.67 billion in 2024 to R20.43 billion in 2025. Direct component exports dropped by 12.8% to R3.86 billion. While analysts note that tariffs already reduced trade significantly, the loss of AGOA adds another layer of pressure to an industry that was already struggling. The combined effect of these trade measures creates a complex environment where maintaining profitability requires handling increasingly difficult regulatory and economic environments.

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East London relies heavily on these export channels. Acting Eastern Cape Premier Mlungisi Mvoko noted that MBSA exports nearly 90% of its cars to the US. He said that recent trade measures have made continued operations “difficult.” The Premier emphasized that the loss of the preferential trade status under AGOA compounds the challenges already presented by the 30% tariffs, creating a perfect storm for the manufacturer.

Broader industry challenges

Renai Moothilal, chief executive at the National Association of Automotive Component and Allied Manufacturers (NAACAM), highlighted the precarious position of component suppliers. He stated that losing AGOA adds a cost to an already struggling sector. NAACAM has recorded 15 company closures and more than 7,500 gross job losses among component manufacturers over the past three years. These closures reflect a broader trend where smaller suppliers struggle to absorb the rising costs associated with international trade barriers and shifting consumer preferences.

The company invested roughly €600 million in 2022 to upgrade and modernize the facility. Business Unity South Africa warned that the loss of AGOA’s preferential access could affect several thousand jobs in both agriculture and automotive manufacturing. Despite the significant capital expenditure in 2022, the recent trade policy changes threaten to negate the benefits of this modernization, casting doubt on the long-term viability of the investment.

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