The important South African city that could be crushed by the United States

The Mercedes-Benz plant contributes significantly to the city’s jobs and broader economy, and a potential shutdown or exit could spell disaster for the region.

The German automaker’s operations are under threat due to a looming 30% tariff from the United States on certain South African exports, effective from Friday, 1 August 2025. 

This new tariff follows a 25% tariff on the auto sector implemented in April, and builds on an existing 10% universal levy on all exports at the same time.

The move has created a hostile environment for South African manufacturers that rely on access to the US market. The automotive industry is among the hardest hit.

According to the National Association of Automobile Manufacturers of South Africa (Naamsa), vehicle exports to the US dropped by a staggering 82% in the first half of 2025.

Only 2,875 vehicles were shipped to the US between January and June, compared to over 16,000 in the same period last year. Nearly all of these were C-Class models built at the Mercedes-Benz facility in East London.

The East London plant, located along the Buffalo River, has been operational since 1962 and was for many years Mercedes-Benz’s flagship quality-control site outside of Germany. 

It is also one of the few plants globally that produces the luxury C-Class for export markets. The factory currently employs 2,400 people and manufactured 70,000 vehicles as of 2024.

Additionally, it was reported in 2023 that MBSA and its suppliers are estimated to contribute around 25% to East London’s economy.

Acting Eastern Cape Premier Mlungisi Mvoko warned that the future of Mercedes-Benz in South Africa is now uncertain. 

“You cannot imagine East London without Mercedes-Benz. MBSA exports almost 90% of their cars to the US. In our interaction with them, they said that, given these tariffs, it would be difficult,” Mvoko said.

He added that the company had indicated it might need to rethink its operations in the country entirely.

Thousands of jobs on the line

The factory’s temporary closure from 24 June to 31 July 2025, which was an annual non-production period based on production programme adjustments, has already offered a glimpse of the potential impact. 

According to the National Union of Metalworkers of South Africa (Numsa), the shutdown triggered short-time work at over 26 companies in the Eastern Cape, underlining the plant’s role as the heartbeat of a far-reaching supply chain.

Mercedes-Benz is known for its heavy investment in R&D and innovation, and its facility in East London has historically benefited from this. 

The German carmaker has invested over R13 billion in the local factory to build the latest C-Class model.

Lizelle Maurice, executive director of the Border-Kei Chamber of Business, expressedconcern that the local economy would not withstand a prolonged or permanent decline in MBSA’s output. 

“Everyone is waiting with bated breath to see the impact of the trade tariffs. We are hoping that Mercedes-Benz is exploring other markets,” she said.

Denise van Huyssteen, CEO of the Nelson Mandela Bay Business Chamber, added the uncertainty surrounding US-South Africa trade relations is already causing anxiety among business leaders. 

“These OEMs are responsible for creating well over 100,000 jobs at their own operations and within their components supplier networks,” she said. 

“The knock-on employment impact results in over 500,000 formal jobs across the entire automotive supply chain.”

She added that the impact goes well beyond vehicle production and component manufacturing. 

“The economic ecosystem around CKD (complete knocked-down) manufacturing extends into everything from logistics, office supplies, and cleaning services to banking, maintenance, and security,” she said. 

“Even sectors like tourism, hospitality, real estate, and education benefit from the ripple effects of a strong local manufacturing base.”

If Mercedes-Benz reduces or ends its operations in the city, it could trigger a downward spiral for a region already grappling with high unemployment and limited alternative sources of economic activity.

BusinessTech reached out to Mercedes-Benz for comment on the potential impact of the US tariffs, but the company did not respond by the time of publication. 

However, MBSA confirmed to the Daily Maverick that production at the East London plant would resume on Thursday, as previously scheduled.

Issued on BusinessTech by Malcolm Liberia | https://businesstech.co.za/news/business/833536/the-important-south-african-city-that-could-be-crushed-by-the-united-states/