Mercedes-Benz is contemplating significant changes at its South African plant following the end of a crucial trade agreement with the United States. This decision has sparked concerns regarding the future viability of the facility, according to sources close to the situation.
The luxury car manufacturer has been exporting its C-Class sedan from South Africa to the US since 1997, capitalising on the African Growth and Opportunity Act (AGOA), which previously eliminated tariffs on imported vehicles. However, the landscape shifted dramatically when the Trump administration imposed a 30% duty on imports from South Africa, complicating the economics of the East London site.
While one option on the table is to close the facility, Mercedes-Benz is hesitant to take this step, having invested around €600 million (approximately $640 million) to modernise the factory in 2022. The company has also developed a robust supply chain in the region, and the plant employs a workforce of 2,400, making it a valuable asset.
To manage potential overcapacity, discussions are underway about the possibility of another car manufacturer sharing the facility. The existing production line could accommodate an additional brand with relative ease, although the new company would need to establish its own body shop for vehicle assembly and painting.
Mercedes-Benz stated that it regularly evaluates the competitiveness and sustainability of its manufacturing network. A company spokesperson confirmed that these assessments are part of ongoing strategic discussions, and no final decisions have been made regarding the future of the East London plant.
The C-Class model is considered a lower-margin vehicle for Mercedes, particularly in comparison to the more profitable S-Class sedan and high-performance AMG models produced in Europe. In addition, Mercedes has shifted production of larger SUVs to its facility in Alabama, further diminishing the role of South Africa in the company’s global operations.
The tariffs have impacted Mercedes significantly in the US, a vital market for its most lucrative offerings. In the second quarter of 2025, unit sales in North America fell by 12%, contributing to a global decline of 9% in deliveries.
Exports of Mercedes passenger cars from South Africa saw a dramatic decline of 48%, dropping to 3,950 units in August, as reported by the Automotive Business Council. The suspension of AGOA, which aimed to bolster the economies of sub-Saharan Africa and enhance trade relations with the US, has raised new concerns about the sustainability of South Africa’s export-driven automotive sector, which includes major players like Mercedes, BMW, and Volkswagen as significant investors and employers.