How can small businesses enter the automotive supply chain?
Staff Reporter, 17 March 2026.
According to the University of Johannesburg, South Africa’s automotive value chain is dominated by Original Equipment Manufacturers (OEMs) and Tier 1 suppliers, who together account for approximately 80% of total value addition. Tier 2 and Tier 3 suppliers, where Small and Medium Enterprises (SMEs) usually operate, remain small, with little incorporation into the core production ecosystem. Local content levels are still below 40%, despite the South African Automotive Masterplan (SAAM) 2035’s target of 60% local content by 2035.
This brings to the fore the reality that there is significant room for SMEs to enter the supply chain, but to be considered, SMEs must meet strict quality, reliability, and compliance standards.
As we have come to know, the challenge is not lack of opportunity, but the all-important matter of readiness.
Where can SMEs realistically enter the supply chain?
There is clear understanding that SMEs do not need to manufacture engines or electronics to partake. The supply chain is broad, and with the right support in place, numerous entry points are accessible. Below are the key areas in which SMEs could actively participate.
1. Manufacturing and components
These are categories that already make up a large share of local content and are appropriate for SME to expand their operations in. These include metal pressings; plastic moulded parts; trim and upholstery; windscreens, filters, and discrete components; as well as wiring harness assembly.
2. Tooling and industrial services
These services are essential to OEMs and Tier 1 suppliers and are often outsourced. Among these are jigs, fixtures, and dies, Computer Numerical Control (CNC) machining, fabrication and welding, as well as maintenance and repair of production equipment.
3. Aftermarket and mobility services
The aftermarket alone accounts for billions in annual spending and is a fertile ground for SMEs to participate meaningfully. We can count diagnostics and repairs; auto-electrical services; tyres, batteries, and fitment; as well as panel beating and refinishing as some of the services that are readily accessible SMEs can easily provide.
4. Support services
These roles require operational excellence more than heavy capital investment. These include logistics and warehousing, cleaning and detailing, parts distribution, and quality inspection services.
Government’s role in opening supply chain access
Government is actively pushing for SME inclusion through SAAM 2035. This is a national strategy to increase local content, expand production, and deepen transformation. A core pillar is developing black-owned SMEs as Tier 2 and Tier 3 suppliers.
1. Regional value chain development
According to the United Nations Economic Commission for Africa, the Commission has called for stronger SME integration across Southern Africa’s automotive value chains, including harmonised rules of origin and supplier databases to link SMEs to OEMs. The Commission is a powerful proponent of SME integration and is actively pursuing member states to put in place necessary measures to achieve this objective.
2. Incentives and support programmes
The following interventions have been implemented to reduce barriers to entry and assist SMEs meet global standards.
- dtic localisation incentives
- SEDFA enterprise development
- MerSETA technical training
- Export readiness programmes
How can the private sector accelerate SME entry?
The reality is OEMs and Tier 1 suppliers hold the key to real market access. The impact is immediate when they partner with SMEs.
1. Supplier development programmes
Accelerators led by OEMs such as those operated by Toyota SA Motors provide mentorship, technical support, and procurement pathways for high potential SMEs.
2. Aftermarket enterprise development
This is a good entry point for SMEs and support is available. Industry bodies such as the Motor Industry Workshop Association of South Africa (MIWA), in partnership with insurers and SETAs, have funded and upgraded SME workshops, awarding up to R1 million to top-performing businesses to help them scale.
3. Franchising and network models
Franchises offer SMEs established brand credibility, technical training, access to parts and supply networks, and standardised operating systems. This greatly reduces overall risk and accelerates entry. Franchising remains a good model for new entries to learn the ropes.
4. Sustainable procurement and supplier databases
According to the United Nations Economic Commission for Africa, regional initiatives such as the Automotive Sustainable Supplier-Finder Database (ASSFiD) are being formulated to connect SMEs to OEM procurement needs.
What must SMEs do to become supply-chain ready?
Entering the automotive supply chain requires more than enthusiasm. SMEs must demonstrate capability, consistency, and compliance.
1. Meet quality and technical standards
Automotive suppliers must comply with ISO 9001, IATF 16949 (for manufacturing), and OEM specific quality requirements. Without these, it becomes almost impossible to access the otherwise available procurement opportunities.
2. Invest in skills and technology
SMEs must build technical expertise, digital diagnostic capability, production efficiency, as well as traceability and documentation systems. These are not open to discussion in automotive environments.
3. Strengthen operational discipline
OEMs expect punctual delivery, no defect production, reliable capacity, and documented processes. In this space, operational excellence is a competitive advantage.
4. Build financial and governance credibility
Funders and OEMs look for clean financials, strong governance, clear business plans, and suitable risk management systems. Over the year, it has become apparent that this is where an untold number of SMEs need support.
Bringing it all together
South Africa’s automotive industry is one of the country’s most advanced and globally integrated sectors, but it is also one where SMEs remain under‑represented, despite the enormous opportunities in manufacturing, components, servicing, aftermarket support, and mobility services. The real unlock lies in stronger partnerships between government and the private sector, creating a pipeline of viable, competitive small businesses that can plug into the automotive value chain.
Government and the private sector must make it their goal to help SMEs move from informal operations to bankable, competitive suppliers capable of meeting the demands of a world-class automotive sector.
The time is now!