Mercedes weighs partners for South Africa plant as US levies hit

Mercedes-Benz Group AG is considering allowing a rival to share its South African plant after the US ended a key trade pact, a move that has raised questions over the viability of the plant, according to people familiar with the matter.

The luxury carmaker has exported the C-Class sedan from South Africa to the US since 1997, taking advantage of the African Growth and Opportunity Act, which eliminated tariffs on cars imported from the country. That changed when the Trump administration imposed a 30% duty on imports from the nation, upending the economics of the site in the South African city of East London.

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While options include closing the facility, Mercedes is reluctant to do so after spending about €600 million ($640 million) to modernise the factory in 2022, one of the people said, asking not to be identified as the discussions are private. The automaker has also built up a supply chain in the region, and executives value the plant’s 2 400-strong workforce.

To avoid costly overcapacity, one option under discussion is bringing in another carmaker to share the facility, the people said. The existing production line could accommodate another brand with relative ease, though the second company would need to set up its own body shop — the part of the factory where vehicle structures are welded, assembled and prepared for painting.

Mercedes said it continually assess the competitiveness and sustainability of its plant network.

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“These evaluations are ongoing and form part of routine strategic discussions within Mercedes-Benz,” a company spokesman said. “No decision has been taken regarding the future of the East London manufacturing plant.”

The C-Class is a comparatively low-margin model for Mercedes, especially when measured against the larger S-Class sedan and the high-performance AMG models the company exports from Europe.

In the US, Mercedes also builds its larger SUVs in Alabama and is shifting production of the GLC sport utility vehicle to that state, making South Africa’s role in the automaker’s global footprint even more vulnerable.

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The tariffs are also weighing heavily on Mercedes in the US, a crucial market for its most lucrative models. Unit sales in North America fell 12% in the second quarter of 2025, contributing to a 9% global drop in deliveries, according to a company statement.

Exports of Mercedes’ passenger cars from South Africa plunged 48% to 3 950 in August, according to the Automotive Business Council.

Introduced during the Clinton administration, Agoa was designed to support the economies of sub-Saharan Africa and improve trade ties with the US.

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Its suspension has raised fresh concerns about the viability of South Africa’s export-driven auto sector, which counts Mercedes, BMW AG and Volkswagen AG among its largest investors and employers.

© 2025 Bloomberg

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