Economic analysis of the impact of policy reforms on the South African automobile industry

After years of intense protection, the South African automobile industry has undergone major policy reforms. This paper investigates the impact of policy reforms on the welfare of consumers, producers and society as a whole. The results of the simulation analysis indicate that, following the removal of domestic content requirements and reduction in tariffs, there has been significant reduction in consumer welfare loss and societal deadweight loss in the automobile industry, while tariff revenue to the South African government has significantly decreased. The results demonstrate that further reduction in tariffs on completely built-up units and completely knocked-down units is likely to result in further reduction in efficiency loss, thus leading to an improvement in the performance of South Africa’s automobile industry