Mahindra & Mahindra Ltd. is set to expand capacity at its South African assembly plant by two-thirds, targeting rising demand for budget vehicles in the continent’s largest economy. The facility, located near the port city of Durban, currently produces the Mahindra Pik-Up and will see output rise to 1,500 units a month from 900, according to Rajesh Gupta, CEO of the local unit. The company is also considering assembling additional models such as the Bolero and Veero pick-ups.

Economic stagnation in South Africa has fuelled demand for more affordable cars, with Mahindra, Suzuki Motor Corp., and China’s Chery Automobile Co. seeing sales growth, while luxury brands like Mercedes-Benz and BMW have suffered declines or stagnation. The average selling price of cars in South Africa has fallen 2.3 per cent over the past two years to 490,478 rand (about Rs 2.30 million), even as annual inflation averaged 4.5 per cent.

Mercedes-Benz, which produced 70,000 vehicles in East London last year, has been hit hard by US tariffs, cutting shifts and shedding 700 jobs before the levies eroded American demand. Gupta suggested that while tariffs disrupt global trade, they could be a “blessing in disguise” for strengthening ties between South Africa and India.

Mahindra’s pick-ups are now among the top four in South Africa, with compound annual growth of 22 per cent since 2019, compared with a 3.1 per cent decline in the broader market. The Durban plant, Mahindra’s largest outside India since opening in 2018, has become popular with local farmers and is also used by police in neighbouring Mozambique.

The expansion is expected to generate around 100 direct jobs, providing a rare boost for President Cyril Ramaphosa’s administration as it grapples with the impact of US tariffs on exports, including agricultural goods. Tata Motors has also entered the mid-market space, partnering with Motus Holdings Ltd. to distribute its vehicles in South Africa.

More than a third of vehicles sold in South Africa originate from India or China, prompting the government to push for greater local manufacturing. Mahindra, which owns luxury EV maker Automobili Pininfarina, also plans to introduce its BE 6 and XEV 9e electric vehicles to the market. Gupta said the company is exploring an upgrade from semi-knocked-down assembly to completely-knocked-down production at the Durban plant.