Exports and foreign investment in the South African motor industry have been growing rapidly. The Motor Industry Development Program (MIDP) has been a crucial factor underlying this performance. Although recent success has attracted considerable attention, questions are being raised about the future of the industry, its dependence on government assisstance, and whether and how the MIDP should be extended after 2007. Answering these questions is important not just for the motor industry, but als for South Africa's overall industrial development. This paper analyzes the complex incentives provided by the MIDP, and discusses some of their likely economic implications. It also examines systemic issues arising from the use of such incentive mechanisms.