Summary
- Growing competition from EVs in key markets cited as reason for sharp decline in South Africa’s vehicle exports
- Automotive industry contributes 5.3% to GDP and accounts for 21.9% of the country’s manufacturing output
- Export of vehicles and automotive components reached a record amount of R270.8 billion in 2023
- South Africa’s government announced a 150% tax deduction on investment in electric and hydrogen-powered vehicle production starting in 2026
- South Africa aims to increase the local component portion in vehicles to 60% by 2035, potentially positioning itself as a regional hub for EV manufacturing in Southern Africa and beyond.
Article
South Africa’s automotive industry faces challenges as competition from electric vehicles (EVs) in key markets has led to a decline in vehicle exports. Over 99% of vehicles manufactured in South Africa for export are traditional internal combustion engine (ICE) vehicles, while countries they export to are transitioning to electric vehicles. Factors such as low economic growth, stricter emission rules, and competition from cheaper electric vehicle imports from China have contributed to the decline in vehicle exports. In 2024, vehicle exports decreased by 22.8% compared to the previous year.
To address the growing competition in the global automotive market, South Africa needs to accelerate its transition to electric vehicles. Countries like the United Kingdom are increasing their adoption of EVs, with EVs making up a record share of new car registrations in 2024. South Africa recently announced a 150% tax deduction on investment in electric and hydrogen-powered vehicle production starting from 2026. The government aims to increase the local component share in vehicles manufactured in South Africa to 60% by 2035.
South Africa has the potential to position itself as a regional hub for the manufacturing of electric vehicles for Southern Africa and beyond. By focusing on producing electric vehicles and components locally, South Africa can create job opportunities, develop businesses, and benefit from the utilization of local resources. The country can also engage in partnerships with local institutions for research and development in the EV industry. Initiatives like assembling completely knocked down kits locally in other African countries can further boost the adoption of EVs on the continent.
The benefits of expanding the electric vehicle market in South Africa and Africa include job creation, skills development, resource beneficiation, and reduction of fossil fuel imports. By increasing the adoption of EVs, there is potential for the growth of innovative business models and partnerships in the automotive and clean energy sectors. Countries importing used vehicles in large quantities could be targeted for supplying locally assembled electric vehicles, leading to a significant increase in the production and adoption of EVs in Africa.
It is crucial for South Africa to expedite its efforts in transitioning to electric vehicles to remain competitive in the global automotive market. Implementing demand-side incentives and moving towards higher local component shares in vehicles manufactured in the country are essential steps in this process. By embracing the EV revolution and positioning itself as a manufacturing hub for electric vehicles in the region, South Africa can capitalize on the growing demand for sustainable transportation solutions and drive economic growth in the automotive sector.
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