Summary
- South Africa’s automotive industry contributes significantly to the country’s GDP
- Electric vehicle (EV) exports have increased in South Africa, while internal combustion engine (ICE) vehicle exports have decreased
- The government has approved a 150% tax deduction for investments in EV manufacturing
- CHARGE is advocating for reduced import duties on EVs and a six-year tax holiday on imports
- South Africa has the potential to become a hub for EV manufacturing and export to other African countries
Article
Calls are being made for wider incentives to promote the adoption of electric vehicles (EVs) in South Africa. The country’s automotive industry is a critical pillar of its economy, contributing significantly to GDP. In 2023, vehicle and automotive component exports reached a record high value, but fossil fuel vehicle exports decreased in 2024 due to competition from new EVs in key markets. The domestic vehicle market also saw a decline in sales in 2024, with the majority of vehicles being internal combustion engine (ICE) vehicles. While the sales of battery electric vehicles (BEVs) in South Africa have surpassed 1,000 units for the first time, BEV market share is still low at less than 1% of annual sales.
To incentivize the local production of electric vehicles, the South African government has approved a 150% tax deduction on investments in electric and hydrogen-powered vehicle production. This tax incentive aims to boost local manufacturing of EVs, but there are calls to reduce the high import duties on EVs, which currently stand at 25% compared to 18% for combustion engine vehicles. CHARGE, a company building an off-grid national charging network for EVs powered by renewable energy, emphasizes the need for a more supportive regulatory environment to encourage EV adoption and address barriers to market growth. The government has signed agreements with Chinese EV manufacturers to explore EV production in South Africa.
CHARGE’s solution includes establishing a network of off-grid, solar-powered charging stations for electric vehicles and trucks. The company aims to ensure that every EV on its network is powered by renewable energy, supporting the government’s net-zero transport target. While South Africa’s charging infrastructure is growing, there is a need to address regulatory barriers and reduce import duties to accelerate the adoption of EVs. Compared to markets like Australia, where EV sales are significantly higher, South Africa needs to take urgent action to promote the adoption of EVs and create a sustainable, reliable, and green charging network.
Given South Africa’s car manufacturing history, there is an opportunity to capitalize on the global shift towards electric vehicles and position itself as a manufacturing hub for EVs in the region. By exporting EVs to Southern African states and other countries on the continent, South Africa could establish itself as a leader in the EV market. The potential benefits of manufacturing EVs locally and exporting them to other African countries are significant and could contribute to economic growth and job creation. By focusing on local assembly and the gradual increase in local components, South Africa could establish a strong presence in the EV market in Africa.
In summary, South Africa’s automotive industry plays a crucial role in the country’s economy, but there is a need to incentivize the adoption of electric vehicles to stay competitive in a changing market. While the government has introduced a tax incentive for EV manufacturers, reducing import duties and addressing regulatory barriers are essential to accelerate the growth of the EV market. By leveraging its manufacturing capabilities and tapping into the growing demand for EVs, South Africa has the opportunity to establish itself as a leading EV manufacturer in the region and contribute to the shift towards sustainable transportation in Africa.
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