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There are calls for wider incentives, including the reduction of import duties levied on EV imports, in South Africa.
The automobile manufacturing sector is a critical pillar of South Africa’s economy. The country’s automotive industry contributes 5.3% to GDP (3.2% manufacturing and 2.1% retail). In 2023, the export of vehicles and automotive components reached a record total value of R270.8 billion, equating to 14.7% of South Africa’s total exports. The industry accounts for 21.9% of the country’s manufacturing output. However, fossil fuel (ICE) vehicle exports dropped by 23% in 2024, to 308,830 units, compared to the record performance of 2023 when South Africa exported 399,594 units. Increasing competition from new EVs in key export markets is one of the reasons cited for the decline in ICE vehicle exports.
The local vehicle market is also quite significant, with new vehicles sales in South Africa of about half a million a year. However, 2024 was also a slow year on the domestic market, with sales decreasing by 3% to 515,712, compared to the 531,775 units sold in 2023. These new vehicle sales are mostly ICE vehicles. December BEV sales figures for South Africa are not yet in. However, from January 2024 to November 2024, 1,179 BEVs had been sold in South Africa. This was the first time ever that BEV sales breached the 1,000 mark. However, it means that BEV market share in South Africa is still less than 1% of annual sales, at 0.23%. That is pretty low! 602 PHEVs were sold in South Africa over the same period, as well as 12,333 traditional plugless hybrids.
South Africa is now moving to incentivise local production of electric vehicles by offering some tax incentives for manufacturers. The South African government approved a 150% tax deduction on investment in electric and hydrogen-powered vehicle production. CHARGE, a company building South Africa’s first off-grid national charging network for EVs — powered by 100% renewable energy — welcomes the EV tax incentive. CHARGE says it appreciates the signing of the 150% tax incentive for electric and hydrogen-powered vehicle manufacturers into law by President Cyril Ramaphosa. The tax incentive comes into effect in 2026 and will enable manufacturers to deduct 150% of the cost of buildings and equipment used primarily for producing electric and hydrogen-powered vehicles. CHARGE says whilst this measure is expected to boost local manufacturing, the South African government should address the barriers that hinder EV adoption overall, including imports, and promote the development of charging infrastructure. The South African government says it has signed several MOUs with Chinese electric vehicle manufacturers to look into manufacturing EVs in South Africa. Let us hope the tax incentives do unlock new a BEV manufacturing industry in a country where 99% of the vehicles made there are still ICE vehicles.
“This incentive to boost local manufacturing is a positive step forward, but we also need to reduce the current high import duties for EVs — 25% compared to 18% for combustion engine vehicles. These taxes inflate EV prices, slow demand, and limit market growth. CHARGE continues to call for a six-year tax holiday on EV imports to address this imbalance. Unfortunately, while steps are being taken to support an EV economy, not enough is being done to support the need for a sustainable, reliable, and green charging network. More support is needed to minimise the significant regulatory barriers hindering the expansion of critical charging networks,” says CHARGE.
CHARGE’s planned solution comprises a network of 120 off-grid, solar-powered charging stations for electric vehicles and an additional 120 stations for electric trucks. These stations will ensure every EV on its network is powered entirely by renewable energy, supporting the Department of Transport’s net-zero transport target by 2050. The first one of these charging stations is already up and running in the Northwest Province. South Africa’s charging network is growing all the time, with players such as Rubicon and GridCars adding chargers in many places across the country, helping to reduce charging deserts and thereby reducing range anxiety fears. So, the charging infrastructure is not a big issue in South Africa at the moment, just that BEV sales have been slow to take off due to several factors, including those high import duties mentioned earlier. Urgent action is needed to accelerate EV sales.
Looking at markets that would be close to South Africa, like Australia, where a similar number of the same type of vehicles are sold in both markets (such as the ICE Ford Ranger and ICE Toyota Hilux trucks), one would think BEV sales in South Africa would also not be too far behind Australia. However, the situation is quite different. A record 91,365 new electric vehicles were sold in Australia in 2024. Of course, Australia gets a lot more BEV options than South Africa, and BEVs are more affordable there due to lower import duties and all, but one would not expect Australia to sell 90 times more BEVs than a market like South Africa. It should be a lot closer than that! That shows that there are some big issues to solve for South Africa’s BEV space to flourish. Reducing import duties would be a good start. The tax incentives for EV manufacturers only kick in in 2026. South Africa needs to act faster.
Given its rich car manufacturing history, South Africa should seize the moment and also ride on this new BEV wave. There is obviously a need to balance the requirements of the current players in the ICE vehicle manufacturing sector that create tens of thousands of jobs and future proof the industry for the new age of so called New Energy Vehicles. There is also big opportunity for South Africa to reposition itself as the main manufacturing hub and export BEVs to the Southern African states and the rest of Africa. EVs such as the BYD Seagull and Wuling Bingo come to mind. Several countries import over 50,000 used vehicles per year. For twenty countries, that is at least one million vehicles per year. If we say 30% of them are in this small vehicle segment, that is at least 300,000 vehicles per year, which would make a decent addressable market to start with.
These 300,000 vehicles could be shipped as completely knocked down kits and then assembled locally in those respective countries on the African continent, progressively increasing the contribution of local components. The potential benefits that could be derived from this would be huge for South Africa and the rest of the countries on the continent.
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