SA mulls tax rebates, subsidies to boost local EV industry

Cars are seen on display at a showroom of a Nissan dealership in Melrose, South Africa, 16 July 2024. Reuters/Siphiwe Sibeko/File Photo

Global automakers like Ford, Volkswagen, BMW and Toyota manufacture models in South Africa for both the local and European markets. Britain and the European Union jointly consume 46% of the vehicles the country produces.

The move towards cleaner and more sustainable fuels, plus stringent regulation in key markets, is putting pressure on some global automakers to shift towards electric and hybrid models, Ramaphosa said at an automotive industry conference.

As a result, South Africa's automotive industry is positioning itself to take advantage of the demand for new energy vehicles.

"Consideration must be given to incentives for manufacturers, as well as tax rebates or subsidies for consumers, to accelerate the uptake of electric vehicles," Ramaphosa said.

To encourage the production of electric cars in South Africa, the government will introduce an allowance for new investments from 1 March 2026, finance minister Enoch Godongwana said in February in his budget.

This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.

Ramaphosa added that the government is working to finalise comprehensive policy guidelines on so-called new energy vehicles "that do not exclude alternative technologies such as hybrids and plug-in hybrids".

Last year, the minister for trade, industry and competition published a white paper outlining steps to support the transition such as government incentives and a temporary reduction on import duties for batteries in vehicles produced and sold in the domestic market.

The paper also advocated the production of batteries for battery electric vehicles in South Africa and the development of value chains in the green hydrogen fuel cell market.

"We are committed to working hand-in-hand with the private sector to promote the production of new energy vehicles and the development of the necessary infrastructure to support them," Ramaphosa said.