Toyota South Africa Motors CEO Andrew Kirby has called for a revision of taxes on locally made vehicles to reduce prices and allow manufacturers to more effectively compete with cheap imports from China and India.
Speaking at the Naamsa AutoWeek Conference in Gqebertha at the start of the month, the CEO warned that imposing luxury taxes on affordable cars was a major hindrance to the industry.
“An ad valorem tax made sense in 1995, but we are now taxing lower-end vehicles as if they were premium products,” he said.
The three-decade-old ad valorem tax has become a sticking point for the industry in recent years, particularly with regards to electric vehicles (EVs), where it is seen as an unnecessary expense that is holding back more widespread adoption.
EVs are not the only models affected, however, as the duty applies to all cars sold in South Africa, whether they are imported or locally made.
A key issue is that the tax has not been adjusted since it was introduced in the 90s, and car prices have increased considerably over the last 30 years.
In 1995, the cheapest passenger car in South Africa was the locally-made VW Citi Golf Chico, which cost R33,950.
Fast forward to today, and the most affordable cars you’ll find on the market are the R178,800 Toyota Vitz and R178,900 Suzuki S-Presso.
To put that in perspective, this is the sort of money that could buy you a top-of-the-line German sedan like a BMW 3 Series back in 1995.
A high-end sedan obviously qualified for the luxury tax back then, but models like the S-Presso are now being taxed as luxury models despite being as bare bones as a car can get in 2025.
Despite this, the formula for the ad valorem tax percentage has not been changed.
It is calculated by multiplying 0.00003 by 80% of the car’s retail value and deducting 0.75.
In the case of the Citi Golf Chico, the duty would have added no more than 0.0648%, equating to R21.
Looking at the S-Presso, the same tax now works out to 3.54%, adding R6,333 to its price tag.
Put another way, the ad valorem amount charged on entry-level vehicles has increased by 30,000% because it has not been adjusted over the last 30 years to account for the ever-growing price of new models.
South Africa at a crossroads
Local manufacturers have issued several warnings over the past few years that South Africa is falling behind the global industry, jeopardizing the future of its car factories.
Kirby explained that South Africa is transitioning to new-energy vehicles like EVs and hybrids far too slowly, and that this will severely limit its ability to export to certain markets over the coming years.
“We don’t want to be relegated to being a conventional internal combustion engine (ICE) manufacturing base,” he said.
“It might be fine for the next five years, but it will prove disastrous in the coming decade.”
The majority of cars produced in South Africa are exported to Europe, which is set to ban the sale of ICE models by 2035.
The European Union is also imposing increased carbon taxes on petrol and diesel models, making them more expensive and less appealing to buyers.
While all of this is happening, Chinese carmakers like Chery and BYD are capitalising on the growing demand for new-energy vehicles with new models that are considerably cheaper than those from other brands.
This can even be seen in South Africa, as Chery recently launched the new Tiggo Cross CSH, a hybrid SUV that is R54,500 cheaper than the locally-made Toyota Corolla Cross HEV.
Ford Motor Company of Southern Africa CEO Neale Hill voiced his own concerns, warning that the industry’s stagnation could lose South Africa it’s crown as the continent’s largest vehicle manufacturer.
He highlighted how Morocco recently announced a $5.6 billion investment from China to build an EV factory, and that the country aims to produce 1 million vehicles in 2025.
In South Africa, this same target is only expected to be reached by 2035.
Hill also pointed out how South Africa is falling behind on EV adoption with only 4,000 models on the roads, compared to over 100,000 in Ethiopia.
The South African government has produced an EV roadmap to help local manufacturers make the transition, but nothing meaningful has come out of the plan so far.
“A turnaround requires urgency and deliberate action in a short space of time,” said Hill.
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