South Africa’s plan to save its car factories doesn’t help VW, Ford, BMW, or Toyota

None of South Africa’s major car producers are set to benefit from the government’s new 150% tax rebate on electric vehicle (EVs) and hydrogen car production, which takes effect in March 2026.

Finance Minister Enoch Godongwana first announced the rebate during his National Budget Speech in February 2024.

The programme is intended to assist automakers with a manufacturing presence in South Africa, who have been sounding the alarm for years that the country needs urgent reforms if it hopes to compete in the world’s rapidly evolving car market.

Most of the vehicles produced in South Africa are exported to the European Union, United Kingdom, and North America, all of which are transitioning from internal combustion engines (ICE) to new-energy vehicles (NEVs).

NEVs is an industry term referring to cars with efficient and environmentally-conscious powertrains, such as hybrids (HEVs), plug-in hybrids (PHEVs), EVs, and hydrogen fuel-cells.

Most countries now feature some form of assistance for local carmakers, such as tax rebates for companies and purchasing incentives for consumers.

Despite this, the South African government has dragged its feet on the issue for years while local manufactures like Ford, Toyota, VW, Mercedes-Benz, and BMW are at risk of losing their competitive edge on the global stage.

Markets like the UK now have strict targets to increase the number of zero-emmissions vehicles imported and sold in the country, meaning demand for ICE models made in South Africa will continue to drop.

BMW South Africa, as one example, ships 97% of the X3 SUVs produced in Gauteng overseas, underscoring the importance of catering to export markets.

South Africa finally addressed these concerns with a long-delayed Electric Vehicle White Paper that was published in 2023, outlining government policies to assist the automotive sector with the transition from ICE cars to the production of NEVs.

The 150% tax rebate announced in Godongwana’s 2024 Budget Speech are meant to encourage electric vehicle production, in addition to existing support under the Automotive Production Development Programme, which is currently under review.

The issue is that no major car brands with factories in South Africa currently produce an EV, and none have announced their intention to build EVs in the near future.

Three of South Africa’s carmakers produce hybrids, but these are not covered by the new rebate.

BMW, which produces a PHEV version of the X3, told our sister publication MyBroadband that it would not benefit from the incentive, which only applies to fully-electric manufacturing.

“It does not extend to hybrid production,” it said.

Ford and Toyota are in the same boat, as the former makes a PHEV version of the Ranger bakkie in Pretoria, while the latter assembles the Corolla Cross HEV in Durban.

The National Association of Automobile Manufacturers in South Africa (Naamsa) commented on the issue, saying that the rebates should be extended to hybrid manufacturing upgrades.

South Africa falling behind the rest of Africa

VW has stated that it will not produce EVs in South Africa until at least 2035.

Volkswagen Group Africa’s head, Martina Biene, explained that the company sees greater potential in exporting affordable ICE models to other African markets.

One potential issue with this strategy is that other African countries are way ahead of South Africa with regards to NEV adoption and industry policies.

Ethiopia has already banned the import of all new petrol and diesel cars, and has established no less than 17 EV assembly plants.

Kenya also intends to ban the sale of new petrol and diesel cars by 2030.

Rwanda has banned the sale of new petrol motorcycles in its capital city, and aims to have EVs account for 8% of new car sales by 2030.

Many African countries also offer tax exemptions and reductions for EVs and EV components to accelerate adoption.

This includes Morocco, which recently overtook South Africa to become the continent’s largest vehicle producer.