Call to scrap tax making certain cars more expensive in South Africa

Zero Carbon Charge (Charge) has called on Finance Minister Enoch Godongwana to announce tax reform to lighten the load on electric vehicles (EVs) when he delivers the Medium-Term Budget Policy Statement on Wednesday, 21 October.

The off-grid EV charging network operator is one of the country’s biggest advocates for advancing local uptake, and has again called on the minister to implement tax reforms and fund renewable charging infrastructure.

The South African Government has already included EVs in the second phase of the Automotive Production and Development Programme (APDP), implementing a 150% tax allowance for investment in battery-electric vehicle manufacturing.

While Charge has welcomed the progress, it said that the tax burden on imported EVs continues to make battery-electric vehicles less affordable and slow transport decarbonisation.

Trade Minister Parks Tau previously said a review of the ad valorem tax structure to create clearer differentiation between locally produced and imported vehicles would be finalised by September 2026.

Approved amendments were expected to be implemented by the fourth quarter of the 2026/27 financial year, subject to the necessary approvals, including National Treasury’s concurrence.

However, according to Charge, the Minister did not provide a completion date or details of proposed tax changes during his SA Auto Week address earlier this week.

“With Treasury concurrence required for any changes, the MTBPS provides an important opportunity to give industry clarity on the way forward,” the company said.

“Charge is concerned that an ad valorem review focused on favouring local production could further increase the tax burden on imported EVs while local EV manufacturing capacity is still being developed.”

It explained that imported EVs face significant customs duties under the current SARS tariff schedule, depending on classification and origin, before ad valorem excise duty and VAT are added on top.

This makes EVs sold locally unaffordable compared to their home markets, including China, where they are considered budget options.

For example, a R500,000 battery-electric passenger vehicle, subject to the 25% general customs duty and no rebates, would attract R125,000 in customs duty and R141,750 in ad valorem excise duty.

Combined, these add more than half the vehicle’s customs value before VAT and other applicable costs, which Charge said results in a disconnect.

“Government is incentivising domestic EV production while the tax structure continues to constrain the consumer demand that future production will depend on,” said Charge Co-Founder and Chair Joubert Roux.

Zero Carbon Charge calls for clear policy direction

Charge has called on Treasury to use the MTBPS to set a clear policy direction on South Africa’s EV taxation and charging infrastructure and commit to measures that can be taken forward.

These include:

• A restructuring of EV customs duties and ad valorem tax to ensure imported EVs are not taxed more heavily than comparable ICE vehicles. 
• Targeted rebates or incentives for lower-priced EVs, to narrow the upfront cost gap with ICE vehicles. 
• Access to concessional, long-term finance through development finance institutions, reflecting the long payback periods of infrastructure for developers. 
• Dedicated funding for renewable energy micro-grids linked to charging stations, expanding local production of clean energy for transport and supporting industrial development without increasing pressure on the national grid.

According to Charge, tax reform is only one part of the equation, as the commercial case for expanding charging networks depends on the pace of EV uptake.

South Africa’s 2023 EV White Paper highlighted charging infrastructure as a foundational pillar of the transition.

“This is an opportunity to decarbonise transport while developing local energy infrastructure and strengthening energy security,” said Roux.

“Localising the production of energy for transport offers government an immediate industrial opportunity with lasting economic benefits.”

He added that the opportunity extends beyond manufacturing vehicles to producing the renewable energy that powers them, using technology and expertise already being deployed in South Africa.