New cars in South Africa are far more expensive than they need to be due to the exorbitant levels of government-imposed taxes and levies on imported vehicles.
According to Naamsa The Automotive Business Council, imported car prices include several surcharges such as Value Added Tax (15%), Ad Valorem Tax (calculated on a per-vehicle basis, capped at 30%), CO2 emissions tax (2.5-6%), and import duties (25%, and 18% if imported from EU).
As such, approximately 18% of the price of entry-level cars on the market today is attributed to taxes and levies, soaring to as much as 42% of the price of premium vehicles.
For reference, the Suzuki S-Presso is the most affordable set of wheels in the country today with a starting price of R178,900.
Of this, approximately R32,202 is chalked up to taxes and levies – equivalent to roughly six months of finance payments.
Naamsa has therefore implored the newly formed Government of National Unit (GNU) to re-evaluate the substantial taxes and levies on new vehicles so as to address the affordability crisis stimulating a declining market.
Speaking to Engineering News, Naamsa CEO Mikel Mabasa said that taxes are a notable driver behind the nation’s substantial car prices.
Annual taxes paid to government by the country’s seven automakers in 2023 amounted to R16.9 billion, while independent vehicle importers contributed a further R19.2 billion.
These enormous figures had to be accounted for in the cost of the vehicles they sold in the country, which in turn raised the prices by a considerable sum.
Automotive industry wishlist
In addition to addressing import and related taxes on new cars, the South African automotive industry has a long wishlist of priorities for the GNU.
The automotive manufacturing industry is one of the largest contributors to the nation’s coffers. Since 1993, it has generated upwards of R1.75 trillion in export revenue of built-up vehicles and R959.5 billion in component exports.
The continued success of the sector is therefore vital for the health of the country’s economy.
With this in mind, Naamsa said that a key priority for the GNU would be to ensure reliable electricity supply to auto-manufacturing plants in the country and to improve infrastructure and transport logistics.
While there has been a break in load-shedding in recent months, several automakers have revealed that the frequent power cuts over the last few years cost them hundreds of millions of rands.
Similarly, they have lamented the deterioration in the country’s rail infrastructure, with freight now largely being moved by truck on public roads which is both more expensive and riskier.
Naamsa said that South Africa’s international competitiveness for new-generation model investments will be strongly influenced by improvements in these areas.
Moreover, Naamsa calls on the Department of Trade, Industry, and Competition (DTIC) to consider a more progressive new-energy vehicle (NEV) policy framework which includes hybrids and plug-in hybrids that will provide immediate support for the manufacturing of battery-electric vehicles on local soil.
In February, the Minister of Finance announced a new tax incentive for local NEV manufacturers that would allow them to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles, starting 1 March 2026.
While celebrated by the industry as a step in the right direction, Naamsa fears it may be too little too late.
The European Union, a top export destination for local automakers, is set to ban the sale of petrol and diesel cars within the coming decades, with many major brands already taking action in this regard by proactively setting up NEV production facilities in hopes of satisfying an expected wave of demand.
However, with South Africa dragging its feet on introducing NEV manufacturing incentives, these companies have started to look elsewhere, which has serious implications for the domestic vehicle export sector which is largely dependent on fossil fuels.
Naamsa thus believes that it is necessary for the GNU to create a more inviting NEV policy framework to safeguard vehicle exports, with sooner being better than later.
Lastly, Naamsa wants the GNU to launch a collaborative and detailed public education narrative about the country’s automotive industry, together with GNU partner departments such as the DTIC and National Treasury.
False and unsubstantiated information about the automotive trade runs rife in South Africa, mostly spread by fly-by-night auto commentators with little knowledge about the sector, noted Naamsa.
“With more than 500,000 formal jobs in the automotive supply chain and about one-million across the value chain, the automotive industry remains fundamental to South Africa’s economy,” concluded Naamsa’s Mabasa.
Join the discussion