South Africa’s carmakers facing make or break decision today

The government urgently needs to establish a framework for the mass adoption of electric vehicles (EVs) to support the local automotive industry going forward.

This is the opinion of Zero Carbon Change (ZCC), which has called upon Finance Minister Enoch Godongwana to talk about EV incentives during his upcoming Budget Speech today, 19 February 2025.

An industry at a crossroads

ZCC is an organization specializing in the installation of off-grid EV charging stations, and has been one of many voices calling for the government to support EV adoption in recent years.

The car industry is facing an increasingly difficult situation as it attempts to balance the need to transition to EVs while also still providing affordable transport for local buyers.

One of the biggest problems with EV adoption is the high barrier to entry, as all but one model in South Africa currently costs over R500,000.

A major contributor to this cost is South Africa’s high import duties for EVs, which are taxed at a higher rate than equivalent internal combustion engine (ICE) models because they are classified as “luxury” goods.

ZCC argues that this policy needs to be amended if the country hopes to achieve its lower-emission targets and support local carmakers.

“Currently, an EV is taxed at 25%, while an ICE vehicle is taxed at 18%. It makes no sense to advocate for decarbonisation while carbon-heavy vehicles remain cheaper than zero-emission EVs,” said Joubert Roux, Executive Chairman of ZCC.

While it is easy to dismiss the idea of mass EV adoption on the grounds that South Africa is not ready for them, the reality is that the rest of the world is making the switch and the local automotive sector cannot afford to be left behind.

The vast majority of vehicles manufactured here are exported to Europe and other markets, which means they can no longer produce ICE cars if these countries will no longer accept them in the next few years.

In a similar vein, automakers have been reluctant to introduce their own new-energy cars in South Africa as the high import duties would make them prohibitively expensive for most consumers, meaning that the sales margin for companies simply isn’t worth it.

To prevent this scenario, Roux suggests that the government should implement a six-year import tax holiday for battery-powered cars, which would allow them to gain market traction while also giving automakers the breathing room they need to transition without compromising the industry.

“If a tax holiday is not feasible, then the import tax on EVs should at least be equal to – or lower than – that of internal combustion engine (ICE) vehicles,” he said.

President Cyril Ramaphosa previously announced in 2024 that the government would consider tax rebates or subsidies to encourage motorists to purchase EVs; however the details of this plan have yet to be announced.

That being said, the President already legislated a 150% tax incentive aimed at encouraging car manufacturers to build EVs in South Africa.

Earlier this year, it was also revealed that the government tried to persuade Elon Musk to build a Tesla factory in South Africa, but this is unlikely to happen given that Tesla already has ample facilities and trade deals with other companies to support its interests.

Meanwhile, companies like BMW and Ford are taking matters into their own hands by establishing new assembly lines for plug-in hybrid versions of their popular X3 and Ranger series, and VW and Kia are piloting their EVs in South Africa to test the viability of launching them in an official capacity.

Manufacturers such as Audi, Jaguar, and Mercedes-Benz are also installing public charging infrastructure around the country to support the transition to EVs.

All of this shows that the industry is currently facilitating the transition to EVs with little to no government support.

Roux stated that more needs to be done to build the necessary charging grid to support mass EV adoption, and that these stations should ideally be off-grid to avoid reliance on Eskom.

Eskom’s history of load-shedding means there are concerns as to whether people will be able to reliably charge their cars, but depending on the company’s coal-fired plants also undermines the purpose of switching to zero-emissions transport in the first place.