Good news for electric cars in South Africa

Multinational carmakers in South Africa are in discussions with their international headquarters to produce electric vehicles (EVs) in the country, and the recently announced tax incentive could soon extend to hybrid cars.

This is according to Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (Naamsa), who told Rapport that it would take a year or more for these carmakers to start producing EVs locally.

This is because parts of the production line need to be recalibrated, and personnel need additional training.

Mabasa said the recently announced investment incentive only refers to fully electric vehicles.

However, he added that Naamsa would ask Department of Trade, Industry, and Competition Minister Ebrahim Patel to include hybrid vehicles.

Mabasa says Finance Minister Enoch Godongwana’s announcement during his budget statement is a commitment to provide continued support to the vehicle industry in South Africa.

“This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles within the first year,” said Godongwana.

“The incentive will be implemented in addition to the existing support under the Automotive Production Development Programme.”

The government has also reallocated R964 million over the next three years to support the transition to EVs.

Carmakers with operations in South Africa have been pleading with the government to take a stance on local EV manufacturing. Volkswagen warned that the country was at risk of being overtaken by countries like Ethiopia and Egypt due to the lack of policy.

Martina Biene, managing director and chair of Volkswagen South Africa, warned that further delays could result in the country missing out on securing future investment in its motor industry.

“Electric-vehicle policies are popping up everywhere. Egypt has one, and even Ethiopia, a country that is not known for automotive industrialisation as South Africa is, has an EV policy,” said Biene.

She added that, from Volkswagen’s perspective as a potential investor, prioritising countries with EV policies is critical, and South Africa’s loss of one means it doesn’t feature high up on carmakers’ lists.

Biene said Volkswagen is still committed to production in South Africa. However, it requires a business case to manufacture 50,000 to 60,000 EVs to invest accordingly.

EVs are becoming increasingly popular in South Africa, with Toyota revealing that the country had shattered its sales records in early 2024.

During its State of the Motoring Industry (SOMI) 2024 address at the Kyalami racing circuit on 25 January 2023, Toyota said 931 new fully-electric vehicles were sold in South Africa in 2023.

This is 85% more than 2022’s 502 units, surpassing all the fully electric models sold in South Africa from 2020 to 2023 by 119 units.

It added that the options available to South African motorists expanded from eight in 2021 to 31 in 2023.

Motorists have a broader selection of hybrid electric vehicles in South Africa, including models from prominent manufacturers like Toyota, Lexus, BMW, and Mercedes-Benz.

Carmakers who produce hybrid vehicles are set to benefit from the investment tax incentive if Naamsa is successful in its discussions with Patel.

Naamsa is talking to vehicle manufacturers to import cheaper models — less than R500,000 — to encourage the use of electrified vehicles in South Africa.