South Africa’s automotive industry, a key player in the country’s manufacturing sector, is facing increasing pressure to adapt to the global shift toward more sustainable modes of transport.
Europe, one of South Africa’s largest export markets, is moving away from traditional internal combustion engine (ICE) vehicles.
This transition is pushing South Africa to ramp up its electric vehicle (EV) production, but the industry has reported that there’s much more to be done and says that without stronger governmental support, South Africa risks losing its competitive edge in the global car market.
Adapting to the shift in global demand
For years, South Africa has been a major exporter of vehicles, with several global carmakers manufacturing cars locally. But as Europe pushes for greener, more eco-friendly transportation, the demand for cars that run on petrol and diesel is steadily decreasing. In fact, many European countries have set deadlines to phase out the sale of new ICE vehicles, creating a challenging environment for countries like South Africa that depend on these exports.
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To stay competitive, South Africa needs to embrace the future of transportation by increasing its production of electric and hydrogen-powered vehicles. But making this shift is not as simple as switching production lines. The government will need to introduce policies that support manufacturers in making the necessary investments in EV technology.
The Need for More Investment in Electric Cars
While some carmakers have reportedly started making hybrid cars in South Africa, there has been little to no investment in fully electric vehicles (EVs). Brands like Ford and BMW are currently have confirmed that they are exploring hybrid options, but the country remains far behind in producing vehicles that run entirely on electricity.
The tax break for new-energy vehicles
In a major move to support this shift, the government of South Africa announced this week that President Cyril Ramaphosa signed a tax break into law for the production of so-called new-energy vehicles, which includes electric and hydrogen-powered cars.
This new law allows companies to claim a 150% tax deduction on their investment in these types of vehicles, making it more financially attractive for automakers to set up or expand their EV production facilities in South Africa.
This tax incentive is a positive step for the industry, as it lowers the cost of manufacturing new-energy vehicles and encourages both local and international carmakers to increase their investments in EV production.
By making the manufacturing of these vehicles more affordable, the law helps South Africa stay competitive with other countries that are also making the shift to greener transportation options.
The government has said that the tax break could also attract more foreign investment, especially from major international players looking to enter the African market. China, in particular, has shown strong interest in South Africa’s automotive sector.
Meanwhile, in the US: EV sales surge after Trump’s threat to eliminate tax credits
In the United States, electric vehicle (EV) sales have seen a notable uptick, likely as a result of President-elect Donald Trump’s threat to eliminate tax credits for electric vehicles.
This development gave the EV market a much-needed boost after a rather disappointing year.
According to forecasts from Cox Automotive, EV sales grew by 12% in the fourth quarter of 2024, contributing to a record total of 1.3 million EVs sold over the course of the year.
