Major Boost to South Africa’s Electric Vehicle Plan: Tax Incentives Fuel Industry Growth

South Africa’s electric vehicle (EV) sector is poised for growth following President Cyril Ramaphosa’s signing of a groundbreaking tax amendment on December 24, 2024. This amendment, which introduces a 150% tax deduction for manufacturers of electric and hydrogen-powered vehicles, is expected to attract significant investments and invigorate local EV production.

Tax Incentives: A Game Changer for EV Manufacturing

The legislation, effective from March 1, 2026, offers manufacturers a 150% deduction on the cost of buildings and equipment used primarily for producing electric or hydrogen vehicles. This incentive, valid for a decade, is a bold move aimed at boosting South Africa’s EV manufacturing capacity.

Key points:

• Applicable to assets brought into use between March 1, 2026, and March 1, 2036.
• If assets are not used for EV or hydrogen vehicle production for at least five years, the deduction drops to 50%.

The amendment follows Finance Minister Enoch Godongwana’s announcement in the 2024 National Budget, allocating R964 million over three years to support the country’s EV transition.

Attracting Global Investments

The new tax policy is already making waves globally. According to reports, three Chinese automakers have signed non-disclosure agreements with the Automotive Business Council, representing $27 billion in potential investments.

“With good government policies, we will attract new investment; we will increase and retain investment,” said Mikel Mabasa, CEO of the Automotive Business Council.

Challenges and Opportunities

While the focus remains on building local manufacturing capacity, challenges like high import duties on EVs persist. Currently, EVs face a 25% import duty, compared to 18% for internal combustion vehicles.

Despite this, EV sales are on the rise, with 1,079 units sold in the first three quarters of 2024, up from 720 in 2023. Traditional hybrid sales have also doubled, reflecting growing consumer interest.

The Road Ahead: Securing the Future of EVs

The Department of Trade, Industry, and Competition has outlined plans to grow the local EV industry, emphasizing manufacturing capacity over direct consumer incentives. This approach is vital for securing South Africa’s automotive industry amid shifting global energy trends.

With strong government policies, robust investment incentives, and increasing global interest, South Africa is well-positioned to become a hub for EV manufacturing in Africa.

Follow Joburg ETC on Facebook, Twitter and Instagram

For more News in Johannesburg, visit joburgetc.com