The motor industry will be breathing a big sigh of relief after President Cyril Ramaphosa announced yesterday that government policy will in future allow for a tax incentive to make new energy vehicles (NEVs) more affordable for local consumers.
Speaking at the South African Auto Week held in the International Conference Centre in Cape Town yesterday, Ramaphosa said that the incentives for electricity-powered vehicles will also apply to hybrid vehicles (which use normal fuels and electricity batteries), as well as potentially other fuels, such as hydrogen.
The government announced its first incentives for NEVs in the Budget in February, a 150% investment allowance for expenses in the initial year of investment, effective from March 1, 2026. Additionally, the depreciation allowance for new and used machinery to make NEVs was accelerated to 40% in the first year and 20% in each of the following three years.
“We are working to finalise comprehensive NEV policy guidelines that do not exclude alternative technologies such as hybrids and plug-in hybrids,” Ramaphosa said.
“Consideration must be given to incentives for manufacturers as well as tax rebates or subsidies for consumers to accelerate the uptake of electric vehicles.”
Yesterday’s additions to the incentives were big for the motor industry, as it had since February said incentives were necessary to make it more attractive for consumers to buy and to be able to afford NEVs.
The local auto industry needs to transform to the production of NEVs or face the prospect of becoming obsolete as its main export markets are moving rapidly towards the introduction of NEVs.
Mikel Mabasa, the Automotive Business Council CEO and executive director, said in an interview at the event that it was “very good to hear some details of new incentives from the President on a public platform such as the National Auto Week”.
Mabasa said while “the devil might still lie in the details,” it was also good to hear the government had pledged to support the motor industry through this period of transition, even while it was faced with many other priorities.
He added that the local automotive industry would likely take longer to transform its production and to the large-scale sale of NEVs than many other global markets, probably about 15 to 20 years.
The additional government support for the motor industry comes at a time when local vehicle sales are struggling to increase due to the weakly growing economy and a range of other factors such as high interest rates and fuel prices.
South African vehicle sales were down 5.8% in the year to end September compared with a year before, exports were 16.9% lower, while vehicle production was down by more than 20%.
The industry, which contributes a hefty 5.3% to South Africa’s GDP and is its biggest manufacturing sector, was supported by some R270 billion of exports last year.
Minister of Trade, Industry and Competition, Parks Tau said the local auto industry was facing massive shifts due to the rise in sales of electric powered vehicles worldwide, the growing use of fuels with cleaner emissions, and the introduction of many other new technologies such as autonomous driving vehicles.
Tau said the country needed to make sure that South Africa's natural resources were used to “reindustrialise” the South African economy, and since 2016, for every rand of support that the South African government had provided as support for the industry, it had generated an additional R5bn that was spent on projects for the industry.
Ramaphosa said the government had consistently created a favourable policy and regulatory environment that had supported growth, transformation, and innovation within the automotive industry. He said the new incentives were being discussed as part of the White Paper on NEVs, the details of which were currently being discussed between the Department of Trade, Industry and Competition, National Treasury and the Department of Mineral Resources and Energy.
There is also a South African Automotive Masterplan (SAAM 2035), which sets the objective of growing South Africa’s vehicle production to 1% of global output and aims to increase the annual export value of the South African automotive industry from approximately R201bn in 2019 to R400bn by 2035.