SA to incentivize EV production

From the newsletter

For a long time, South Africa has been Africa's leading automotive manufacturer, but recently Morocco has been closing the gap; and South Africa is reacting. In his address during Auto Week, President Ramaphosa announced plans to incentivize local EV manufacturing and offer tax breaks for buyers to boost local production and consumption. 

• This move comes as major trading partners increasingly shift towards EVs. South Africa seeks to avoid being left behind in the global automotive supply chain.

• The government is developing a national EV policy that aims to transition the automotive industry towards electric vehicles by 2035.

• But at the same time, the government is cautious not to cripple the industry that employs around 110,000 South Africans.

More details

• Finance Minister Enoch Godongwana recently introduced incentives for electric vehicle (EV) production, allowing manufacturers to claim up to 150% of qualifying investment spending. 

• While welcomed by the industry, these incentives will only take effect in 2026, causing some frustration due to the delay. This delay in policy implementation has allowed other African countries like Morocco to take the lead in EV production.

• South Africa's dirty coal grid complicates the EV transition. Charging EVs using this grid results in higher emissions than petrol cars. 

• Off-grid charging through solar power offers a potential solution, with companies like Zero Carbon Charge stepping in to fill this gap. 

• The development of renewable charging infrastructure is crucial, not only for widespread EV adoption but also for maximizing environmental benefits.

• Affordability remains a barrier for many South Africans considering EVs. Despite these challenges, the push for EVs presents significant opportunities for economic growth and job creation in the green energy sector

Our take

• South Africa's automotive industry has mainly relied on the export of catalytic converters, which account for 40% of its exports. However, demand for these components is declining as the transition to EVs accelerates in Europe, their largest export market. 

• To reclaim its position in the global automotive landscape, South Africa must respond swiftly to align with current market needs.

• The development of a national electric vehicle policy will be a game-changer for both the internal combustion engine (ICE) vehicle market and the emerging EV market.