Breaking: South Africa unveils 150% NEV manufacturing tax relief to shield local auto sector
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Johannesburg — in a long-awaited move after years of industry lobbying, South Africa on Monday unveiled government support to upgrade car plants for new energy vehicle production, signaling a push to keep homegrown factories competitive as the global shift toward NEVs accelerates.
Starting 1 March 2026, automakers can claim a tax deduction equal to 150% of eligible investments in buildings, plant, and machinery intended to boost NEV manufacturing, the government said.
NEVs include hybrids, battery-electric vehicles, and hydrogen-powered models.
The relief runs for 10 years, with the deductible portion in the first financial year capped at R500 million.
Officials say the policy is pivotal to preserving jobs and maintaining SA’s role in vehicle production at a time of rising NEV uptake worldwide.
President Cyril Ramaphosa announced the tax incentive in 2024. While the plan was broadly welcomed, industry leaders had hoped for earlier benefits.
Ramaphosa stressed that the measure aims to safeguard a sector employing about 115,000 peopel directly and supporting more than 500,000 across the value chain.
Yet the domestic industry faces pressure from the rapid NEV adoption in export markets, eroding demand for traditional SA-built models.
In europe, SA’s main export destination, roughly 65% of cars sold in the first 11 months of 2025 were hybrids or EVs, while conventional petrol and diesel vehicles accounted for about 35%—a shift from 46% in 2024.
To date,SA has produced only a limited number of hybrids,with the Toyota Corolla Cross Hybrid being the standout in local output. BMW, Ford, and Mercedes-Benz manufacture plug-in hybrids, but primarily for export markets.
The growing presence of Chinese brands offering both conventional and NEV models has increased competition at home.
Industry figures have urged lower taxes on locally made vehicles to better compete with Chinese contenders.
Rising electricity costs add another hurdle, forcing automakers to invest in backup energy and option power sources.
Other headwinds include higher U.S. import tariffs on SA products and the closure of ArcelorMittal’s long-steel plants, a key component in auto manufacturing.
South Africa trails peers in EV policy on the continent
The country has ceded its position as Africa’s top vehicle producer to Morocco, which surpassed one million units by early December 2025. SA produced about 549,000 cars in the first 11 months of 2025.
Morocco’s surge is driven by extensive government support for EVs,including producer incentives and consumer subsidies. other african nations, including Tanzania, Kenya, Uganda, Zambia, and Benin, have also introduced EV incentives.
Legal and advisory firms noted the SA package is a welcome step but warned the carbon intensity of SA’s electricity grid could dampen gains from the NEV push.
With Eskom relying heavily on coal, solar capacity has grown mainly in the private sector, and estimates place coal at roughly 80–85% of electricity supply.
Global buyers are increasingly mindful of carbon footprints, and some export markets are prepared to penalize goods produced with high emissions, which could raise input costs for SA manufacturers and tilt competition toward cleaner-grid producers like Morocco.
Industry voices argue for broader measures, including leveraging SA’s mineral wealth for local battery production and reducing taxes on EVs to accelerate consumer uptake.
| Aspect | details |
|---|---|
| Effective date | 1 March 2026 |
| Incentive | Tax deduction equal to 150% of eligible NEV investments |
| Scope of NEVs | Hybrids, battery-electric vehicles, hydrogen-powered models |
| Duration | 10 years |
| First-year cap | R500 million |
| employment impact | About 115,000 direct jobs; over 500,000 in the value chain |
| Export market shift (11 months 2025) | NEV share ~65%; petrol/diesel ~35% |
What this means for SA’s EV future
Beyond the incentive, success hinges on delivering cleaner, reliable power to support NEVs and manufacturing. Expanding local battery supply chains and aligning tax and tariff policies with green energy goals could strengthen resilience amid regional competition.
Two big questions for readers:
1) Should the government accelerate incentives or broaden them to consumer subsidies to spur electric-vehicle adoption?
2) What mix of policies would best balance environmental aims with industrial growth in SA’s auto sector?
Share your thoughts in the comments below.
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