Toyota South Africa CEO Proposes Solutions to Combat High Car Prices in Local Market

South African Auto Industry Faces Crisis: Tax Policies and Rising Competition Threaten Leadership

Gqeberha – The South African automotive industry is at a critical juncture, facing mounting challenges from outdated tax policies and increasing competition from abroad. Leading figures in the sector are warning that without swift and decisive action, the nation risks losing its position as the continent’s largest vehicle manufacturer.

Outdated Tax System Inflates Vehicle Prices

Toyota South Africa’s Chief Executive Officer,Andrew Kirby,recently voiced concerns regarding the current tax system,specifically the ad valorem tax applied to vehicles. Speaking at the Naamsa Autoweek Conference, Kirby argued that the current formula, unchanged for three decades, disproportionately impacts affordable cars, effectively taxing them as luxury items. He highlighted the absurdity of applying the same tax structure to entry-level models now as was applied to premium vehicles in 1995.

The ad valorem tax is calculated by multiplying 0.00003 by 80% of a vehicle’s retail price and then deducting 0.75. this formula, while reasonable in 1995, now results in substantially higher tax amounts due to significant increases in vehicle prices. For example, a Volkswagen Citi Golf Chico in 1995 faced a minimal tax of approximately R21, whereas the current most affordable model, the Suzuki S-Presso, bears a tax burden exceeding R6,300 – a staggering increase of over 30,000%.

Vehicle Model	Year	Retail Price (ZAR)	Ad Valorem Tax (ZAR)
Volkswagen Citi Golf Chico	1995	33,950	21
Suzuki S-Presso	2025	178,900	6,333

Competition from Asia Intensifies

The rising costs, exacerbated by the existing tax structure, are making South African-manufactured vehicles less competitive against imports, especially from China and India. While Chinese brands like BYD and Chery are gaining traction with affordable electric vehicles (EVs) and plug-in hybrids,India’s influence is even more pronounced. In 2024, India-made vehicles accounted for 35.8% of all new vehicle sales in South Africa, exceeding the 10.7% share held by Chinese brands.

Interestingly, the dominance of india-made cars is less visibly attributed to Indian brands; many are manufactured in India for other global automakers.This has been a subtle shift, as these vehicles comprised only about 1% of South African sales just seven years ago.

Urgent Need for Transition to new Energy Vehicles

Beyond pricing challenges, industry leaders emphasize the critical need to accelerate the transition to new energy vehicle (NEV) production. Andrew Kirby cautioned that failing to do so risks relegating South Africa to a base for only traditional internal combustion engine (ICE) vehicle manufacturing. He underscored the importance of preparing for the European Union’s ban on ICE vehicle sales from 2035 and the increasing carbon taxes on petrol and diesel models.

Neale Hill, President of ford Southern Africa, echoed these concerns, pointing out that Morocco has secured a significant $5.6 billion investment from China to establish an EV factory,aiming to produce one million vehicles annually by 2025 – a target South Africa currently hopes to achieve by 2035. Furthermore, South Africa lags significantly in EV adoption, with only approximately 4,000 EVs on the road compared to over 100,000 in Ethiopia.

Did You Know? Morocco’s ambitious EV production goal reflects a broader trend of investment in EV manufacturing across Africa, driven by access to raw materials and growing demand for lasting transportation.

Pro Tip: For consumers considering purchasing a vehicle in South Africa,researching total cost of ownership,including taxes and potential fuel efficiency savings with EVs,is increasingly important.

The current government EV roadmap has yet to yield significant results. Industry experts stress that a swift and comprehensive response is essential to avoid losing ground in the global automotive landscape.

Long-Term Implications for South Africa

The challenges facing the South African automotive industry extend beyond immediate sales figures and market share. The sector plays a crucial role in economic growth, job creation, and technological advancement. A decline in automotive manufacturing would have ripple effects across various industries, impacting suppliers, logistics, and associated services.

Addressing these issues requires a collaborative effort between the government, automakers, and labor unions. Policy reforms, investment in infrastructure, and skills development are all necessary components of a sustainable solution.

Frequently Asked Questions about the South African Automotive Industry

• What is the primary issue facing the South African auto industry? The primary issue is an outdated tax structure that inflates vehicle prices, making them less competitive.
• How are Chinese and Indian automakers impacting the South African market? They are increasing their market share significantly with more affordable vehicles, especially EVs and hybrids.
• What is the *ad valorem* tax, and how does it work? It’s a percentage-based tax on vehicle value, calculated using a formula that hasn’t been updated in decades, resulting in a disproportionately high tax on lower-end vehicles.
• What is the significance of the EU’s 2035 ban on ICE vehicles? It forces South African manufacturers to transition to NEV production to maintain access to the European market, a major export destination.
• What steps can be taken to address these challenges? Revising the tax system, investing in NEV production capabilities, and developing a comprehensive EV adoption strategy are vital steps.

What role should the South African government play in revitalizing the automotive sector? Do you believe that consumers are adequately informed about the long-term costs associated with vehicle ownership in South Africa?

Share your thoughts in the comments below!

What specific import duties does Toyota South Africa’s CEO propose be reviewed, and why?

The Rising Cost of Vehicle Ownership in South Africa

South Africa’s automotive market is facing a important challenge: escalating car prices. Factors like a weakening Rand, global supply chain disruptions, increased import duties, and rising inflation are all contributing to the problem, making vehicle ownership increasingly unaffordable for many South Africans. Recently, Andrew Kirby, CEO of Toyota South Africa Motors (TSAM), has publicly outlined a series of proposed solutions aimed at mitigating thes challenges and fostering a more accessible automotive landscape.These proposals aren’t just about Toyota; they’re about the health of the entire South African car market.

kirby’s key Proposals: A Multi-Pronged Approach

Kirby’s strategy focuses on several key areas, advocating for both government intervention and industry-led initiatives. He’s been vocal about the need for a collaborative effort to address the complex issue of vehicle affordability. Here’s a breakdown of the core proposals:

* Review of import Duties: A significant portion of Kirby’s argument centers around the high import duties levied on fully built-up (CBU) vehicles and components. He suggests a strategic review and potential reduction of these duties, particularly for vehicles that don’t have local manufacturing equivalents. This would promptly lower the landed cost of imported vehicles.

* Local Content Enhancement: While advocating for duty reductions on CBU imports, kirby simultaneously stresses the importance of bolstering local content. increasing the percentage of locally sourced components in vehicle manufacturing would reduce reliance on imports and strengthen the South African economy. This ties into the Automotive Production Development Programme (APDP).

* Exchange Rate Stability: Recognizing the Rand’s volatility, Kirby highlights the need for broader economic policies aimed at stabilizing the currency. A stronger Rand would directly translate to lower import costs and, consequently, more affordable vehicle prices.

* Incentivizing Electric Vehicle (EV) Adoption: Kirby proposes incentives to encourage the uptake of EVs, including reduced import duties on electric vehicles and components, as well as investment in charging infrastructure.This aligns with global trends towards enduring mobility and could perhaps lower the total cost of ownership in the long run.

* Streamlining Regulatory Processes: He advocates for a simplification of regulatory processes related to vehicle importation and manufacturing, reducing bureaucratic hurdles and associated costs.

The impact of the Weakening Rand on Car Prices

The South African Rand has experienced considerable fluctuations in recent years, significantly impacting the price of imported vehicles and components. A weaker Rand means that manufacturers need to spend more Rand to purchase the same amount of foreign currency, driving up costs. This effect is particularly pronounced for brands like Toyota, which import a substantial portion of their vehicles and parts.

Consider this: a 10% depreciation of the Rand can translate to a 5-8% increase in vehicle prices, depending on the import content.This directly affects consumer purchasing power and contributes to the growing affordability crisis. The current exchange rate is a major driver of new car prices and used car prices in South Africa.

The Role of the Automotive Production Development Programme (APDP)

The APDP is a cornerstone of South Africa’s automotive industry policy. It aims to promote local manufacturing,attract investment,and create jobs. While the APDP has been prosperous in attracting foreign investment and increasing vehicle production, its effectiveness in addressing affordability remains a point of debate.

Kirby’s proposals suggest a need to refine the APDP to ensure it not only supports local manufacturing but also contributes to lowering vehicle prices. This could involve:

1. Expanding the scope of incentives: Including incentives for manufacturers who actively pursue cost reduction strategies.
2. Prioritizing localization of key components: Focusing on developing local capabilities for components that currently rely heavily on imports.
3. Enhancing skills development: Investing in training programs to equip the workforce with the skills needed to support a growing automotive industry.

Benefits of Implementing Kirby’s Proposals

Implementing these proposals could yield several significant benefits for the South African automotive market and the broader economy:

* Increased Vehicle Affordability: Lower prices would make vehicle ownership more accessible to a wider range of consumers.

* Stimulated economic Growth: Increased vehicle sales would boost economic activity across the automotive value chain.

* Job Creation: A thriving automotive industry would create more employment opportunities.

* Enhanced Competitiveness: A more competitive automotive market would benefit consumers and drive innovation.

* Sustainable Mobility: Incentivizing EV adoption would contribute to a cleaner and more sustainable transportation system.

real-World Examples & Industry Response

Toyota South Africa has already begun implementing some cost-saving measures within its own operations, such as optimizing logistics and streamlining production processes. Other manufacturers are closely watching the situation and engaging in discussions with government officials.

the National Association of Automobile Manufacturers of South Africa (Naamsa) has publicly supported calls for a review of import duties and a more thorough approach to addressing vehicle affordability. However, there are differing views on the extent to which import duties should be reduced, with some arguing that it could harm the local manufacturing sector.

Practical Tips for Consumers Seeking Affordable Vehicles

While waiting for broader policy changes, consumers can take several steps to find more affordable vehicles:

* Consider Used Cars: The used car market offers a wide range of options at lower price points.

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