SA forecast to manufacture EVs locally by 2026

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 26 Apr 2024
Government is engaging stakeholders to identify ways of creating a conducive environment for the adoption of electric vehicles.
Government is engaging stakeholders to identify ways of creating a conducive environment for the adoption of electric vehicles.

There are several emerging opportunities for local and international investors in the South African (EV) sector, with the first iteration of locally-manufactured EVs expected as early as 2026.

This is according to the Electric Vehicle Market Intelligence Report (MIR) released this week, compiled by non-profit green economy organisation GreenCape.

The MIR provides a landscape of SA’s EV market opportunities and challenges, according to the growth potential and ability to overcome market entry barriers.

It also focuses on the investment opportunities in the electric mobility value chain, as the technology has shown evidence of viable business cases in key industries, including last-mile delivery, public transportation, freight and logistics, and private passenger transportation.

There is a growing trend of EV adoption in the South African market due to an increase in operational cost competitiveness, notes the report.

Referencing statistics from the Automotive Business Council, the report notes battery EV sales in SA grew by 85.46% from 502 vehicles sold in 2022, to 931 vehicles sold in 2023.

Sales of electric trucks and light duty vehicle have been recorded in official statistics for the first time, showing the EV market is diversifying away from being predominantly private passenger vehicle sales.

“There are several emerging opportunities in the South African EV industry for local and international investors looking to enter the local market,” according to the report.

“The EV transition in South Africa presents opportunities to develop localised energy security for transportation. It has the potential to stimulate new green industries through viable investment opportunities that exist and are emerging over the next decade in the EV value chain in SA.

“To encourage the local production of EVs, government says it will introduce an allowance for new investments, beginning 1 March 2026.”

According to the report, this will enable producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.

The incentive will be implemented in addition to the existing industrial support mechanisms under the Automotive Production Development Programme.

In his seventh State of the Nation Address, held in February, president Cyril Ramaphosa said government is laying the groundwork for the local production of EVs in SA, through engagements with neighbouring countries that are forerunners in automotive manufacturing on the continent.

He highlighted the local production of EVs as an important part of the Energy Transition Investment Plan, with the potential to drive investment in green energy and skills development programmes.

The cost factor

According to the GreenCape report, there are currently no EV models manufactured locally in SA (only locally assembled vehicles), which means consumers are dependent on EV imports.

Import duties on EVs are around 25% and ad valorem (luxury goods taxes) are applied to all vehicle imports into SA with a value of R600 000 or above – contributing to the high cost of EVs.

Government is engaging relevant stakeholders to identify ways of creating a conducive environment for the adoption of electric vehicles, including the possibility of lowering import levies.

Government has also reprioritised R964 million over the medium-term to support the transition to EVs, in line with the New Energy Vehicles White Paper, approved by Cabinet in 2023.

“With regards to EV policy development, 2023 was a significant year for SA. The Department of Trade, Industry and Competition released the Electric Vehicle White Paper in December 2023. The key insight from this policy document relevant to this MIR is that the focus of government incentives and financial support will be directed towards the automotive manufacturing industry to support local EV production in the medium-term with the first battery,” says the report.

Last year, the Department of Transport released the Electric Vehicles Regulations Framework for public comment − an important step towards formalising regulations and standards that will be important for the growth of SA’s EV industry.

A key aspect of EV regulation in the short- to medium-term will be the standardisation of charging hardware in the South African market, it says.

The adoption of the North American Charging Standard byoriginal equipment manufacturers (OEMs) in the US has largely been an industry-led initiative, with little government intervention.

“EV OEMs in South Africa will likely adopt a similar industry-led approach to that which has been implemented in North America. This approach will allow drivers who own EVs made by a wide range of brands to collaborate and use the same network of charging stations,” notes the report.