South Africa Races to Keep Auto Exports Competitive in EV Era
South Africa risks losing future vehicle production to Asian rivals as global automakers decide where to build the next generation of electric vehicles, despite a new government tax incentive aimed at attracting investment, executives say.
The industry, which exports about two-thirds of its output, is seeking a place in global EV supply chains as rivals in Asia and South America attract investment.
President Cyril Ramaphosa has signed into law a 150% tax deduction aimed at spurring electric and hydrogen vehicle production from March 2026, but executives and analysts say the industry’s future will depend on factors the incentive cannot directly address, such as reliable electricity supply, charging infrastructure, consumer demand, policy certainty and export competitiveness.
The automotive industry is a cornerstone of South Africa’s economy, contributing 23.8% of manufacturing output in 2025, directly employing about 113,000 people and supporting a further 498,000 jobs.
Around 67% of locally manufactured vehicles are exported, with the European Union and United Kingdom accounting for 63% of those shipments. Both markets are rapidly tightening emissions standards and accelerating the shift to lower-emission vehicles.
Industry leaders warn the country risks losing future model allocations and investment unless it secures a place in global EV supply chains.
“What we’ve got to be very careful of is that South Africa doesn’t get left behind because the global framework is moving so quickly,” Neale Hill, president of Ford Motor Company Africa, told Reuters.
GOVERNMENT’S EV INCENTIVE
The incentive allows automakers to deduct 150% of qualifying investments in buildings, machinery and equipment used to produce electric and hydrogen-powered vehicles.
South Africa’s domestic NEV market remains small, accounting for just 2.8% of new vehicle sales, although the arrival of more affordable electric and plug-in hybrid models has helped drive growth.
De Wet Taljaard, technical adviser at Investec Sustainable Solutions, described the measure as one of South Africa’s strongest incentives for EV manufacturing, but cautioned that tax breaks alone rarely determine investment decisions.