26 Feb 24

South Africa offers tax breaks to energize EV industry

South Africa offers tax breaks to energize EV industry

From 2026, South African companies investing in the production of electric or hydrogen-powered vehicles can claim a 150% tax deduction on those investments. 

The measure, announced on 21 February in the country’s annual Budget, aims to energize the local EV and hydrogen industries which, despite local availability of essential minerals, remain small. 

South Africa (pictured: Cape Town) is a major automotive manufacturer. Local production sites for Toyota, BMW, Ford and Volkswagen, among others, contributed more than $21 billion to the country’s annual exports in 2023. 

However, the South African automotive industry has made little progress in developing alternate powertrains – this despite the fact that the country is rich in some of the key ingredients of both EVs and hydrogen vehicles. 

South Africa is the world’s sixth-largest manufacturer of nickel and manganese, which are essential for EV batteries. And it is the world’s largest manufacturer of platinum, a key element of the fuel-cell engines that power hydrogen vehicles. 

While the tax break is a welcome incentive for EV and hydrogen industries in South Africa, the National Association of Automobile Manufacturers of South Africa (NAAMSA) regrets that it will only enter into force from 2026. 

Other obstacles include the large amounts of carbon used to produce electricity in South Africa, and the frequent power outages across the country, which are a challenge for automotive (and other industries). Should the incentive work nevertheless, South Africa could become a hub for EV and hydrogen vehicle manufacturing for Africa, and other parts of the world. 

Image: David Stanley, CC BY-SA 2.0

Authored by: Frank Jacobs