According to Bloomberg, South African President Cyril Ramaphosa has signed a law that provides tax reductions for the production of new energy vehicles (NEVs), planning to offer a 150% tax rebate to companies investing in the production of electric and hydrogen-powered vehicles in South Africa. Chinese automakers are now planning to invest in South Africa's automotive industry.
Mikel Mabasa, CEO of the South African Automotive Manufacturers Association (NAAMSA), stated that three Chinese car manufacturers have signed confidentiality agreements with the South African Automotive Business Council, but he declined to disclose their names. Mikel Mabasa added, "With the active support of the South African government's policies, the South African automotive industry will attract and retain new investments."
In the South African market, Chinese automakers such as Chery and Great Wall Motors are competing with global manufacturers like Toyota and Volkswagen. In December 2024, Wu Peng, the Chinese ambassador to South Africa, indicated that the Chinese government is encouraging Chinese car manufacturers to invest in South Africa.
The South African tax amendment was first introduced in the national budget in February 2024 but was only enacted by Cyril Ramaphosa on December 24, 2024. While companies like Ford and BMW are either already producing or planning to produce hybrid vehicles in South Africa, no company has announced plans to invest in pure electric vehicles (EVs). The South African automotive industry currently faces risks as the European Union, South Africa's largest export market, plans to phase out internal combustion engine vehicles.
Representatives of Volkswagen Group and Isuzu in South Africa have stated that they believe it is unlikely for the two companies to produce electric vehicles in South Africa. However, Stellantis has indicated that the company plans to produce pure electric vehicles in South Africa once the operating environment is favorable.
Mikel Mabasa remarked that, despite slower-than-expected adoption of electric vehicles in developed markets such as the EU and the US, South Africa needs to begin producing electric vehicles to maintain its position in the global automotive industry.
Mike Whitfield, Head of Stellantis for Sub-Saharan Africa, stated that for South Africa to produce electric vehicles, several necessary measures need to be taken. These include additional investment in the charging station network, development of a supply chain "utilizing Southern African mineral resources," and reducing sales tax on electric vehicles. He emphasized that, aside from the tax amendment, South Africa must implement other measures, as companies will not make investment decisions based solely on the tax change.
Meanwhile, a significant portion of automotive manufacturers' revenues comes from domestic market sales in South Africa, and the country has not adjusted the tariff on imported electric vehicles or the ad valorem tax on luxury cars for decades. Mikel Mabasa pointed out that South Africa's taxes are higher than those of other emerging markets, and the ad valorem tax should either align with inflation rates or be abolished altogether.
Mikel Mabasa emphasized that, given South Africa's infrastructure and relatively affluent consumer base, the country remains the most attractive investment location for automakers in Africa. However, the South African automotive industry also requires more support. He warned, "If the South African government fails to provide policy support, the South African automotive industry will disappear."
South Africa is the world's largest producer of manganese and nickel, both of which are key components for electric vehicle batteries. The country also has the largest platinum reserves, which can be used to manufacture fuel cells for hydrogen-powered vehicles.
