South Africa boosts EV investments
In a significant move to embrace sustainable transportation, the Automotive Business Council has lauded the initiative that Finance Minister Enoch Godongwana announced in his 2024 Annual Budget Speech. This initiative aims to bolster the transition to electric vehicles (EVs) in South Africa through a strategic plan focused on investment. Mikel Mabasa, CEO of naamsa, expressed approval for the government's proactive approach towards fostering the production of EVs, aligning with the global trend towards environmentally friendly mobility solutions.
A vital element of the Minister's announcement was the introduction of an investment allowance for new EV ventures starting March 2026. This incentive allows businesses and investors in the EV sector to deduct 150% of qualifying investment expenses in the first year, a move Mabasa believes will attract investments, spur innovation, and accelerate the growth of South Africa's EV market. The reallocation of funds to support the transition to new energy vehicles is a commitment to providing the fiscal backing necessary for developing and adopting EVs, contributing to global efforts to reduce carbon emissions.
The investment allowance for EVs complements the existing Automotive Production Development Programme (APDP), underscoring the government's comprehensive support for the automotive industry. However, naamsa anticipates ongoing dialogues with the government to navigate challenges within the APDP, especially regarding vehicles with low local content due to the predominant battery production in countries like Japan, South Korea, and China.
The industry suggests that the allocated R964 million funding, while significant, is only a fraction of the annual investments by Original Equipment Manufacturers (OEMs), which stand at approximately R5 billion. This funding is viewed as an initial step, with expectations for further acquisitions and collaborations in the future. Additionally, naamsa will seek to address potential timeline gaps in the pre-investment cycles for production starts, ensuring the incentive framework matches the industry's requirements.
Beyond financial incentives, naamsa praised the Minister's attention to structural reforms in electricity supply, transport logistics, and infrastructure provision. These reforms are crucial for the automotive sector's growth and sustainability. The industry suffered substantial financial losses due to load shedding in 2023 and is keen on improving energy security and operational stability.
As a key contributor to South Africa's economy, with exports exceeding R400 billion in 2023, the automotive industry is poised to collaborate with entities like Transnet for efficient logistics operations. These efforts aim to enhance the industry's global competitiveness and ensure its continued growth in the era of sustainable mobility.