Pixabay
South Africa's carmakers have welcomed the government's announcements on support for the sector's transition to electric vehicles.
Finance Minister, Enoch Godongwana, announced a strategic and investment-driven plan during his budget speech in Cape Town on Wednesday.
"The Electric Vehicle white paper outlines our strategy to transition towards broader energy vehicle production and consumption in South Africa, starting with electric vehicles.
"It aims to transition the automotive industry from primary-producing internal combustion engine vehicles to a dual platform that includes electric vehicles by 2035.
"To encourage production of electric vehicles in South Africa, government will introduce an investment allowance for new investment beginning from 1 March 2026," the Minister said.
Godongwana said this would allow producers to claim "150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year", with the incentive being in addition to the existing industry support under the Automotive Production Development Programme.
<blockquote class="twitter-tweet"><p lang="en" dir="ltr"><a href="https://twitter.com/hashtag/Budget2024?src=hash&ref_src=twsrc%5Etfw">#Budget2024</a>| This will allow producers to claim 150 per cent of qualifying investment spending on electric <br> and hydrogen-powered vehicles in the first year. <a href="https://t.co/CEt8LrmzAf">pic.twitter.com/CEt8LrmzAf</a></p>— South African Government (@GovernmentZA) <a href="https://twitter.com/GovernmentZA/status/1760282563115888805?ref_src=twsrc%5Etfw">February 21, 2024</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
In a detailed response, Naamsa CEO, Michael Mabasa, described the government's strategy as forward-looking.
However, he noted concerns related to the Automotive Production Development Programme, saying automakers will continue to engage with the government to manage some of the challenges associated with the implementation of the APDP.
Mabasa said these concern vehicles with limited local content due to the predominant location of battery production in Japan, South Korea, and China.
"While this synergy underscores the government's holistic approach to supporting the automotive industry, the composition of APDP post the investment phase remains a critical lever in ensuring the transitioning from traditional internal combustion engines to a dual platform that includes electric vehicles by 2035," Mabasa said.
"In the short term, the existence of low local content necessitates Government's consideration to support other key technologies such as traditional hybrids and plug-in hybrids.
"We hope to compare notes around the adoption of an APDP rate specifically designed to cover instances of low local content and the exploration of effective strategies to address the adoption of locally produced EVs. The aim is to ensure that the advantages of the programme keep the local industry globally competitive," he added.
