Minster: EV production in South Africa won’t be a tripped switch

Government has approved investments for electric cars and focus from March 2026.

Between manufacturing and retail, the South African automotive industry accounts for just shy of five percent of the national gross domestic product (GDP).

Support from 2026

The Minister of Finance has outlined some key strategies to ensure it remains globally competitive.

During his annual Budget Speech last month, Minister Enoch Godongwana addressed several automotive sector-related topics including the adoption of EV manufacture, mitigating gross production losses due to load shedding and ameliorating the exporting process at ports with private sector partnerships.

While some plans are more long-term, this is critical and welcomed in the context that according to the national treasury the automotive sector in South Africa contributed 4.9% to GDP in 2023 with component-related investment alone during the year at R4.5-billion.

Massive news is the government’s adoption of EV technology production.

naamsa comments

“A notable component of the Minister’s announcement is the introduction of an investment allowance for new EV investments, set to commence in March 2026,” said Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (naamsa)

“This allowance enables businesses and investors involved in EV production to claim 150% of qualifying investment spending in the first year. This financial incentive is a crucial step in attracting investments, fostering innovation, and driving the growth of the EV sector within South Africa”.

Mabasa continued, saying, “We welcome government’s decision to reallocate funds to specifically support the transition towards our broader evolution towards new energy vehicles because this demonstrates a commitment to provide the necessary fiscal support for the development and adoption of EVs”.

Approach

The investment allowance for EVs is highlighted as a complementary initiative to the existing Automotive Production Development Programme [APDP].

While this synergy underscores the government’s approach to supporting the automotive industry, the composition of APDP post the investment phase remains a critical lever in ensuring the transition from traditional internal combustion engines to a dual platform that includes electric vehicles by 2035.

Critical for this is government’s engagement with industry on how locally produced EVs can emerge as globally competitive in comparison to predominant battery production locations like China, Japan and South Korea.

naamsa also said that the allocated R964-million should be viewed in the context of the average annual investments by OEMs, which currently stands at approximately R5-billion.

While government’s commitment is evident and welcomed, it is important to recognise the scale of investments required by industry. This funding should be seen as a significant initial step, with further collaborations and investments anticipated in the coming years.

It is also important to note that the 2026 implementation rollout date for the investment allowance does not cover the pre-investment cycles before some of the production starts.

Considering the state of infrastructure and consistent power delivery, particularly to the massive automotive industry which faces global consequences, the Minister of Finance also presented several reforms.

These are in the areas of electricity supply, transport logistics, and infrastructure provision, which are crucial for the continued growth and sustainability of the automotive sector.

With the obvious dangers of inconsistent electricity supply causing losses of up to R200-million per OEM every six months, these urgent reforms will serve as a stride forward for future investments from automakers in the region.