
South Africa is poised to draw in Chinese investments towards its $27 billion automotive sector, thanks to the president’s endorsement of a tax incentive designed to enhance the production of new-energy vehicles.
Mikel Mabasa, CEO of the Automotive Business Council, shared that three Chinese automotive manufacturers have already signed non-disclosure agreements, although he withheld their identities.
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“With robust government policies, we aim to attract fresh investments as well as retain current ones,” Mabasa remarked during an interview on Friday.
Chery Automobile Co and Great Wall Motor Co are increasingly emerging as competitors to local brands such as Toyota Motor Corp and Volkswagen AG. In December, Wu Peng, the Chinese ambassador to South Africa, noted that his government is motivating automakers to invest in the country.
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While the sector has embraced this initiative, it follows years of worries that automotive manufacturing, a key pillar of South Africa’s manufacturing landscape, faces challenges due to legislation in its primary export market—the EU—targeting the phase-out of internal combustion engines.
The tax amendment, initially proposed in the national budget back in February of the previous year, was officially enacted by President Cyril Ramaphosa on December 24.
Some companies, including Ford Motor Co and BMW AG, are in the process of manufacturing or planning to produce hybrid models in the country, but none have announced plans for investments in fully electric vehicles.
Local leaders at Volkswagen and Isuzu Motors convey that they do not anticipate their companies producing EVs in South Africa. Stellantis NV has expressed intentions to do so once market conditions become favorable.
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Although the shift towards electric vehicles in developed markets like the EU and US has been slower than expected, Mabasa argues that South Africa must initiate EV production to uphold its status in the global arena.
Mike Whitfield, head of Stellantis sub-Saharan Africa, highlighted the need for further investment in charging-station networks, the establishment of a supply chain leveraging southern Africa’s mineral wealth, and tax reductions on vehicle sales.
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He noted that the tax amendment “cannot and will not be sufficient on its own,” underscoring that additional measures are vital as “this isn’t the only determinant that can cement an investment decision.”
As the top producer of manganese as well as nickel and rare earth elements—critical materials for electric vehicle batteries—South Africa also leads in platinum mining, which is used in fuel cells for hydrogen-powered vehicles.
Nonetheless, local sales account for a significant segment of automaker revenue, and import duties on electric vehicles—including an ad-valorem tax originally aimed at luxury cars—have not changed in decades.
“We’ve issued our initial warning to the government,” Mabasa noted, stating that levies are higher than those in other emerging markets.
The ad-valorem tax should either be revised “to align with inflation or be removed entirely,” he suggested.
Even though South Africa remains the most attractive destination for automaker investments in Africa due to its infrastructure and relatively affluent consumer base, Mabasa emphasizes that the industry needs more support from the government.
“If the government fails to provide assistance, the industry will decline,” he cautioned.
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