The goal of establishing a low-carbon economy is central to global development and it is a central pillar of South Africa’s growth plans. It is apparent that policy reforms are necessary to incentivise the transition to clean energy and reduce the burning of fossil fuels, whose combustion releases gases that negatively impact the environment. Internal combustion engine (ICE) vehicles are a contributor to carbon emissions and, globally, steps are being taken to end the reliance on ICE vehicles and replace them with Electric Vehicles (EVs).
ICE vehicle manufacturing is a critical component of South Africa’s Gross Domestic Product (GDP) and, as such, the government is currently seized with the necessary policy reforms to incentivise the transition from ICE vehicles to EVs. This entails a comprehensive redesign of the motor vehicle manufacturing, retail, infrastructure and consumer framework. President Ramaphosa has highlighted that the local production of EVs is an important part of the Energy Transition Investment Plan, with the goal to drive investment in green energy and skills development programmes.[1]
The South African government published the Electric Vehicles White Paper[2] in which it sets out the aim to implement a comprehensive, coordinated approach to the transition to electric vehicles and that, “decarbonisation should not lead to de-industrialisation but rather be leveraged for growth, deepening the automotive value chain, fostering growth of local industry, and ensuring the transition aligns with economic priorities.” In this series of articles, we will assess the potential impact of the current policy direction on the various stakeholders in South Africa’s motor vehicle industry and look at positions that are likely to emerge which will ultimately affect South Africa’s automotive policy direction.
This is the first in a series of articles in which we will attempt to outline a unitary policy and regulatory framework to achieve South Africa’s goals in the EV space. In this instalment, we outline the broad context of the automotive sector in South Africa, the current policy framework and proposals, and the affected stakeholders and imperatives that will likely steer the narrative around the EV transition.
The Automotive Sector
The automotive sector in South Africa accounts for 4.3% of the GDP, which underlies the importance of this sector to the nation.[3] In 2023, 66.5% of light vehicles produced in South Africa were exported, with Europe and the United Kingdom receiving the bulk of these exports.[4] The EU and UK have set a target ban on new internal combustion engine vehicles by 2035 and, due to the South African automotive sector’s export dependence, local automotive manufacturers start to invest in enhancing the capacity to manufacture electronic vehicles.[5] Table 1 below shows the investment pledges made by various automotive manufacturers.
Table1. [6]
| Company/ Entity | Investment pledge in (Billion Rand) | Date |
| Ford Motor Company | 15.8 | 2021 – ongoing |
| BMW Group | 4.2 | 2024 – ongoing |
| Nissan | 3.0 | 2021 – ongoing |
| Toyota | 6.1 | 2021 – ongoing |
| Volkswagen group | 4.5 | 2021 – ongoing |
| Beijing Automotive International Corp | 11.0 | 2021 – ongoing |
| Total | 44.6 | |
| Development of Tshwane Automotive Special Economic Zone (SEZ) | 4.0 | 2019 – ongoing |
Given the significant amount of investment that is required to upgrade our electronic vehicle manufacturing capacity, automotive manufacturers have been at pains to point out that it is not enough to rely on export capacity only; there is a need to increase local demand for electronic vehicles. Table 2 below shows the local sales of electronic vehicles.
Table 2.[7]
South Africa is experiencing a growing demand for electric vehicles, driven by government incentives and increasing environmental consciousness, as evidenced by the increase in EV sales in 2023 and 2024. According to Statista, the South African EV market is anticipated to witness a significant growth in revenue at an annual growth rate of 8.69% by 2029. However, South Africa is lagging.
Policy Landscape
One of the primary ways to stimulate a significant increase in EV adoption, is to implement a policy environment and regulatory framework that supports and attracts the necessary investments in EV manufacturing. The South African government has published several policies that are currently in place to support local automotive manufacturing.[8] Whilst the policy landscape is encouraging, there are questions whether it sufficiently addresses the commercial value chains and incentives for manufacturing entities to establish a competitive e-mobility ecosystem.
Some of the criticism leveled against the current policy landscape is that they do not adequately address potential issues such as the feasibility of achieving high production and employment targets, the effectiveness of incentives in stimulating the desired growth, or the practical hurdles in transitioning to greener transport. In addition, the current policies are fragmented thus not able to adequately stimulate the local market or manufacturers to fully immerse themselves into the South African market. South Africa needs to harmonise the fragmented policies and come up with a unitary EV policy that pulls together environmental, consumer, energy, labour and fiscal concerns.
Way forward for South Africa
For South Africa to fully support the transition to EVs, more investment is needed to localize new technologies and capabilities including component manufacturing incentives for retooling, machinery, and skills development. It is also imperative for South Africa to prioritize investments in charging infrastructure and to stimulate local demand in to facilitate faster and wider EV adoption. This presents wide-ranging budgetary and policy challenges for the South African government which straddle diverse areas including –
- Manufacturing
- Retail
- Infrastructure
- Labour
- Consumer
Sources: Automotive Sector Policy and Briefs.
