Don’t expect cheaper electric cars in South Africa soon

Don’t expect electric vehicles (EVs) to become cheaper in South Africa any time soon.

Trade and industry minister Ebrahim Patel on Monday put paid to those hopes by saying import duties on EVs — which are higher than those on internal combustion engine (ICE) cars — would not be reduced in the short-term mainly because of load-shedding.

Tax and cashback incentives are offered to EV buyers in many countries to reduce the price gap between EV and ICE cars, but doing so in South Africa would lead to more EV sales which government believes is undesirable now because of Eskom’s woes and the small public charging infrastructure.

“Bringing a lot of EVs onto the market now is probably not smart due to the grid challenges,” Patel said in a media briefing in Pretoria outlining government’s long awaited white paper on the EV roadmap.

“We are looking at a two-phase approach. First to land a greater number of production facilities for EVs and later to introduce consumer incentives. A premature change to customs duties is likely to have a limited effect now, but at the appropriate time we will look at that. We’ll be talking to the motor industry from time to time to look at when will be the optimum moment to reduce import duties,” he said, adding he expected this might happen over the next seven to eight years.

His comments put paid to the motor industry’s hopes of boosting EV sales by making them more affordable. Imported ICE cars attract a duty of 18% compared to the 25% for EVs, which contributes to battery-powered vehicles carrying significant price premiums.

South Africa’s EV market has grown exponentially in the past few years with the launch of battery-powered models from Audi, BMW, MINI, Mercedes-Benz, GWM, Jaguar, Porsche and others, but off a very low base. EV sales rose 132% to 506 units last year, from 218 in 2021, but battery-powered cars are still priced beyond the reach of most motorists, with the cheapest costing nearly R700,000.

Patel announced a temporary reduction of import duties for batteries in vehicles produced and sold in the domestic market to improve cost competitiveness.

His briefing follows two years of intense lobbying by local automotive manufacturers for government to introduce an EV policy. The survival of the country’s seven big vehicle manufacturers relies on switching to EV manufacture as nearly two-thirds of their production goes overseas and a number of countries are to ban the sale of ICE vehicles soon. 

He said the primary goal of the white paper is to set a course to transition the vehicle industry from primarily producing ICE vehicles to a dual platform that includes EVs in the production and consumption mix by 2035. The first EV vehicle is expected to be produced locally by 2026.

It also aligns with changing demand in export markets and South Africa’s commitment to reducing greenhouse gases, Patel said.