MIDTERM BUDGET | SA electric vehicle market will need domestic demand, says Godongwana

The South African automotive sector’s ability to grow a sustainable electric vehicle market will depend greatly on the market’s ability to cultivate local demand for hybrid and electric vehicles, says finance minister Enoch Godongwana.

While tabling his medium-term budget policy statement in parliament on Wednesday, Godongwana said the transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans.

“South Africa's traditional trading partners are intensifying their decarbonisation plans. Many countries introduce carbon pricing mechanisms to make emissions more expensive and incentivise emissions reductions,” said Godongwana.

In the automotive sector, a major exporter and source of employment, the transition to new energy vehicles posed an “existential threat to South African vehicle production”.

“This transition will require balancing domestic market demand, establishing renewable energy-based charging infrastructure, and supporting production,” Godongwana said.

During a briefing ahead of the medium-term budget policy statement, Godongwana told reporters he believed it would be more sensible to leverage South Africa’s position as an exporter of vehicles to develop a domestic electric vehicle market over time.

“If we start with a consumer incentive, we must kiss production in South Africa goodbye. There is competition about the location of investment. Our first approach at the moment is the export market because the majority of cars, in any event, are going to the export market,” he said.

After the National Treasury’s extensive discussions with South Africa’s seven car manufacturers, he said he was of the view that South Africa will likely see the first hybrid vehicle in 2026.

He said he was reluctant to look into the consumer market, which was “currently sucking in imports” and that South Africa planned on prioritising production for export.

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