South Africa is strengthening EV manufacturing incentives as automakers warn that electricity, logistics and policy uncertainty could threaten vehicle exports.
South Africa is stepping up efforts to protect its position in global vehicle exports as automakers shift investment towards electric vehicles and increasingly compare the country with lower-cost production hubs in Asia and South America.
The country has introduced a 150% tax deduction for qualifying investments in the production of electric and hydrogen-powered vehicles, but automotive executives say financial incentives alone may not be enough to secure future vehicle production programmes.
South Africa’s automotive industry is heavily export-oriented. About 67% of locally manufactured vehicles are exported, with the European Union and United Kingdom accounting for approximately 63% of those shipments.
Both markets are tightening emissions standards and accelerating the transition towards lower-emission vehicles, increasing pressure on South African manufacturers to participate in the global electric-vehicle supply chain.
The automotive sector contributed 23.8% of South Africa’s manufacturing output in 2025 and directly employed around 113,000 people, while supporting an estimated 498,000 additional jobs.
The new incentive allows manufacturers to deduct 150% of qualifying investments in buildings, machinery and equipment used to produce electric and hydrogen-powered vehicles. The measure took effect from March 2026.
However, the domestic market for new-energy vehicles remains relatively small, accounting for about 2.8% of new vehicle sales. The introduction of more affordable electric and plug-in hybrid models has supported growth, but industry executives say greater consumer support will be needed alongside production incentives.
Neale Hill, president of Ford Motor Company Africa, said South Africa needed to avoid falling behind as the global automotive industry changes rapidly.
Investment decisions extend beyond tax incentives, with manufacturers considering production costs, market access, logistics, electricity reliability, workforce skills, local supplier capacity, exchange-rate risks, trade agreements and regulatory certainty.
South Africa also faces infrastructure and cost pressures. Toyota South Africa CEO Andrew Kirby said the country had lost some of the advantages it previously enjoyed through relatively low energy, labour, tax and logistics costs.
The shift in global production is already creating challenges. Toyota selected Thailand rather than South Africa as the production base for the electric version of its Hilux pickup, while Nissan has exited local vehicle manufacturing after operating below capacity.
China’s strong position across the electric-vehicle supply chain has also helped attract investment from both Chinese and Western automakers seeking competitive manufacturing locations.
South Africa’s automotive industry is therefore calling for greater certainty around the country’s industrial policy as manufacturers make decisions on vehicle platforms that could remain in production for many years.
The review of the Automotive Production and Development Programme 2 (APDP2) has become increasingly important as the country seeks to determine how future support for vehicle manufacturing should evolve.
The government has pointed to improvements in electricity supply and reforms at logistics operator Transnet as part of efforts to strengthen the industrial environment. However, manufacturers continue to highlight reliable power, grid capacity, transport infrastructure and logistics efficiency as critical requirements.
South Africa has not yet announced an EV manufacturing investment directly linked to the new 150% incentive. Existing automotive support programmes have, however, attracted substantial investment from established manufacturers and newer entrants, including China’s BAIC and Chery, which plans to begin local production in 2027.
The immediate concern for South Africa is therefore not necessarily the loss of existing vehicle production, but whether future vehicle models and manufacturing investment will be allocated to the country.
As global automakers restructure their production networks around electric and lower-emission vehicles, South Africa’s ability to combine competitive costs, reliable infrastructure, skilled labour, market access and predictable policy will increasingly influence its role in global vehicle supply chains.