Tax breaks for South African carmakers coming into effect soon
Significant tax breaks for South African carmakers are said to be in the works and will come into effect as early as the year 2026.
The call for tax breaks for South African carmakers to transition to new-energy vehicles (NEVs) has finally been heard. According to Daily Investor, quoting Bloomberg, sizeable tax breaks for carmakers will come into effect in 2026.
Speaking this week on the sidelines of the Black Industrialists and Exporters Conference in Tshwane, Trade and Industry Minister Ebrahim Patel said the following. Tax breaks for South African carmakers will allow them to start gearing up (for NEVs). New-energy vehicles refer to any battery-electric augmented vehicle, whether it be fully electric, hybrid or hydrogen powered.
TAX BREAKS FOR SOUTH AFRICAN CARMAKERS
“A carmaker can commence immediately to put in place the (NEV) production capabilities and systems ahead of 2026. As they incur that expense off the back of our incentive, they know they will be reimbursed 150%,” said Patel. To help preserve one of South Africa’s key export industries, in February 2024, a 150% tax deduction on investments in the production of electric and hydrogen-powered vehicles in SA was announced by the ministry.
BILLIONS ON THE LINE
Vehicle exports from the likes of BMW South Africa, Mercedes-Benz South Africa, Ford South Africa, ISUZU Motors South Africa, Volkswagen South Africa and others, generates more than R397.3 billion ($21 billion) per year for the country.
However, the worldwide shift away from internal-combustion engine (ICE) vehicles, that South Africa produces, has left us behind the curve. A lack of incentives and tax breaks for South African carmakers has stymied a transition that’s moving fast overseas. Put simply, if we don’t adapt to NEV, there will no longer be a market to export SA-built vehicles to.
GEAR UP FOR 2026
Patel reiterates the 2026 deadline is designed to give South African carmakers enough time to prepare. And, most importantly, win support from their parent company motherships overseas. Only time will tell if all of this is too little, too late and whether these large corporations still have faith in South Africa.