South Africa aims to draw Chinese investments into its $27 billion automotive sector after the president sanctioned a tax incentive designed to enhance the production of new-energy vehicles.
CEO Mikel Mabasa of the Automotive Business Council reported that three Chinese automotive manufacturers have entered into non-disclosure agreements, although he did not disclose their identities.
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“With effective government policies, we will attract new investments and retain existing ones,” Mabasa remarked in an interview on Friday.
Vehicles from Chery Automobile Co and Great Wall Motor Co are increasingly competing with local manufacturers, such as Toyota Motor Corp and Volkswagen AG. In December, Chinese ambassador to South Africa, Wu Peng, indicated that his government is encouraging automakers to invest in the country.
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While the sector has welcomed the initiative, it follows years of concerns that automotive manufacturing—a key pillar of South Africa’s manufacturing landscape—faces challenges due to legislation in its primary export market, the European Union, which aims to phase out internal combustion engines.
The tax amendment, initially proposed in the national budget in February last year, was officially enacted by President Cyril Ramaphosa on December 24.
Although some companies, including Ford Motor Co and BMW AG, are producing or planning to manufacture hybrids in the country, none have publicly announced intentions for fully electric vehicle investments.
The local leaders of Volkswagen and Isuzu Motors have stated that they do not foresee their firms producing EVs in South Africa. Stellantis NV has expressed intentions to do so once market conditions improve.
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While the adoption of electric vehicles in developed regions like the EU and US has been slower than expected, Mabasa insists that South Africa must start producing EVs to sustain its global market position.
Mike Whitfield, the head of Stellantis sub-Saharan Africa, underscored the need for more investment in charging station networks, the development of a supply chain utilizing southern Africa’s mineral wealth, and the reduction of vehicle sales taxes.
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He stated that the tax amendment “cannot and will not suffice on its own,” emphasizing that additional actions are vital as “this isn’t the only factor that can ensure an investment decision.”
As the world’s largest producer of manganese, along with nickel and rare earth elements essential for electric vehicle batteries, South Africa also excels in platinum mining, which is vital for fuel cells in hydrogen-powered vehicles.
Nevertheless, local sales form a significant part of automaker revenue, and import duties on electric vehicles—including an ad-valorem tax originally aimed at luxury cars—have remained static for decades.
“We’ve sent our first warning to the government,” Mabasa noted, pointing out that levies are higher than those in other emerging markets.
He suggested that the ad-valorem tax should either be adjusted “to align with inflation or removed entirely.”
Even though South Africa remains the most attractive destination for automaker investments in Africa due to its infrastructure and relatively affluent consumer base, Mabasa urges that the industry requires further government support.
“If the government does not provide backing, the industry will gradually decline,” he cautioned.
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