South Africa is putting a 150% tax deduction behind its push to win electric-vehicle investment, but automakers warn the incentive may not be enough to protect the country’s role as a major vehicle exporter.

Global manufacturers are weighing lower-cost production bases as the industry shifts toward electric and hydrogen-powered models.

About 67% of vehicles manufactured in South Africa are exported, with the European Union and United Kingdom taking 63% of those shipments. Both markets are tightening emissions rules, raising the pressure on local factories to secure future model allocations and remain integrated into global electric-vehicle supply chains.

The automotive industry contributed 23.8% of South Africa’s manufacturing output in 2025, directly employed about 113,000 people and supported another 498,000 jobs.

That makes the transition more than an industry issue: decisions by global automakers could affect a major source of manufacturing activity, exports and employment.

Tax break meets reality

President Cyril Ramaphosa has signed legislation allowing companies to deduct 150% of qualifying investments in buildings, machinery and equipment used to produce electric and hydrogen-powered vehicles from March 2026.

Automakers have welcomed the measure, but South Africa’s new-energy vehicle market remains small, accounting for just 2.8% of new-vehicle sales.

De Wet Taljaard, technical adviser at Investec Sustainable Solutions, described the incentive as one of South Africa’s strongest measures for attracting EV manufacturing.

He cautioned, however, that tax breaks rarely settle investment decisions on their own, with manufacturers also weighing logistics, electricity reliability, labor skills, localization, currency risk, trade agreements and regulation.

Ford Motor Co. Africa President Neale Hill said South Africa needs to avoid falling behind as global investment moves quickly into new technologies.

Ford South Africa, which produces the Ranger plug-in hybrid, sees the tax measure as a first step, but says production support must be matched by policies that encourage consumer adoption.

Asia raises the stakes

South Africa offers no incentives for EV buyers, while industry representatives want taxes reduced that can push total import duties on electric vehicles to as much as 30%, depending on value.

Ford tax head Carla Terblanche said grants could prove more effective than tax incentives because cash support reaches businesses immediately and helps fund investment.

Toyota South Africa CEO Andrew Kirby said the country’s competitiveness problem extends beyond electrification. Energy, labor, taxes and logistics, once key advantages, have become more expensive over the past decade.

Infrastructure failures and a weakening supplier base are also increasing costs as automakers compare South Africa with production platforms across Asia.

Toyota, South Africa’s largest automaker, chose Thailand rather than South Africa as the production base for the electric version of its Hilux pickup.

Nissan also exited local vehicle manufacturing this year after production ran below capacity. China’s strength across key EV supply chains is helping draw investment toward lower-cost manufacturing locations.

Investment clock Is ticking

Isuzu Motors South Africa said reliable electricity, grid capacity and gas infrastructure will remain central to the country’s transition across vehicle technologies.

Automakers are also pushing for an urgent conclusion to the review of the Automotive Production and Development Programme 2 as companies make production decisions that could shape the industry into the next decade.

Ramaphosa said in August that the APDP2 review was a government priority, while authorities have pointed to improved electricity supply and reforms at logistics operator Transnet.

Existing APDP support has attracted billions of rand in investment from established manufacturers and newer entrants, including China’s BAIC, while Chery plans to begin local production next year.

No automaker has announced an EV manufacturing investment directly linked to the new 150% deduction.

Taljaard said the bigger risk is not that existing production disappears overnight, but that the next generation of vehicle platforms, technologies and manufacturing investment goes elsewhere. For South Africa, the race is increasingly about securing what comes next.