South Africa's 150% tax deduction for electric and hydrogen vehicle production starts in March 2026, but executives warn it may not secure future investment amid competition from Asia and concerns over costs, power reliability and policy certainty.
About 67% of locally built vehicles are exported; the EU and UK take 63% of shipments as both tighten emissions standards. The sector accounted for 23.8% of manufacturing output in 2025, employed 113,000 people directly and supported a further 498,000 jobs. The deduction applies to qualifying investment in buildings, machinery and equipment used to produce electric and hydrogen vehicles. New-energy vehicles are 2.8% of domestic new-vehicle sales. South Africa has no EV-buyer incentives; the industry seeks to remove luxury taxes that can push total import duties on EVs as high as 30%, depending on value.
No automaker has announced an electric-vehicle manufacturing investment linked to the tax break. Toyota chose Thailand, not South Africa, as the production base for the electric Hilux; Nissan exited local vehicle manufacturing this year after production ran below capacity. Executives say a review of the main automotive manufacturing incentive programme, APDP2, is urgent as automakers decide on programmes extending into the next decade.
