Analysis-South Africa races to keep auto exports competitive in EV era

South Africa is in a race against time to retain its auto exports in the face of the electric vehicle (EV) era, according to industry experts. Despite a new government tax incentive aimed at attracting investment in electric and hydrogen vehicle production, executives warn the country risks losing future vehicle production to Asian rivals.

The incentive, which doubles the tax deduction for qualifying investments in EV and hydrogen-powered vehicle manufacturing, is set to take effect in March 2026. However, the industry faces several challenges beyond the incentive, including reliable electricity supply, charging infrastructure, consumer demand, policy certainty, and export competitiveness.

South Africa's automotive industry is a major contributor to the country's economy, accounting for 23.8% of manufacturing output in 2025 and supporting around 498,000 jobs. The industry exports about two-thirds of its output, with the European Union and the United Kingdom being the primary markets. Both markets are tightening emissions standards and accelerating the shift to lower-emission vehicles, posing a significant threat to South Africa's position in the global EV supply chain.

Neale Hill, president of Ford Motor Company Africa, emphasized the need for South Africa to secure a place in global EV supply chains to avoid losing out to Asian rivals. The industry's future will depend on a range of factors, including market access, production costs, logistics performance, electricity reliability, labor skills, localization potential, exchange rate risk, trade agreements, and regulatory certainty.

While industry leaders welcome the new tax incentive, they stress that long-term policy certainty and consumer support are equally important for attracting investment. South Africa's domestic New Energy Vehicle (NEV) market remains small, accounting for just 2.8% of new vehicle sales. However, the arrival of more affordable electric and plug-in hybrid models has helped drive growth.

The industry's challenge extends beyond electrification, as rising import competition and the erosion of South Africa's traditional cost advantages pose additional threats.