150% tax incentive for electric and hydrogen vehicle production passed into law in South Africa.

• Companies investing in electric vehicle production in South Africa will enjoy tax incentives starting in March 2026.
• Vehicle manufacturers will be able to claim a 150% tax deduction on such investments.
• The passing of the draft Taxation Laws Amendment Bill (TLAB) gives effect to an investment allowance of R500 million for the 2026/27 tax year.

“The compelling reasons behind this transition include the urgent need to address environmental concerns and for countries to meet their national emission reduction commitments stemming from the Paris Agreement,” National Treasury says in the TLAB explanatory memorandum.

The move follows the publishing of the country’s Electric Vehicle White Paper in December 2023 which sets a course to transition the auto industry from primarily producing Internal Combustion Engine (ICE) vehicles to a dual platform that includes EVs in the production and consumption mix, alongside ICE vehicles in South Africa, by 2035. This vision is aligned with the foundational objectives outlined in the South African Automotive Masterplan (SAAM), a strategic framework implemented from 2021 to shape the nation’s automotive industry. The tax incentives are an important step towards helping grow South Africa’s electric and hydrogen vehicle sector. It also aligns with changing demand in export markets.

South Africa is the main automotive manufacturing hub in Africa. The sector, which produces over 500000 units annually, is also key export industry, contributing more than ZAR400 billion (US$20.9 billion) in exports in 2023. The following manufacturers are currently present in South Africa: BAIC (Beijing Automotive Group), BMW, Ford, Mahindra, MAN, Mercedes, Nissan, Stellantis, Toyota, Volkswagen, and Volvo Trucks.

The move is also intended to boost the upstream value chain. South Africa is also the world’s sixth‑largest supplier of raw materials for lithium‑ion battery manufacturing; and has the world’s largest manganese reserves, along with a growing supply of nickel: both critical for battery production. It is also the world’s biggest producer of platinum, a crucial component in hydrogen fuel cells.

Author: Bryan Groenendaal