Electric vehicles (EVs) have been a topic of great debate in South Africa, with polarising opinions on whether they can gain mass adoption in the country. Janico Dannhauser, Product and Pricing Manager for JLR South Africa, and naamsa EV sub-committee member, shares his insights and addresses some of the key challenges and opportunities for the widespread adoption of EVs in South Africa.
Government Reforms for Commercial Viability
To make EVs more attractive and commercially viable in South Africa, government-level reforms are crucial. The advancement of South Africa’s new energy vehicle policy is a significant step in the right direction. There are two main factors that require attention: stimulating local EV manufacturing and reducing import costs to boost demand.
Currently, imported EVs face a 25 percent import tax, while internal combustion engine (ICE) vehicles only incur an 18 percent tax. To encourage EV adoption, reducing the tax on EVs to match ICE vehicles is essential. Global examples support this approach. For instance, Norway achieved over 80 percent EV sales in 2022, driven by government incentives such as lower public parking fees and road tolls, along with tax exemptions.
Taxation’s Impact on Adoption
Norway’s case demonstrates the impact of taxation on EV adoption. In January 2023, when VAT was introduced for higher-priced electric cars, new EV sales dropped significantly, yet they still accounted for a substantial portion of the market. A similar effect was observed in Mauritius, where zero-rated import duties on EVs led to a remarkable 64 percent increase in EV sales.
South Africa can learn from these examples. Even a modest 7 percent reduction in taxation, as proposed by the National Association of Automobile Manufacturers of South Africa (naamsa), can positively affect EV adoption. Lower prices can encourage manufacturers to bring a broader range of EVs to the local market.
The Potential for Disruption
As demand grows, global manufacturers can quickly import EVs to South Africa, as they are more adaptable to market-specific specifications compared to ICE vehicles. Offering more affordable entry-level EVs will disrupt the market and boost awareness and interest in EVs across all segments, from basic hatchbacks to luxury vehicles.
Infrastructure and Charging
In terms of infrastructure, South Africa has made significant progress with over 300 public chargers installed, thanks to investments from major automakers and private network developers. While public charging is available, charging at home remains the cheaper and more convenient option for most EV owners.
Despite South Africa’s electricity challenges, EV owners can schedule their charging during periods of stable power supply. This approach aligns with how we use other electricity-dependent appliances and devices, adapting to power availability.
Renewable Energy Integration
The adoption of renewable energy sources, such as solar installations, is growing in South Africa. Solar power can not only supplement household electricity needs but also recharge EVs, significantly reducing the payback period for solar installations when factoring in fuel costs.
Mass EV adoption in South Africa is not a matter of if but when. By addressing taxation, promoting local manufacturing, and leveraging renewable energy sources, the barriers to EV entry will gradually dissipate. It’s reasonable to predict that by 2030, a substantial portion of the South African new car parc will be electrified, marking a transformative shift in the country’s automotive landscape.
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