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HomeAfricaBudget 2024: Tax incentive for local auto makers to produce electric cars

Budget 2024: Tax incentive for local auto makers to produce electric cars

THE Treasury yesterday announced a tax incentive to help local vehicle manufacturers to adapt their factories and technologies to produce electric-powered cars, in line with the global introduction of these vehicles, and to preserve South Africa’s seat as a global exporter of automobiles.

The tax inventive was among a mixed bag of announcements that affected motorists yesterday in the Budget and followed recent calls by the motor industry that the government needs to urgently firm up its electric vehicle industry policies, so that South Africa’s vehicle manufacturing sector, the biggest manufacturing sector in the country, is not left behind as the rest of the world converts to electric vehicle production.

Finance Minister Enoch Godongwana proposed that producers of electric vehicles in South Africa would be able to claim 150% of qualifying investment spending as an incentives to aid the transition to new energy vehicles.

The incentive was expected to made available from March 1, 2026, and the incentive applied to electric and hydrogen vehicles.

At a briefing yesterday, the Treasury said the level of the incentive had been ascertained following discussions with the Department of Trade, Industry and Competition, which in turn had looked at incentives for electric vehicles in other parts of the world such as Morocco and Thailand.

The new incentive would apply on top of all the other existing industrial incentives that are available to the local auto manufacturing industry.

The tax expenditure to the government of the new incentive was estimated to amount to R500 million for 2026/27.

Also in the Budget, albeit of relatively small benefit to motorists, was the fact that no changes were proposed to the general fuel levy and Road Accident Fund, which would result in tax relief to motorists of some R4 billion if one takes other inflationary cost increases into account.

The decision not to increase the fuel tax was to mitigate against the inflationary effect of the fuel price increases.

The carbon tax increased to R190 per ton of carbon dioxide from R159, equivalent from January 1, 2024.

The carbon fuel levy increased from 11c per litre for petrol and to 14c per litre for diesel from April 3, 2024.

From January 1, 2024, the carbon cost recovery for the liquid fuels sector increased from 0.66c per litre to 0.69c per litre.

The motor emissions tax for passenger vehicles was increased to R146 per gram of carbon dioxide emissions per kilometre, from R132, while double cab owners emissions tax increased to R195 per gram of carbon dioxide emissions per kilometre from R176.