Lower tax could stimulate EV adoption

Common responses are either for or against them, and many motorists are still of the opinion that mass local adoption is not viable and will not happen.

Many naysayers cite our country’s electricity issues as a primary challenge and then follow with arguments regarding the availability of public chargers, range anxiety, charging trauma and the relatively high cost of EVs in general. Allow me to address these and express some opinions of my own.

For the sale of EVs to become commercially viable in South Africa, we need a few reforms at government level, and this, in part, hinges on the advancement of South Africa’s new energy vehicle policy. There are two main factors that need to be addressed: stimulating local manufacture of electric vehicles and boosting demand for them by reducing import costs.

Currently, EVs sourced from Europe are subject to import duties of 25 percent, while ICE vehicles only attract 18 percent tax. A reduction in EV tax to make prices comparable to ICE vehicles will go a long way to stimulate demand.

For instance, the mainstream adoption of EVs in Europe, or Norway in particular, has largely been driven by a reduction in tax. In 2022, Norway reached a new record with EVs totalling over 80 percent of all new cars sold.

The effect of tax is also evident in Norwegian new car sales figures for January 2023, which were down 77 percent year-on-year. This was likely owing to the introduction of VAT for new electric cars priced above 500 000 NOK (R887 000) and a new weight tax for all passenger cars. Electric car sales took the biggest knock, yet they still accounted for 76.3 percent of the total market.

The effect of reduced tax on EV adoption in Mauritius is another example. The official JLR importer in Mauritius has shifted its entire business to offer mainly mild-hybrid, plug-in hybrid or electric vehicles, driven by a change in legislation and the needs of this market.

The Mauritian government offered a huge incentive to opt for an electric, plug-in hybrid or mild hybrid vehicle by removing import duties on these vehicles, while ICE vehicles are still taxed anywhere from 15 to 100 percent. The effect of the zero-rated import duties for JLR Mauritius is that EVs now account for a massive 64 percent of vehicle sales, up from 12 percent five years ago.

The significant change in demand, based on duty adjustments in Norway and Mauritius, can obviously be applied to South Africa. Since the local market, via the National Association of Automobile Manufacturers of South Africa (naamsa), is only calling for a 7 percent reduction in tax, it might not be on the same scale as overseas, but it will certainly have a positive effect.

A more entry-level product with a cost closer to the average retail price of cars in South Africa will disrupt the market and significantly increase awareness and appetite for all EVs.

South Africa is ripe for EV adoption. From only a couple of EVs available five years ago, we now have access to 18 EV nameplates, with many derivatives within these nameplates. South Africa has seen a hefty 755 percent increase in EV sales over the past five years, though this figure still pales in comparison to total new vehicle sales.

As for infrastructure, there are now over 300 public chargers in South Africa, thanks to investment from JLR, BMW, Audi and a number of private network developers such as GridCars and Rubicon.

It’s difficult to argue that South Africa’s electricity crisis does not pose an inconvenience. But think about it this way: Have you not washed your clothes for more than a decade because we’ve had load-shedding and your washing machine runs on electricity? Just like we run electricity-heavy appliances and charge our devices when the power is on, we can schedule our EV top-ups when the lights are on. It’s as simple as that.

Ultimately, it’s just a matter of time before EVs will be our main mode of road transport. Mass EV adoption in South Africa is not optional, and as I’ve said before, by the end of the decade many, if not all, of the barriers to EV entry will have toppled. I still predict that by 2030, the South African new car parc will be largely electrified.