SA’s automotive policy regime: building a future-ready industry

Guided by the South African Automotive Masterplan (SAAM) 2035 and the Automotive Production and Development Programme (APDP2), the policy regime seeks to balance competitiveness, localisation, transformation, and sustainability.

These frameworks provide incentives, protection, and strategic direction to ensure South Africa remains a leading automotive hub in Africa while preparing for the global transition to new energy vehicles, according to the latest 2026 Trade Manual from naamsa (The Automotive Business Council).

The South African Automotive Masterplan (SAAM) 2035:

The SAAM 2035 was approved by Cabinet in 2018 and implemented in July 2021. Its vision is to create “a globally competitive and transformed industry that actively contributes to the sustainable development of South Africa’s productive economy.” To achieve this, six development objectives were set:

• Grow vehicle production to 1% of global output.
• Increase local content in manufactured vehicles to 60%.
• Double employment in the supply chain.
• Improve competitiveness to match leading global standards.
• Transform the automotive value chain.
• Deepen value addition within local supply chains.

These objectives are supported by six pillars: local market optimisation, regional market development, localisation, infrastructure development, industry transformation, and the development of technologies and skills. The Automotive Industry Transformation Fund (AITF) now coordinates delivery, ensuring inclusive participation and monitoring progress.

The Automotive Production and Development Programme (APDP2):

The APDP2, introduced in 2021, builds on the earlier APDP and provides structured incentives through four pillars:

• Import duty protection: 25% on light vehicles and 20% on components, with preferential rates for European Union and United Kingdom (UK) imports.
• Volume Assembly Localisation Allowance (VALA): Duty rebates linked to local value addition, rewarding manufacturers that achieve higher local content.
• Production Incentive (PI): Rebates for component suppliers and exporters, encouraging competitiveness and integration into global supply chains.
• Automotive Investment Scheme (AIS): Cash grants of up to 35% for qualifying investments, particularly in electric vehicle projects.

Transition to new energy vehicles:

A major policy milestone came in December 2024 when President Cyril Ramaphosa signed the Taxation Laws Amendment Bill into law. Section 12V of the Income Tax Act, effective from March 2026, provides a 150% tax deduction for investments in electric and hydrogen-powered vehicle production. This incentive covers qualifying equipment, buildings, and improvements, and is designed to attract large-scale investment. Government has committed R1 billion to support this transition, aiming to leverage R30 billion in private sector investment.

The inclusion of hybrid and plug-in hybrid technologies, alongside subsidies for consumers, ensures a broader adoption of cleaner vehicles. This policy shift is critical as South Africa must align with global bans on fossil-fuelled internal combustion engine vehicles in the European Union (EU) and UK to safeguard export markets.

Industry transformation and skills development:

Transformation is embedded in the policy regime. Broad-based Black Economic Empowerment (B-BBEE) requirements ensure inclusive participation, while the AITF drives supplier development and skills training. Programmes focus on empowering historically disadvantaged groups, building technical expertise, and strengthening industrial resilience. Skills development is particularly important as the industry adapts to new technologies such as battery assembly, hydrogen fuel systems, and advanced tooling.

Trade agreements and market access:

South Africa leverages trade agreements to expand its automotive exports. The African Continental Free Trade Area (AfCFTA) provides access to regional markets, while preferential agreements with the EU and UK ensure competitive entry into key export destinations. These agreements are vital for sustaining production volumes and diversifying export markets.

Challenges facing the industry:

Despite strong policy support, the industry faces challenges. Infrastructure bottlenecks, supply chain inefficiencies, and global competition for electric vehicle investment remain pressing concerns. Road transport accounts for more than 90% of emissions in South Africa, making decarbonisation essential. Legislative amendments are being considered to accommodate new energy trucks and buses, including concessions on import duties, cleaner fuels, and procurement requirements.

Review and future outlook:

An official review of the SAAM 2035 and APDP2 is scheduled for 2026. Industry stakeholders had requested an earlier review in 2025, reflecting the urgency of adapting to global market shifts. The frameworks were designed before the COVID-19 pandemic and before the announcement of fossil-fuel bans in Europe, highlighting the need for updates. Sustainable growth will require collaboration between government, industry, and labour, ensuring that South Africa remains competitive while meeting economic and employment objectives.

Conclusion:

South Africa’s automotive policy regime provides a comprehensive roadmap for growth, transformation, and sustainability. The SAAM 2035 and APDP2 balance protection with incentives, ensuring localisation, competitiveness, and industrial resilience.

With the global transition to greener mobility, South Africa must continue to adapt, defend its market position, and seize opportunities in electric and hydrogen-powered vehicle production.

The success of this policy regime will determine whether South Africa remains a leading automotive hub in Africa and a competitive player in the global industry.