Reforming Government Policies: A Key Step for Commercial Viability of Electric Vehicles in SA
Electric vehicles (EVs) have long been hailed as the future of road travel, poised to replace traditional internal combustion engine (ICE) vehicles. However, in the South African market, opinions on EVs remain polarizing. Many motorists are skeptical about the feasibility and widespread adoption of EVs in the country. Critics often point to challenges such as electricity issues, the lack of public charging infrastructure, range anxiety, and the relatively high cost of EVs.
To make the sales of EVs commercially viable in South Africa, several government level reforms are necessary. A crucial aspect of this transformation revolves around the advancement of the country’s new energy vehicle policy. Two key factors need to be addressed: promoting local manufacturing of EVs and boosting demand by reducing import costs.
At present, EVs imported from Europe are subject to higher import duties of 25% compared to the 18% tax imposed on ICE vehicles. Reducing the tax on EVs to make their prices comparable to ICE vehicles would significantly stimulate demand. This viewpoint finds support in global case studies.
The mainstream adoption of EVs in Europe, particularly in Norway, has largely been driven by tax reductions. In 2022, Norway set a new record with over 80% of all new cars sold being EVs. The country is committed to having only zero-emission vehicles sold by 2025. The rapid increase from a mere 2.9% of all cars sold a decade ago was primarily influenced by government incentives like reduced fares for public parking and road tolls, as well as appealing tax exemptions.
The impact of taxation on EV adoption is further evident in the new car sales figures for January 2023 in Norway, which saw a 77% year-on-year decrease. This decline is likely attributable to the introduction of value-added tax (VAT) for new electric cars priced above 500,000 NOK (approximately R921,431) and a new weight tax for all passenger cars. Although electric car sales were significantly affected, they still accounted for 76.3% of the overall market share.
Another example illustrating the effect of reduced taxation on EV adoption is Mauritius. Following legislative changes and market demands, the official importer of Jaguar Land Rover in Mauritius transitioned its business to predominantly offer mild-hybrid, plug-in hybrid, or electric vehicles.
Reforming government policies and reducing taxation can be instrumental in driving the commercial viability of EVs in South Africa. By stimulating local production and lowering import costs, the barriers to EV adoption can be overcome. Learning from successful case studies like Norway and Mauritius, South Africa can pave the way for a sustainable and eco-friendly future of transportation.
While challenges surrounding electricity supply, charging infrastructure, and cost must be addressed, it is crucial to recognize the benefits EVs bring. They offer lower emissions, reduced dependence on fossil fuels, and contribute to a cleaner environment.
Ultimately, striking a balance between policy reforms, infrastructure development, and consumer incentives will be vital for fostering the growth and competitiveness of the EV market in South Africa. As the world continues its transition towards sustainable mobility, it is imperative that government and stakeholders collaborate to create an environment conducive to the commercial viability of electric vehicles. Only then can South Africa harness the full potential of EVs and align itself with global trends shaping the future of transportation.
