South Africa is poised for Chinese investment in its $27 billion automotive industry after the president signed a tax break for the production of so-called new-energy vehicles into law.<\/p>\n\n\n\n
Three Chinese automakers have already signed non-disclosure agreements with the Automotive Business Council, Chief Executive Officer Mikel Mabasa said, declining to identify them. <\/p>\n\n\n\n
\u201cWith good government policies we will attract new investment, we will increase and retain investment,\u201d Mabasa said in an interview on Friday. <\/p>\n\n\n\n
Enabling a 150% tax deduction on investment in electric- and hydrogen-powered vehicle production comes as Chinese automakers are taking Africa\u2019s biggest car market by storm.<\/p>\n\n\n\n
Vehicles made by Chery Automobile Co. and Great Wall Motor Co. are increasingly competing with those from the local manufacturing units of carmakers such as Toyota Motor Corp. and Volkswagen AG. In December, Chinese ambassador to South Africa Wu Peng said his government was encouraging automakers to invest in the country. <\/p>\n\n\n\n
While the industry has welcomed the step, it comes after years of warnings that car making, the jewel in South Africa\u2019s manufacturing sector, is at risk because of legislation in its biggest export market \u2014 the European Union \u2014 aimed at phasing out the use of internal-combustion engines. <\/p>\n\n\n\n
The tax amendment, first proposed in the national budget in February last year, was only enacted by President Cyril Ramaphosa on Dec. 24. While some companies including Ford Motor Co. and BMW AG make or plan to manufacture hybrids in the country, none have announced planned investment in battery-electric vehicles. <\/p>\n\n\n\n
The local heads of Volkswagen and Isuzu Motors Ltd. have said they don\u2019t see a likelihood of their companies making EVs in South Africa. Stellantis NV said it plans to once the operating environment is conducive.<\/p>\n\n\n\n
While the uptake of electric vehicles in developed markets such as the EU and US has been slower than expected, South Africa needs to start producing them to keep its place in the global industry, Mabasa said. <\/p>\n\n\n\n
Additional investment in charging-station networks, developing a supply chain that uses southern Africa\u2019s mineral wealth and reducing taxes on car sales are all needed, said Mike Whitfield, the head of Stellantis sub-Saharan Africa.<\/p>\n\n\n\n
The tax amendment \u201ccannot and will not on its own be sufficient,\u201d he said in an interview. Other steps are needed because \u201cit\u2019s not the only thing that can confirm an investment decision.\u201d<\/p>\n\n\n\n
South Africa is the world\u2019s biggest producer of manganese, mines nickel and has deposits of rare earths \u2014 all key components in the manufacture of batteries for electric vehicles. It\u2019s also the largest miner of platinum, used in the fuel cells that power hydrogen-fueled vehicles. <\/p>\n\n\n\n
At the same time, local sales make up a large component of automaker revenue and import levies on electric cars \u2014 together with an ad-valorem tax that was originally intended for luxury vehicles \u2014 haven\u2019t been adjusted for decades. <\/p>\n\n\n\n
\u201cWe\u2019ve shot our first warning bullet at government,\u201d Mabasa said, noting that levies are higher than in other emerging markets. The ad-valorem tax level should move \u201cin line with inflation or they should get rid of it,\u201d he said. <\/p>\n\n\n\n
While South Africa remains the most attractive place for automaker investment on the continent given its infrastructure and relatively affluent consumer base, the industry needs more support, Mabasa said. <\/p>\n\n\n\n
\u201cIf government is not supportive the industry will die,\u201d he said.\u00a0<\/p>\n\n\n\n