South Africa’s Department of Trade, Industry and Competition has released a Green Paper which discusses ways to advance “new energy vehicles” in the country.
The “new energy” term refers to non-internal-combustion-engine vehicles – such as electric cars – and the Green Paper forms part of a series of policy papers the department is working on.
“The purpose of the Green Paper is to establish a clear policy foundation that will enable the country to coordinate a long-term strategy that will position South Africa at the forefront of advanced vehicle and vehicle component manufacturing,” said the department.
“The strategy is complemented by a consumption leg, and a focus on increasing competitiveness in the global race to transition from the internal combustion engine era into electro-mobility solutions and technologies.”
Tax reforms
As part of the department’s plan to stimulate demand for electric vehicles, it is considering the use of tax reforms.
These reforms would include lowering Ad Valorem duties for electric vehicles.
“A standard rate per kWH could be used – the industry suggests an average rate of… 137$/kWh – to reduce the price of an EV in aligning it to be closer to the price of an internal-combustion-engine vehicle for a period of say five years in stimulating market demand for electric vehicles,” stated the department.
It added that the government has seen the need to synchronise these potential reforms with “active localisation of production”.
“In this way, the Ad Valorem tax could be used as the instrument to tackle the demand side. This must be balanced with the need for Treasury to maintain a targeted tax collection from the Ad Valorem tax, which may require a restructuring of the tax.”
An option here could be higher tax levels for luxury vehicles over a certain price, it said.
Components
The department went on to look at electric vehicle components, and suggested lower or zero-rated duties for certain components could be considered.
“Lower/zero duties on EV components will reduce the OEM customs account owed to SARS. Careful analysis will be undertaken on the commercial case for such duty reduction,” said department.
The full Green Paper is available for download from the department’s website – Green Paper PDF download link.
Keyword: South African government looking at tax changes to make electric cars more affordable