Electric vehicle tax incentives hold business opportunities

A notable aspect of the recent Budget speech by Minister of Finance Enoch Godongwana was the introduction of a local electric vehicle production incentive, heralding the long-awaited strategic support for this in the motor industry and aligning South Africa with the growing international focus on electric vehicles and the phasing out of internal combustion engines.

This initiative, scheduled for commencement from 1 March 2026, introduces an investment allowance for companies investing in the production capacity for electric and hydrogen-powered vehicles which will permit producers to claim 150% of the qualified spending in the first year of investment. Government will in effect subsidise the motor industry and the development of electric vehicles through the investment allowance.

For business, this is an opportunity to not only align with greener technologies but also tap into a fast-developing segment of the motor industry. With year-on-year growth in the number of electric vehicles on our roads and substantial opportunities locally and abroad, local businesses can benefit by taking a swing at this growing market segment. No doubt, local businesses will also seek to partner with international companies that have established R&D in these new technologies and introduce these technologies locally. 

This will however require a business to ensure that it has transaction, tax, intellectual property and legal advisors that can assist in the introduction, protection and commercialisation of technologies created or introduced into the South African market. Additionally, local BEE and regulatory compliance will also need to be addressed to ensure that licensing, production and competition approvals meet South African requirements. The last thing that should happen is for a good opportunity to go begging because of a lack of advice and support.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

June 26, 2024
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