With the country’s electric vehicle market in the spotlight, an industry expert speaks to FORBES AFRICA about the complex tariff and trade dynamics shaping its import duties.



What drives the tariffs of imported vehicles into South Africa? Currently, the country levies a 25% import tax on EVs, compared to 18% for internal combustion engine vehicles (ICEVs).



In a recent exchange on X (formerly Twitter), South Africa-born, Elon Musk, CEO of Tesla, addressed the barriers hindering Tesla&#8217;s entry into the South African market. Responding to a question about Tesla&#8217;s absence, Musk cited &#8220;super high&#8221; import duties on electric vehicles (EVs) as a primary obstacle, bringing to light the complexities of South Africa&#8217;s approach to EVs and its impact on global manufacturers.



Dr Norman Lamprecht of the Automotive Industry Export Council (AIEC) and the Automotive Business Council (NAAMSA) explains how South Africa’s trade agreements and import taxes function.



“It’s not about any differentiation between internal combustion vehicles and electric vehicles, but about our free trade agreements,” Lamprecht says to FORBES AFRICA.



How South Africa’s vehicle trade works



South Africa has a compelling automotive production industry. The country manufactures cars for multiple car makers, for both local use and export markets, Lamprecht explains.



“Import duties on a normal passenger vehicle, bakkies or light commercial vehicles are standardized at 25%,” says Lamprecht. “Because of a Free Trade Agreement we have with the European Union, we offer a 7% reduction on importing vehicles from that region, and in return, we export around 400,000 vehicles a year – the vast majority of which go to the EU.”



Lamprecht notes that the import tax for normal commercial vehicles into the US, excluding SUVs, is also 25%, a clear parity.



Protecting the South African automotive sector



He also agrees that the South African automotive sector requires protection, echoing Minister of Trade, Industry, and Competition, Ebrahim Patel’s recent comments, which was not the suggestion of a cautious approach to EV adoption, but rather a need to develop local capacity to secure the future of South Africa’s automotive export market. This, by building local capacity for EV and component production as much of Europe prepares to phase out ICEVs.



&#8220;With the transition to electric vehicles, we don’t want to lose the 75% of our exports to Europe around 2030-2035,” says Lamprecht. “Therefore, we need to start building these vehicles in South Africa.”



However, the creation of this new capacity needs to be balanced with the need for ICEVs, locally, and before the phase-out and move to EVs becomes permanent in South Africa’s export markets.



The automotive tax burden on the South African consumer



One aspect which Lamprecht takes great pains to note is the automotive taxes on the South African consumer. Not only are import taxes levied, but a plethora of other costs are involved in vehicle purchases.



“The tax burden on consumers purchasing vehicles is huge,” says Lamprecht, noting that South Africans pay taxes on carbon dioxide, VAT, and an ad valorem tax – essentially a levy on luxuries, which can be up to 30% on vehicles over $50,000.



However, policy is shifting fast, with both national government as well as policy-guiding bodies, such as the AIEC and NAAMSA, working together to guide a manufacturing future that is sustainable and beneficial for all parties involved, over the next 20 years.

Midsection of woman plugging cable in electric car

Interpreting South Africa’s EV Import Duties

Brought to you by Hugo Boss



<div class="wp-block-image"><figure class="aligncenter is-resized"><img loading="lazy" decoding="async" src="https://www.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo-1024x576.jpg" alt="" class="wp-image-40468" width="60" height="34" srcset="https://cms.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo-1024x576.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo-300x169.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo-600x338.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo-768x432.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2019/05/Hugo-Boss-Logo.jpg 2048w" sizes="auto, (max-width: 60px) 100vw, 60px" /></figure></div>



HUGO BOSS and Porsche have partnered to bring an action-packed racing experience to the streets of the world’s major cities through Formula E. 







Formula E is known
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<figure class="wp-block-image"><a href="https://ad.doubleclick.net/ddm/trackclk/N4022.3065143FORBESAFRICA/B22341404.245922753;dc_trk_aid=442353181;dc_trk_cid=115471848;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=" target="_blank" rel="noreferrer noopener"><img loading="lazy" decoding="async" width="1024" height="683" src="https://www.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK-1024x683.jpg" alt="" class="wp-image-40367" srcset="https://cms.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/HB_Formula_E_01_CMYK.jpg 2048w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /></a><figcaption> Alejandro Agag (Formula E CEO) and Mark Langer (HUGO BOSS CEO)</figcaption></figure>



Mark
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“As a fashion brand, we are always looking at innovative approaches to design and sustainability. When we first encountered Formula E, we immediately saw its potential and we are pleased to be the first apparel partner to support this exciting new motorsport series,” he says. 



The fashion group is also the official outfitter to the entire Porsche motorsports team worldwide. 



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<figure class="wp-block-embed-youtube wp-block-embed is-type-video is-provider-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Porsche x BOSS: introducing a new collaboration | BOSS" width="500" height="281" src="https://www.youtube.com/embed/Fx-BDDA-FOM?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>
</div><figcaption> Porsche x BOSS: introducing a new collaboration | BOSS </figcaption></figure>



Since
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Alejandro
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“This new partnership will see the team on the ground at each race dressed with a winning mindset and ready to deliver a spectacular event in cities across the world. As the first Official Apparel Partner of the series, we look forward to seeing the dynamic style and innovation on show that BOSS is renowned for,” says Agag.



<figure class="wp-block-image"><a href="https://ad.doubleclick.net/ddm/trackclk/N4022.3065143FORBESAFRICA/B22341404.245922753;dc_trk_aid=442353181;dc_trk_cid=115471848;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=" target="_blank" rel="noreferrer noopener"><img loading="lazy" decoding="async" width="1024" height="683" src="https://www.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB-1024x683.jpg" alt="" class="wp-image-40376" srcset="https://cms.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2019/04/SR19_HugoBoss_Porsche_04_sRGB.jpg 2048w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /></a><figcaption> Hugo Boss x Porsche&nbsp;&nbsp; </figcaption></figure>



Oliver Blume CEO of Porsche AG says Formula E is an exceptionally attractive racing series for motorsport vehicles to develop. 



&#8220;It offers us the perfect environment to strategically evolve our vehicles in terms of efficiency and sustainability. We&#8217;re looking forward to being on board in the 2019/2020 season. In this context, the renowned fashion group HUGO BOSS represents the perfect partner to outfit our team.&#8221;

SR19_HugoBoss_Porsche_04_sRGB

HUGO BOSS Partners With Porsche To Bring Action-Packed Racing Experience Through Formula E

If Volkswagen realizes its ambition of becoming the global leader in electric cars, it will be thanks to a radical and risky bet born out of the biggest calamity in its history. 



The German giant has staked its future, to the tune of 80 billion euros ($91 billion), on being able to profitably mass-produce electric vehicles &#8211; a feat no carmaker has come close to achieving.



So far mainstream automakers’ electric plans have had one main goal: to protect profits gleaned from high-margin conventional cars by adding enough zero-emission vehicles to their fleet to meet clean-air rules.



Customers have meanwhile largely shunned electric vehicles because they are too expensive, can be inconvenient to charge and lack range.



The biggest strategy shift in Volkswagen’s 80 years has its roots in a weekend crisis meeting at the Rothehof guesthouse in Wolfsburg on October 10, 2015, senior executives told Reuters.



At the meeting hosted by then VW brand chief Herbert Diess, nine top managers gathered on a cloudy Saturday afternoon to discuss the way forward after regulators blew the whistle on the company’s emissions cheating, a scandal that cost it more than 27 billion euros in fines and tainted its name.



“It was an intense discussion, so was the realization that this could be an opportunity, if we jump far enough,” said Juergen Stackmann, VW brand’s board member for sales.



“It was an initial planning session to do more than just play with the idea of electric cars,” he told Reuters. “We asked ourselves: what is our vision for the future of the brand? Everything that you see today is connected to this.”



Just three days after the Rothehof meeting of the VW brand’s management board, Volkswagen announced plans to develop an electric vehicle platform, codenamed MEB, paving the way for mass production of an affordable electric car.



For months after the Volkswagen scandal blew up in 2015, rival carmakers treated diesel-cheating as a “VW issue”, according to industry experts. But regulators have since uncovered excessive emissions across the sector and unleashed a clampdown that undermines the business case for combustion engines, forcing a sector-wide rethink.



Now the “villain” of dieselgate is likely to become the largest producer of electric cars in the world in coming years, analysts say, putting it in pole position to flood the market &#8211; should the demand materialize.



“Decisions to convert the Emden factory (in Lower Saxony) to build electric cars, would never have happened without this Saturday meeting,” said Stackmann, one of five senior VW executives who spoke to Reuters.



However the full scale of VW’s ambitions were only revealed two months ago when it took the industry by surprise by pledging to spend 80 billion euros to develop electric vehicles and buy batteries, dwarfing the investment of rivals.



It plans to raise annual production of electric cars to 3 million by 2025, from 40,000 in 2018.



<h4 class="wp-block-heading">STRATEGIC PERILS</h4>



It’s a risky bet.



With regulators and lawmakers, rather than customers, dictating what kind of vehicles can hit the road, analysts at Deloitte say the industry could produce 14 million electric cars for which there is no consumer demand.



It’s also an all-or-nothing bet in the long run.



VW, whose ID electric car will hit showrooms in 2020, has set a deadline for ending mass production of combustion engines. The final generation of gasoline and diesel engines will be developed by 2026.



Arndt Ellinghorst, analyst at Evercore ISI, said betting on electric vehicles (EVs) could be risky because customers did not want to own cars dependent on street-charging facilities.



“What if people are still not ready to own EVs? Will adoption be the same in the U.S., Europe and China?” he said.



But he added that EU and Chinese emissions regulations made electric vehicle adoption inevitable and that being an early industry mover in that direction offered a “positive risk-reward”.



Another by-product of dieselgate that quickened VW’s electric drive, according to the senior executives, was a purge of the company’s old guard, who became the focus of public and political anger.



This empowered Diess, a newcomer who had joined as VW brand boss shortly before U.S. regulators exposed the carmaker’s emission test cheating.



Diess, who joined from BMW where he helped pioneer a ground-breaking electric vehicle, has since been appointed CEO of Volkswagen Group, a multi-brand empire that includes Audi, Porsche, Bentley, Seat, Skoda, Lamborghini and Ducati.Slideshow&nbsp;(3 Images)



Carmakers have failed to mass-produce electric cars profitably largely because of the prohibitive cost of battery packs which make up between 30 percent and 50 percent of the cost of an electric vehicle.



A 500 km-range battery costs around $20,000, compared with a gasoline engine that costs around $5,000. Add to that another $2,000 for the electric motor and inverter, and the gap is even wider.



Even electric start-up Tesla’s cheapest car, the Model 3, is on sale in Germany at 55,400 euros, priced just below a base model Porsche Macan, a compact SUV. In the United States, Model 3 prices start at $35,950.



VW believes its scale will give it an edge to build an electric vehicle costing no more than its current Golf model, about 20,000 euros, using its procurement clout as the world’s largest car and truck maker to drive down the cost.



“We are Volkswagen, a brand for the people. For electric cars we need economies of scale. And VW, more than any other carmaker, can take advantage of this,” a senior Volkswagen executive told Reuters, declining to be named.



The carmaker’s electric-vehicle budget outstrips that of its closest competitor, Germany’s Daimler, which has committed $42 billion. General Motors, the No.1 U.S. automaker, has said it plans to spend a combined $8 billion on electric and self-driving vehicles.



Renault-Nissan-Mitsubishi said in late 2017 they would spend 10 billion euros by 2022 on developing electric and autonomous cars.



“On a 2025 view, we expect Volkswagen to be the number one electric vehicles producer globally,” UBS analyst Patrick Hummel said. “Tesla is likely to remain a niche player.”



U.S. shale boosts BP profits to five year high



<h4 class="wp-block-heading">STRICTER TESTING</h4>



VW’s test cheating using engine management software &#8211; “defeat devices” &#8211; resulted in the introduction of tougher pollution tests which revealed in 2016 and 2017 that emissions readings across the industry were up to 20 percent higher under real-world driving conditions compared with lab conditions.



This has raised the bar on the auto sector’s efforts to cut emissions of carbon dioxide, blamed for causing global warming.



EU lawmakers in December agreed a cut in carbon dioxide emissions from cars of 37.5 percent by 2030 compared with 2021 levels. This was after the European Union forced a 40 percent cut in emissions between 2007 and 2021.



“This goal is no longer reachable using combustion engines alone,” Volkmar Denner, chief executive of Bosch, the world’s biggest auto supplier, said about the 2030 proposals.



Every gram of excessive carbon dioxide pollution will be penalized with a 95 euros fine from this year onwards.



Strategy firm PA Consulting forecasts VW will face a 1.4-billion-euro penalty for overstepping average limits in Europe by 2021, while Ford and Fiat-Chrysler face fines of 430 million euros and 700 million euros respectively.



Daimler, BMW, PSA, Mazda and Hyundai will miss their 2021 average emissions targets, PA Consulting forecasts. Toyota, Renault-Nissan-Mitsubishi, Volvo, Honda and Jaguar Land Rover are on track to meet their goals.



PA Consulting’s forecasts were extrapolated using 2017 registration data for each powertrain type and consumer buying trends, but do not include more recent sales trends.



Ford, VW and BMW said they would meet their targets because of a push to sell more hybrid and electric cars in 2018. Daimler said it aimed to meet the targets, PSA said it would respect the targets while Fiat-Chrysler declined to comment. Mazda had no immediate comment, while Hyundai did not respond to a request for comment.



Carmakers have struggled to lower their average fleet emissions because of a shift in customer taste toward heavier, bigger SUVs (sports utility vehicles), which make it harder to maintain the same levels of acceleration and comfort without increasing fuel consumption and pollution.



SUVs are now the most popular vehicle category in Europe, commanding a market share of 34.6 percent, according to JATO Dynamics. Even Porsche, which makes lightweight sportscars, relies on sports utility vehicles for 61 percent of sales.



As the industry-wide scale of excessive emissions prompted Brussels to push through tougher laws late last year, VW executives concluded that purely electric cars were the most efficient way to meet carbon dioxide goals across its fleet.



This was the point of no return, according to executives, when the company made the final electric investment decisions and committed to staying the course it had plotted after dieselgate.



“After evaluating alternatives, we opted for electromobility,” chief operating officer Ralf Brandstaetter told Reuters about VW’s deliberations in November. -Reuters



-Ilona Wissenbach and Agnieszka Flak

Tag: electric vehicle

FORBES AFRICA SOCIAL MEDIA

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