New legislation introducing a 150% investment allowance for capital investments to enable the production of electric (EV) and hydrogen vehicles in South Africa has been signed into law.

Effective from March 2026, the incentive allows vehicle manufacturers to claim a 150% tax deduction on qualifying investments with an investment allowance capped at R500 million for the 2026/27 tax year. The measure includes hybrid and plug-in hybrid vehicle (PHEV) production alongside battery electric vehicles (BEVs), according to Naamsa CEO Mikel Mabasa, as reported by Engineering News.

While the investment allowance is a positive development, Mabasa said additional steps are needed to support South Africa’s automotive sector fully as it transitions to new vehicle technologies.

Investments in charging networks, leveraging South Africa’s mineral wealth for battery production and reducing high import levies and ad-valorem taxes are critical to maintaining competitiveness. “South Africa’s status as a leading manganese and platinum producer, essential for EV batteries and hydrogen fuel cells, positions it as a strategic location for EV manufacturing,” said investment platform Daba. However, additional policy support is vital.