Why are electric vehicles so expensive?

Electric vehicles (EVs) are becoming increasingly popular in South Africa and across the globe, as evidenced by the launch of EV models by Mercedes-Benz, BMW, Audi, and other leading brands. Many of these EVs will be released this year and in 2023. Before introducing their sustainable vehicles in South Africa, several other car brands are waiting to see if legislation and taxation policies around EVs is likely to change.

The cost of electric vehicles is currently the most pressing concern, as this will inevitably affect uptake and local sales. Any additional EV taxes could be disastrous for an already costly vehicle platform. If affordable electric vehicles and the ability to manufacture them locally become a reality, the current taxation structures must be revised.

At the moment, all-electric vehicles are not built in South Africa; some basic components are made here, but the vehicles are assembled overseas and then imported. This raises the price and adds import duties and taxes to the consumer’s ultimate payment. However, some car brands may move their EV assembly lines to South Africa in the near future, which will certainly reduce the price of new battery-powered cars in the country.

Naamsa comments on the high cost of electric vehicles

Mikel Mabasa, the chief executive officer of the National Association of Automobile Manufacturers (Naamsa), says the government’s pace of reform is too slow. The Department of Trade, Industry and Competition, along with the National Treasury, are not acting as quickly as industry stakeholders would like.

Currently, an internal combustion engine vehicle has an average import duty of 18%, whereas electric vehicles have a tax rate of up to 25%. This means that an SUV may be imported for the same price as a basic EV car in many cases. 

The Mini Cooper SE, which costs roughly R658 000, is the most affordable EV currently available in South Africa. The Mercedes-Benz A-Class hatchback costs R660 000, the Toyota Hilux double cab costs R465 000 and the Toyota Fortuner costs R605 000. These figures clearly illustrate that EVs are costly due to additional tariffs and import duties, as well as the expense of the technology.

EV batteries are currently extremely costly

Since the technology is still new, the average price of an EV’s battery pack is still relatively high. This price will decrease over time. In South Africa, however, EVs are subject to a 17% luxury tax due to their batteries. As a result, several of the EVs slated for release this year are being used as marketing tools by their various manufacturers to highlight their zero-emission future goals.

Local automotive component manufacturers, such as Formex Industries, are hoping to be allowed to produce more parts for EVs, including batteries, according to Naamsa. Their goal is to put South Africa on the forefront of innovative component manufacturing, which will require factory workers to be trained up and more sustainable manufacturing processes to be implemented. If electric vehicles are assembled in South Africa in the near future, it will benefit local manufacturers and lower the retail price of electric vehicles.


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Written by Taryn Hill

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