The cost of owning a new car in South Africa has reached unprecedented levels, and Toyota South Africa CEO Andrew Kirby believes government tax policy is partly to blame. Speaking at the Naamsa Autoweek Conference in Gqeberha, Kirby called for a revision of the decades-old ad valorem tax applied to vehicles, arguing that it unfairly treats affordable models as if they were luxury cars.
“An ad valorem tax made sense in 1995, but we are now taxing lower-end vehicles as if they were premium products,” Kirby said.
How the Tax Works — and Why It’s a Problem
The ad valorem duty, introduced nearly 30 years ago, is imposed on all cars — both imported and locally manufactured. It is calculated by multiplying 0.00003 by 80% of the car’s retail value and deducting 0.75.
While this formula hasn’t changed since 1995, car prices certainly have. Back then, the Volkswagen Citi Golf Chico was South Africa’s most affordable passenger vehicle, retailing at R33,950. Today, the cheapest option is the India-made Suzuki S-Presso, priced from R178,900 — an amount that could have bought a BMW 3 Series in 1995.
On the Chico, the ad valorem tax worked out to just R21. On the S-Presso, it amounts to roughly R6,333 — an increase of over 30,000%, despite the car being a no-frills, entry-level model.
Competition Heats Up
The pressure isn’t just local. Chinese brands like BYD and Chery are aggressively entering both South Africa and global markets with affordable electric and hybrid cars. Meanwhile, India-made cars have already claimed a massive share of South Africa’s market, accounting for 35.8% of new vehicle sales in 2024, compared to 10.7% for Chinese cars.
Seven years ago, imports from both countries made up just 1% of the market. Today, they are a force South African manufacturers cannot ignore.
EV Transition at Risk
Kirby also warned that the industry faces a looming crisis if it fails to accelerate production of new energy vehicles (NEVs). With the European Union set to ban sales of internal combustion engine (ICE) vehicles by 2035 and carbon taxes making petrol and diesel models less attractive, South African automakers risk being left behind.
“We don’t want to be relegated to being a conventional internal combustion engine manufacturing base,” Kirby cautioned. “It might be fine for the next five years, but it will prove disastrous in the coming decade.”
Rivals Sound the Alarm
Other industry leaders share the concern. Ford Southern Africa president Neale Hill warned that South Africa could lose its position as the continent’s top vehicle producer. Morocco recently secured a R106 billion ($5.6 billion) investment from China to build an EV plant, with an ambitious target of producing one million vehicles by 2025 — a milestone South Africa only hopes to achieve by 2035.
Hill also highlighted South Africa’s slow adoption of electric vehicles, with just 4,000 EVs on local roads, compared to over 100,000 in Ethiopia.
A Call for Urgent Reform
Both Kirby and Hill stressed that without urgent government intervention, South Africa risks losing billions in revenue and tens of thousands of jobs. They argue that tax reform and decisive EV policies are critical to safeguarding the local automotive industry against foreign competition.
As Kirby put it: “We must close the loopholes, reform outdated taxes, and future-proof our industry. Otherwise, we’ll be left asking why we didn’t act sooner.”
