An ‘outdated luxury tax’ that should not be applied to entry-level vehicles, according to an industry leader. Picture: AdobeStock The Department of Trade, Industry and Competition (dtic) is planning amendments to the ad valorem tax on new vehicles to improve the affordability of some cars, particularly entry-level models. It has also indicated that it may seek to address the dominance of imported vehicles in the South African market, the bulk of which are from India and China.
Andrew Kirby, vice president of manufacturing at automotive business council Naamsa and president and CEO of Toyota South Africa, said on Tuesday he was “very pleased” the dtic had acknowledged that the ad valorem tax is one of the elements of the industry programme that should be rethought. Kirby said it was introduced in 1995, with the initial intention of serving as a luxury tax on very high-priced vehicles. “This has not moved with inflation or price increases, so what we have now is a luxury tax being applied to entry-level vehicles.
“This was never the intention and it undermines the ability of the auto sector to provide affordable access to mobility,” he told parliament’s Standing Committee on Trade, Industry and Competition. This followed dtic chief director for automotives Mkhululi Mlota stating that work is currently underway as part of a plan to mitigate the effect of challenges facing South Africa’s automotive industry. Mlota said SA’s automotive industry has been facing a lot of challenges recently, with stagnant localisation at around 39%-40% for the past decade, far below the objectives of the SA Automotive Master Plan (SAAM) to achieve local content of 48% by 2025 and 60% by 2035.
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He said this limited localisation has also constrained employment creation and supply competitiveness as production volumes are quite low. This, in turn, makes it difficult to achieve economies of scale and undermines the sector’s long-term resilience.
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