Tesla won’t be launching its electric vehicles (EVs) in South Africa anytime soon—and the reason is simple: high import taxes.
According to Cars.co.za journalist Ciro de Siena, who cited insights from Mikel Mabasa, the CEO of the National Automobile Association of South Africa (Naamsa), Tesla has made its stance clear.
“He met with Tesla representatives, and they categorically stated that they won’t set up shop in SA until that EV tax is dropped,” De Siena shared in a recent post on X.
The 25% Import Duty: A Major Roadblock
The so-called “EV tax” De Siena referenced is a hefty 25% import duty that applies to all passenger vehicles imported from outside of Europe and the UK.
Many people assume that this tax specifically targets EVs, but that’s not the case. The 25% duty applies across the board to most passenger vehicles—including petrol, diesel, and hybrid models—imported from countries outside of Europe and the UK.
Thanks to South Africa’s preferential trade agreements with the EU and the UK, petrol, diesel, and hybrid vehicles from those regions benefit from a reduced import duty of 18%. However, fully electric vehicles don’t get the same break. No matter where an EV is imported from, the 25% tax still applies.
While the difference between 18% and 25% might not seem drastic at first glance, it has a compounding effect due to the way vehicle pricing is calculated.
Here’s how it works:
- The import duty is applied to the vehicle’s recommended retail price (RRP) in its country of origin, after subtracting VAT from that region.
- South Africa’s 15% VAT is then added to the converted price, along with the duty and a 10% mark-up.
- Finally, an ad valorem (luxury) tax is applied based on the following formula: 0.00003×(RRP excluding VAT)−0.750.00003 \times (\text{RRP excluding VAT}) – 0.75
For a car priced at R500,000 (excluding VAT), this tax structure results in a major price difference depending on the duty rate:
| Duty Rate | Total Taxes as a % of RRP | Final Price After Taxes |
|---|---|---|
| 18% (Cars from EU & UK, except EVs) | 51.72% | R758,600 |
| 25% (EVs and cars from other regions) | 58.88% | R799,375 |
| Difference | +7.16% | +R40,775 |
Government Resistance to Lowering EV Taxes
Despite strong lobbying from major car manufacturers in South Africa, the government—specifically the Department of Trade, Industry, and Competition—has refused to budge on EV tax reductions.
Another key factor driving up EV prices is the ad valorem (luxury) tax.
While this tax applies to all vehicles, it disproportionately impacts EVs because they generally have higher base prices than their petrol or diesel counterparts.
One of the biggest issues with the ad valorem tax is that its formula has remained unchanged for nearly three decades. This means it does not account for inflation, making even budget-friendly vehicles subject to the same tax rates that once applied only to luxury cars in the 1990s.
For example, on a car with an R200,000 RRP (excluding VAT), the ad valorem tax alone adds about 3%, or R6,000.
How This Affects Tesla
Tesla CEO Elon Musk has previously acknowledged the issue, stating that South Africa’s high import duties are the main reason Tesla has stayed out of the market.
“Import duties are super high in South Africa to protect the domestic industry,” Musk explained. “Doesn’t make sense for Tesla, given that electric cars are not locally made.”
A closer look at the numbers reveals just how big the tax burden is for Tesla vehicles.
For Tesla’s most affordable model, the Model 3, the ad valorem tax alone comes out to roughly R200,000.
After factoring in the 25% import duty, 15% VAT, and a 10% mark-up, the total cost of bringing a Model 3 into South Africa balloons to 67% more than its UK price.
The Bigger Picture: Local Manufacturing vs. EV Adoption
While the current tax system helps protect local car manufacturers, many of these brands argue that the South African government is failing to support local EV production.
Most locally assembled vehicles are exported to markets like Europe and the UK, where the phase-out of petrol and diesel cars is already in motion. However, South Africa has yet to create policies that actively incentivize local EV production for its own market.
In an effort to change that, the government has announced a 150% tax incentive for manufacturers investing in electric and hydrogen vehicle production, set to take effect in March 2026.
However, industry leaders believe this isn’t enough. Many are calling for consumer rebates and subsidies to encourage EV adoption in South Africa.
Until then, Tesla—and many other EV brands—are likely to remain absent from the South African market.
Photo by Charlie Deets on Unsplash
