The National Association of Automobile Manufacturers of South Africa (Naamsa) accepts, in principle, the introduction of an environmental tax on new cars sold in South Africa from September 1, says Naamsa president David Powels.

However, he adds, the measure will push vehicle prices up by about 2%, and this additional tax burden amounts to about R1,2-billion a year, based on 2010 projected new-car sales.

Powels says “there is no doubt” a price increase to new-car buyers of “at least 2% will depress sales volumes and could have negative implications on [automotive] 
industry employment levels”.

Finance Minister Pravin Gord-han announced in his maiden Budget speech last week that new passenger vehicles would be taxed based on their certified carbon dioxide (CO2) emissions at R75 per g/km for each g/km above 120 g/km.

The new tax regime favours the use of more fuel-efficient 
vehicles (often equated to vehicles 
with smaller engines) that emit less CO2.

Powels says Naamsa would have preferred to have seen more emphasis on the socioeconomic 
impact of the new emissions tax, and a quantification of the 
expected impact of the tax regime on sales volumes and on the structure of the new-car and used-
car markets in South Africa, as well as on inflation and employment.

“The timing of the introduction of the tax is also questionable, given the current fragile state of the industry, which is at the initial stage of emerging from an extremely severe recession in domestic new-vehicle sales over the past three years, compounded by the negative impact on 
export sales as a result of the 
global economic crisis,” says Powels.

“The impending higher taxes will do little to assist the much-needed recovery in domestic sales.”

In order to be effective in influencing consumer purchasing decisions, it is essential that the tax should be applied at point of sale to ensure visibility to the end customer, adds Powels.

He also says that a number of technical, administrative and legal issues need to be dealt with to facilitate the introduction of the tax regime, and that a team of industry experts will assist National the Treasury and the South African Revenue Service in this regard.

Cleaner Fuel to Make Big CO2 Impact

Powels says that Naamsa has 
advocated the need for an integrated approach within government to CO₂ emission reduction initiatives.  

In this context, it is “imperative that government should legislate and incentivise the introduction of Euro IV-enabling ‘green’ fuel in South Africa”. 


The current general fuel production standard in South Africa matches Euro II engines. The higher the number, the less the engine emissions.

By not having cleaner fuel available, the local automotive industry cannot bring in the latest technology – cleaner burning engines.

“This [cleaner fuel] will provide a quantum leap benefit in the 
reduction of CO₂ emissions of new cars sold,” says Powels.

“Specifically, correct fuel 
quality could reduce new-car emissions by over 20%.”