New Vehicle Levy Proposed

PRETORIA, 22 October 2026 — South African motorists who purchase petrol and diesel vehicles with high carbon emissions could face additional costs under a new government proposal aimed at encouraging cleaner and more energy-efficient transport.

The Department of Electricity and Energy has proposed restructuring the country’s existing vehicle carbon dioxide emissions levy into a system that would reward efficient vehicles and impose additional charges on those with higher emissions.

The proposal forms part of the draft National Energy Efficiency Strategy (NEES), which is open for public feedback.

Under the proposed system, vehicles producing emissions above a specified benchmark would attract levies, while vehicles performing better than the benchmark could qualify for rebates.

Electric and hybrid vehicles are expected to benefit from the proposed incentives.

However, the department has not yet announced the emissions thresholds, levy rates, rebate amounts or implementation timetable.

Government Proposes New Vehicle Levy

The draft strategy proposes introducing what is known as a feebate system.

A feebate combines a fee imposed on less-efficient products with a rebate offered for more-efficient alternatives.

In the automotive sector, this means that vehicles producing comparatively high emissions could become more expensive, while vehicles with lower emissions could become more affordable.

The department wants the system to be revenue-neutral.

This means the levies collected from higher-emission vehicles would be intended to finance rebates for qualifying lower-emission vehicles, rather than simply generating additional revenue for government.

The proposed structure would be based on vehicle emissions relative to an established standard.

The department has not yet determined which vehicles would fall above or below that benchmark.

Consequently, motorists cannot currently calculate how much extra they might pay for a particular petrol or diesel vehicle.

Petrol And Diesel Cars Could Become More Expensive

The proposal could affect buyers of certain petrol and diesel vehicles, particularly models with relatively high carbon emissions.

Larger engines and heavier vehicles often consume more fuel, although actual emissions vary according to engine technology, vehicle design and efficiency.

However, the proposal does not mean every petrol or diesel vehicle would automatically attract an additional charge.

A fuel-efficient petrol or diesel vehicle could potentially fall below the future emissions benchmark, depending on the rules eventually adopted.

The department intends to commission technical work to determine appropriate standards.

Until those standards are published, it remains unclear which vehicle models would be affected.

The proposal also does not establish a new recurring tax on everyone who already owns a petrol or diesel vehicle.

Its focus is on vehicle emissions standards and the taxation of new vehicles.

Electric And Hybrid Vehicles Could Benefit

The proposed reforms are intended to encourage greater adoption of lower-emission vehicles.

Battery-electric vehicles produce no tailpipe emissions, while hybrid vehicles combine conventional engines with electric propulsion to improve efficiency.

The government wants to use rebates to make qualifying vehicles more attractive to consumers.

This could help narrow the purchase-price difference between some conventional vehicles and their electrified alternatives.

However, the amount of any rebate has not been announced.

The department has also not confirmed whether every hybrid vehicle would qualify or how different hybrid technologies would be treated.

A vehicle’s eligibility would depend on the final emissions standards and the regulations implementing the programme.

How The Proposed Feebate System Would Work

The proposed framework would distinguish between vehicles according to their emissions performance.

Vehicle category	Proposed treatment
Above-standard emissions	Additional levy
Below-standard emissions	Potential rebate
Electric vehicles	Incentives envisaged
Hybrid vehicles	Incentives envisaged, subject to qualifying criteria
Vehicles at the benchmark	Treatment not yet specified

The government intends to adjust the emissions thresholds periodically as vehicle technology improves.

The draft strategy proposes annual adjustments to the feebate thresholds to reflect improvements in the average emissions performance of the vehicle fleet.

This could encourage manufacturers to introduce more efficient vehicles over time.

However, the final structure would need to balance environmental objectives with affordability and the needs of South African consumers.

Existing Carbon Emissions Levy Could Be Restructured

South Africa already imposes an environmental levy on new motor vehicles based on carbon dioxide emissions above specified thresholds.

According to the South African Revenue Service (SARS), the existing levy is intended to encourage a more energy-efficient and environmentally friendly vehicle fleet.

The levy is administered through the tax system and is payable by relevant manufacturers and importers under the applicable rules.

The Department of Electricity and Energy argues that the current system does not provide sufficiently strong incentives for improved efficiency.

It therefore wants the existing approach restructured rather than simply continuing with the present framework.

The precise relationship between the current levy and the proposed feebate would need to be established in future legislation and regulations.

Mandatory Fuel Economy Standards Also Proposed

The proposed feebate is not the only change under consideration.

The draft strategy also calls for mandatory fuel economy standards for new light vehicles sold in South Africa.

The Department of Electricity and Energy and the Department of Transport would commission a study to establish appropriate benchmarks.

These standards would take account of international requirements and technological developments.

The department proposes reviewing and progressively tightening the standards every three years, based on the cost and availability of improved technology.

Certain exemptions for manufacturers are also envisaged.

The government argues that introducing mandatory standards could help protect the competitiveness of South Africa’s automotive manufacturing industry.

This is particularly relevant because several international export markets are moving towards stricter vehicle emissions requirements.

South African Car Manufacturers Face Changes

South Africa’s automotive industry is an important source of manufacturing activity, exports and employment.

The transition towards electric and hybrid vehicles presents opportunities but also requires investment in new production technology.

The draft strategy proposes restructuring automotive incentives to encourage local manufacturing of new-energy vehicles.

These measures could include support for local assembly, component development and preferential government procurement.

The Department of Trade, Industry and Competition would have a role in reviewing existing automotive incentives.

The government has already introduced a tax incentive for qualifying investment in new-energy vehicle manufacturing capacity.

Since March 2026, eligible manufacturers have been able to claim a tax deduction equal to 150% of qualifying investment in production buildings, machinery and equipment, subject to the applicable rules.

The broader objective is to encourage manufacturers to modernise South African facilities as international demand for cleaner vehicles grows.

Government Wants Eco-Driving Training

Another proposal involves teaching motorists how to drive more efficiently.

The draft strategy states that driver behaviour can influence fuel consumption by approximately 15% to 20%.

The department wants eco-driving principles included in the national driving-licence curriculum, professional driver certification programmes and public awareness campaigns.

Eco-driving techniques can include maintaining appropriate speeds, avoiding unnecessary acceleration, keeping tyres correctly inflated and reducing unnecessary idling.

The proposed education programme is intended to help drivers reduce fuel consumption and vehicle emissions.

Unlike the proposed feebate, these measures focus on driving behaviour rather than the purchase price of vehicles.

What About Petrol And Diesel Prices?

The proposed vehicle emissions levy should not be confused with South Africa’s monthly petrol and diesel price adjustments.

Fuel prices are affected by international petroleum prices, the rand-dollar exchange rate, regulated margins and fuel-related taxes.

On 21 October, Finance Minister Enoch Godongwana announced temporary relief from the general fuel levy.

From 4 November to 1 December 2026, the general fuel levy will be reduced by R1.50 per litre for petrol and R3 per litre for diesel.

The relief will then be reduced to R1 per litre for petrol and R1.50 per litre for diesel until 5 January 2027.

The government estimates that the intervention will provide R10 billion in temporary support to households and businesses.

This fuel levy relief is a separate measure from the proposed vehicle emissions feebate.

It also does not guarantee that pump prices will fall, because international fuel costs and exchange-rate movements can offset the levy reduction.

Will Existing Car Owners Pay More?

The draft strategy does not establish an immediate new payment obligation for existing petrol and diesel vehicle owners.

The proposed emissions-based reforms primarily concern the standards and incentives applying to vehicles sold in the market.

Motorists who already own conventional vehicles should therefore not interpret the announcement as confirmation of a new annual ownership charge.

However, buyers considering a new vehicle may eventually need to take emissions performance into account alongside price, fuel economy and maintenance costs.

Whether the proposal increases or decreases the price of a particular model will depend on the final rules.

When Will The New Levy Start?

No implementation date has been confirmed.

The proposal is contained in a draft national strategy, and further policy development is required.

The government must still establish emissions benchmarks, determine levy and rebate calculations, assess administrative requirements and complete the necessary approval processes.

Public feedback could also influence the final design.

Until the relevant legislation or regulations are adopted, the proposed feebate remains a policy proposal rather than an enforceable new tax.

What This Means For South African Motorists

South Africa is considering a significant change in how it encourages vehicle efficiency.

Instead of relying solely on the existing carbon emissions levy, the government wants a system that financially rewards cleaner vehicles while imposing greater costs on models with relatively high emissions.

Supporters of this approach may see it as a way to encourage cleaner technology and improve fuel efficiency.

However, its impact on affordability will depend on how the standards are calculated and whether rebates make efficient vehicles more accessible.

For consumers, the most important outstanding questions concern the amount of the proposed levies, the vehicles affected and the availability of rebates.

For now, no new emissions-based feebate has taken effect. South African motorists will need to wait for the final policy and regulations before knowing how their next vehicle purchase could be affected.