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THE government’s controversial new plan to introduce a CO² emissions tax on all new vehicles has sparked fears in the Eastern Cape motoring industry that the move could threaten jobs, cripple future sales growth and plunge the industry straight back into a financial crisis.

As the automotive hub of South Africa, the Eastern Cape has gone through tough times due to the impact of last year’s economic slump, with many jobs in the industry lost in the process.

To add to its woes, the destructive crash in domestic vehicle sales has continued for a third consecutive year, with 2009 showing the biggest percentage decrease in the industry’s 110-year history in South Africa.

The newest figures from the National Association of Automobile Manufacturers (Naamsa) and independent Associated Motor Holdings (AMH) show last year’s total sales plummeted 25,9% below the 2008 level.

Manufacturers, industry leaders and economists say the introduction of the new tax on March 1 is premature and that it will not only hurt the industry further, but will put pressure on struggling consumers still battling the effects of the recession – and who will now likely have to fork out even more to own a new vehicle.

The South African National Treasury’s plan to introduce the new tax is designed to curb spiralling carbon dioxide emissions. Department spokesman Thoraya Pandy told Weekend Post this week it would press on with the “adjusting of existing ad valorem excise duties on motor vehicles”, and that the tax would definitely be implemented in March.

However, there has been no indication of how much the tax would amount to, or how it will be levied.

Annelise van der Laan, spokesman for Mercedes-Benz South Africa which has a plant in East London, said the company recognised the need to reduce greenhouse gas emissions, but that initiatives such as the CO² tax, while acceptable in principle, should be carefully conceived.

“The introduction of the CO² tax, at a time when the local market is just exiting a recession, could prove most detrimental and could even be considered punitive,” Van der Laan said.

“It could hamper sales growth, and hence place local production and exports, future production contracts and job stability in jeopardy.”

Volkswagen South Africa communications executive Bill Stephens said the company supported the principle of encouraging more fuel-efficient, emission-friendly vehicles. However, he said implementation of the new tax was “premature” as consumers were still suffering in “a tough economic environment”.

“The timing is not right. The issue should be given more consideration and debate,” said Stephens.

General Motors South Africa (GMSA) vice-president of engineering, Wendle Roberts, said a carbon tax on passenger vehicles would increase the price South African consumers could expect to pay for most new passenger vehicles.

“It is also expected to impact on all light commercial vehicles, should government decide to implement this at a future date,” said Roberts.

Because the tax would increase the selling price of new passenger cars, it could slow down any recovery in the domestic auto industry, he said.

Roberts hoped that, once implemented, the regulations would not be more onerous than those already in effect in European countries like Germany. However, local economic and operating conditions, as well as the “unique market”, had to be taken into consideration.

Naamsa confirmed it would accept the new tax in principle, but added its “early timing could hinder recovery prospects for struggling auto makers”.

“The industry is emerging from one of the deepest and most severe recessions in its history and the introduction of additional taxes could, if they are too punitive, result in the industry lapsing back into recession,” said Naamsa director Nico Vermeulen.

Bay economist Neal Bruton said introducing the new tax so soon could be detrimental to the recovering automotive market. “If this new tax hikes vehicle prices, it will most probably have a negative impact on the recovery of the struggling car market caused by the economic recession,” said Bruton.

Van der Laan also said the structuring of such a tax and its introduction should have been done in accordance with the introduction of suitably improved quality fuels in South Africa – which are as yet scarcely available in this country.

“There are many cars and commercial vehicles available from the Mercedes-Benz stable offering environmentally friendly technologies together with exceptional fuel efficiency. The majority of these are, however, not available in South Africa because of the lack of suitable fuel quality,” she explained.

Vermeulen agreed the unavailability of cleaner fuels was a concern for manufacturers.

He explained that South Africa only conformed to “Euro 2” engine emissions levels, whereas many of the newer vehicles already had “Euro 5” conforming engines.

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