European countries are accelerating their shift towards emissions-free vehicles, heaping more pressure on the SA motor industry to end its almost exclusive production of models powered by petrol and diesel internal combustion engines (ICE).
Romain Gillet, associate director at automotive market intelligence company Standard & Poors (S&P) Global Mobility, said last week the European new-vehicle market had “changed dramatically” in two years as global motor companies pumped billions of euros and dollars into the development of electric vehicles (EVs).
In 2019, European buyers had a choice of no more than 20 pure-electric car models. By 2021, this had increased to over 60. The number has continued to rise since. Hybrid electric vehicles, powered by dual electric and ICE motors, have also proliferated, though Gillet said these would lose substantial market share in the next few years, even before they join ICE vehicles in being banned by many countries.
The EU has set a target of carbon neutrality by 2050. Towards that, its Fit For 55 programme aims to reduce greenhouse gas emissions by 55% by no later than 2030. Electrification by the motor industry is considered a key part of that target.
Many European countries have declared their intention to ban the sale of new ICE light vehicles — which include cars and bakkies — after 2030 and hybrids after 2035. Some, like Norway, plan to start doing so as early as 2025. Gillet said other countries might also have to enforce sales of pure-electric vehicles — known as battery-electric vehicles (BEV) — “more than before” to meet EU targets.
Why does this matter to SA? In 2021, the local motor industry built 471,433 vehicles. Of those, 297,441, or 63.1%, were exported. They included 229,672 — more than half of SA’s total production — to Europe. The single biggest export market was the UK which, though no longer part of the EU, subscribes to its environmental aims and says it will ban ICE and hybrid vehicles in line with other countries.
According to the Automotive Industry Export Council, eight of SA’s top-10 vehicle export markets in 2021 were in Europe. The interlopers were Japan and Australia. Even super-green Norway, which has the world’s highest per-capita number of plug-in EVs, received more than R500m of SA vehicles and components in 2021.
Gillet, who heads S&P power-train activities in Europe, Middle East and Africa, said ICE’s demise would be mirrored in a shift towards automatic gearboxes, which are better suited to electric motors. By 2030, he said, manual ICEs would occupy 2.5% of the European new-vehicle market. Their 2022 share is 38%.
If it is not to lose many of its European exports, SA must transition rapidly from ICE technology to EV. By S&P’s estimate, ICE vehicles will account for 5% of European sales in 2030. BEVs will have 61.5% and hybrids 33.5%.
At present, no SA motor companies manufacture BEVs. Toyota builds hybrids for local demand, but Mercedes-Benz SA is the only company to export any. Ford SA plans to eventually include some hybrid versions of its new Ranger bakkie, which is about to be launched. BMW SA and Volkswagen SA hope to add EVs in their next model ranges. Nissan SA and Isuzu SA, whose main export markets are in Africa, where EV demand is small, are under no immediate pressure to follow suit but will do so in future.
In most cases, multinational parents will want to see significant local demand for their EVs before they invest billions of rand in their production. However, because SA does not offer buyers any of the price incentives, such as tax rebates, that have kick-started EV demand in other countries, sales are painfully slow.
The government was supposed to publish a policy white paper late in 2022, setting out its plans to incentivise local EV sales and manufacture. Insiders say the delay is caused by disagreement over how to fund incentives.
The new SA-built Ford Ranger, a European best-seller, will still be in production when ICE bans kick in. So will a number of other SA products due for launch from 2023. If Gillet is right, the European window of opportunity for local EV transition may close faster than expected.
The good news is that other regions around the world are moving more slowly and, as a last resort, SA can direct exports there instead.
Nevertheless, in a measure of how far behind SA and the rest of Africa have fallen, S&P lists its predictions for BEV regional market share in 2030. Europe leads the way with 61.5%, followed by China at 46%, North America at 36%, South Asia at 12% and South America at 4%. Africa does not rate a mention.
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