The government is talking to potential foreign partners to establish a solid foundation for the creation of a SA electric vehicle (EV) manufacturing industry, trade, industry & competition minister Ebrahim Patel said on Thursday.
He told a motor industry conference in Tshwane that, far from dragging its feet on EV policy, as it has been accused, the government was “taking time to ensure that when we have a programme, it is sustainable”.
Deputy finance minister David Masondo told the same conference, organised by the National Association of Automotive Component and Allied Manufacturers (Naacam), that finance minister Enoch Godongwana was expected to announce a new motor industry support package, including EVs, in October.
A government policy white paper on new energy vehicles, mainly electric, should have been published in October 2021. After successive delays, Patel said he hoped it would now be ready “before the end of this administration”. He did not elaborate but industry sources say he means next year’s national elections.
Patel said SA had made “significant progress” in preparing the way for EV production. The government had launched a study to investigate the opportunities for SA to become involved in EV battery production, either alone or in partnership.
Among others, it had consulted BYD and CATL, two Chinese companies with market-leading experience in EV manufacture and battery technology. There had been discussions about SA co-operation with Zambia and the Democratic Republic of Congo, both rich in minerals needed for battery production. And he said SA had approached the US government to discuss a minerals-based manufacturing partnership.
Masondo said the government’s willingness to support local EV manufacture and market development was tempered by a “particularly stretched” fiscus. The motor industry has asked the government to include buyer incentives in any EV strategy. In almost every country where EV sales have flourished, they have been stimulated by such inducements, to narrow the price gap between EVs and vehicles with petrol and diesel internal combustion engines (ICE).
Patel has said previously that the government cannot afford buyer incentives and that any stimuli are likely to be targeted at vehicle production. The industry has responded that without local demand, multinational motor companies will find it hard to justify EV investment in SA.
Without that investment and subsequent local production of EVs and their components, Masondo said it would be difficult to market SA and its neighbours as a global hub for EV minerals and components beneficiation.
He was particularly concerned that a local switch from ICE to EV manufacture could cost the components industry 67% of its exports, which in 2022 totalled over R70bn. Catalytic converters, which clean exhaust emissions in ICE vehicles, accounted for nearly half that.
Masondo’s calculation assumes a complete changeover to EVs. However, though export markets plan to ban the sale of ICE vehicles in coming years, many more, particularly in Africa and other developing regions, will continue to buy them for decades to come. Naacam director Renai Moothilal has said consistently that the local components industry is sophisticated enough for any technology change and that companies are already exporting EV components.
Patel said future development of the SA motor industry must be based on local growth in components production. In particular, there must be more involvement of local, black-owned companies.
Of about 200 companies supplying completed parts directly to vehicle assembly lines, about 75% were foreign owned. However, there was considerable opportunity for black SA newcomers to initially provide sub-components, then grow into full-scale components manufacturers.
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