Taxing the poor so the rich can drive expensive electric vehicles (EVs) may be a step too far for the government in SA’s economic climate, Volvo Car SA MD Greg Maruszewski said last week.
Despite an urgent need to encourage the local sale of EVs, he said, the government might find it hard to justify setting aside billions of rand to incentivise the purchase price of vehicles that, in the short term at least, would be bought by those who are better off.
The department of trade, industry & competition has postponed publication of a white paper on its strategy for incentivising the sale and manufacture of new-energy vehicles in SA. Though these will be primarily EVs, they may also include hydrogen and other forms of automotive power.
The white paper was due late in 2021, but is now not expected until the second half of 2022, at the earliest. The department has not explained the delay but motor industry insiders say it is struggling to find ways to fund incentives.
In nearly every country where EVs sell well, governments — many of which plan to outlaw the sale of vehicles using petrol and diesel internal combustion engines (ICE) from 2030 — offer generous tax and cash incentives to make EVs affordable. These incentives will be phased out eventually, when increased EV manufacturing volumes reduce unit costs and prices to an acceptable level. Maruszewski predicted this could happen within five years, but for now they are deemed necessary.
In the long term, SA hopes EVs will be affordable for every potential car owner. But at the moment, as in the rest of the world, the overwhelming majority are bought by people who already have one or two petrol and diesel vehicles intheir garage.
Maruszewski said that as the SA economy continued to recover from unemployment and other consequences of Covid-19, and consumers had been told to expect the toughest conditions in a decade because of other political and economic issues, “there’s no money for the poor to pay for the rich in electric cars”.
He said: “I’m not sure we will see incentives in the short term.”
Past proposals have included hitting ICE vehicles with higher taxes and using these to subsidise EV prices. Since this would penalise poorer South Africans who require cheap cars, a counterproposal was to exempt cars below a certain price.
Premium market
Maruszewski was speaking in Johannesburg at the launch of Volvo’s updated car range, which is exclusively electric. Some are hybrids, using dual ICE and electric motors, and some pure battery-electric. It is a bold move by the Chinese-owned, Swedish carmaker, most of whose local sales until now have been diesel cars.
The parent company has already begun to phase out diesel and petrol. Maruszewski said SA customers were embracing the shift to hybrids and EVs. Other premium car firms say the same. He predicted that the premium market could be exclusively EV by 2030.
The bigger challenge will be to accelerate sales of cheaper EVs. Nearly two-thirds of production by SA motor companies is exported, most to countries that are preparing to ban ICE vehicles. Yet with the exception of Mercedes-Benz SA, which includes some hybrids among its C-Class exports, everyone else ships ICE cars and bakkies. Toyota’s Corolla Cross hybrid is exclusively for the domestic market.
Most SA companies have said they will include EVs in future model plans. Among these is Ford SA, which is about to launch its new Ranger bakkie model after a R15.8bn investment. The model range will include some hybrids, but longer term, the company will have to increase EV options.
Most production goes to Europe, where even hybrids will be banned by most countries after 2035. The company has also invested R600m in its Gqeberha engine plant.
Ford Motor, the US parent company, recently declared that it wants at least half of its global new-vehicle sales to be EVs by 2030. Early in 2021, it confirmed that EVs were under future consideration for SA, but gave no timetable. The company’s vehicle assembly plant is in the Tshwane suburb of Silverton.
So, everyone, including some local Ford executives, were surprised last week when finance minister Enoch Godongwana suggested in parliament that the company already had advanced plans to build an EV plant. He said: “In the city of Tshwane, we are at risk of losing a potential multibillion-rand investment by Ford in an electric vehicle plant.”
Solar panels
This, he said, was in addition to the R15.8bn Ranger investment. The minister blamed the DA-led Tshwane city council for being “unable and perhaps unwilling to secure the electricity the new plant needs”.
Ford has previously declared that it expects the Silverton plant to be completely energy self-sufficient by 2024 — more than 10 years ahead of the 2035 target date for all Ford operations around the world.
So does Ford really have firm plans to build an EV plant in SA? The company is not saying.
In reply to direct questions from Business Day, it issued a statement simply confirming it had invested in Silverton and Gqeberha, and repeating a previous announcement that it had installed 31,000 solar panels at Silverton to supply additional power.
Its only reference to EVs was: “While we can confirm there will be an electrified Ranger in the future, we can’t share any details at this time.”
Despite Godongwana’s apparent giveaway, the only further comment was: “We cannot discuss any future investments.”
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