The government’s refusal to consider consumer incentives to make electric vehicles (EV) more affordable for South Africans is counterproductive and could deter motor companies from investing in local production, Naamsa CEO Mikel Mabasa has said.
“You can’t expect the industry to manufacture a product it can’t sell to its own people,” he said. “Are we to become an industry that builds vehicles that its local customers will never drive? We believe very strongly that this is the wrong policy.”
In most markets where EV sales have flourished, initial local demand has been stimulated by tax breaks to reduce the price premium of the new technology. Finance minister Enoch Godongwana and his trade, industry & competition counterpart Ebrahim Patel have repeatedly stated that SA can’t afford such largesse and incentives must be manufacturing-based.
The government’s 2023-27 Just Energy Transition (JET) implementation plan for new energy vehicles (NEV) — a term that refers primarily to EVs but also includes hydrogen and other forms of emissions-free automotive power — says SA’s shift away from petrol and diesel internal combustion engines (ICE) must be achieved in two stages. The first, to manufacture NEVs and their components, will cost an estimated R68bn between now and 2035. The second phase to get motorists into the new vehicles will cost another R133bn.
The latter amount, says the government, just isn’t there. For now, it says the industry must continue to rely on overseas sales. In 2022, the industry exported 63% of its combined vehicle production — most of it to the UK, Europe and US, where sales of ICE vehicles will be banned in coming years. While many other markets, including most of Africa, will remain ICE-dependent for years to come, SA companies don’t want to lose existing footprints.
Some will have no choice. Volkswagen SA (VWSA), which exports two-third of production, is likely to lose its European markets in five years. Their EV needs will be met by the global group’s European plants, while VWSA shifts its focus to Africa. MD Martina Biene said on Monday the company still hoped to build a battery-electric vehicle (BEV) in SA but it would require significant local demand to make it feasible.
While, in the short- to medium-term there was plenty of ICE demand to keep the Eastern Cape plant busy, a BEV product was also needed. If not, the plant would become redundant when ICE demand eventually dwindles.
SA-made vehicles are almost exclusively ICE. Two of the country’s seven major manufacturers build small quantities of hybrid-electric vehicles, with dual ICE and electric motors, and two more have announced plans to follow suit.
The JET document, however, makes clear that the government is wedded to the local manufacture of BEVs, which have no ICE component and rely on regular battery recharging.
Mabasa described this as a leap of faith at a time when, despite a worldwide trend towards BEVs, there was also recognition that hybrids and hydrogen may also have a big say in the future of automotive technology. If the government hoped that BEVs would one day take a significant local market share there would have to be huge investment in recharging infrastructure.
The government’s other big EV dream in the JET plan is for a thriving local battery industry. Batteries account for half the total cost of an EV. If they continue to be imported, as most ICE batteries are, they will make it nigh impossible for the industry to meet its 60% local content target for SA-made vehicles.
Many of the raw materials required for battery manufacture, such as lithium, cobalt, manganese, nickel, graphite and rare earths, are abundant in Southern Africa and the government believes regional co-operation can create a thriving industry. As things stand, most are exported for processing and value addition overseas.
China holds the mining and beneficiation rights to many of Africa’s reserves and may not want to cede its strategic advantages. However, Renai Moothilal, director of the National Association of Automotive Component and Allied Manufacturers (Naacam), believes it may be persuaded.
He said: “Our Brics relationship does allow for possible partnerships to be developed once clear business cases for battery production start to develop, including the understanding of the selected forms of government support through Brics.”
A battery production chain was vital for SA, he said. “It has to be based on competitiveness from the bottom up. Drivers of that will be a clear minerals beneficiation arrangement, with financial benefits for processing raw materials in SA that feed into battery production.”
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