President Cyril Ramaphosa is putting government officials on the spot with his repeated insistence that SA is ready to become a global player in the manufacture of new-energy vehicles (NEV) and components.
On Thursday, at the BMW SA car assembly plant in Rosslyn, Tshwane, he said: “As the transition to battery-electric vehicles, plug-in hybrids and hydrogen mobility gathers momentum, SA is perfectly positioned as a key global manufacturing base for the mobility of the future.”
He added the government was finalising targeted incentives “for battery-cell localisation, electric-vehicle (EV) component manufacture, clean mobility research and design and critical minerals beneficiation”.
Government officials have been saying for years that such incentives are necessary to future-proof the local industry against the global shift away from the petrol- and diesel-powered internal-combustion engine (ICE).
The industry exports two-thirds of the cars and bakkies it manufactures — most to markets planning to ban ICE technology in coming years.
Despite acknowledging the need to change, and the publication of an EV white paper in November 2023 setting out general goals, the government has been slow to act.
That it was an EV white paper, not an NEV one, underlines the fact that EVs are the immediate priority. Hydrogen and other technologies will follow.
Some local motor companies manufacture hybrid-electric vehicles — offering a combination of ICE and EV technology — but the industry has grown impatient with the government’s apparent lack of urgency.
They warn that if EV-friendly policies are not accelerated, multinational motor companies will take future investments to other countries.
Thursday was not the first time Ramaphosa has upped the stakes. In most countries where EV sales have flourished, governments got the ball rolling with consumer incentives that reduced purchase prices.
The SA motor industry says such incentives are needed here to accelerate the painfully slow growth of EV demand.
Multinational motor companies with SA subsidiaries are more likely to invest if there is strong local demand for their new products.
For a long time, officials from the treasury and department of trade, industry & competition insisted that the government couldn’t afford buyer incentives and the only incentives on offer would be for manufacturing.
Late last year, however, Ramaphosa said buyer assistance was a possibility.
While that has yet to translate into direct action and there was no mention of it on Thursday, the president’s general comments suggest real action on EV incentives is nearing.
BMW SA CEO Peter van Binsbergen said Friday he was “positive” government would announce policy changes this year, after a series of “intense” discussions with trade, industry & competition minister Parks Tau.
One of the issues in those discussions is the integration of EV development into the 2021-2035 automotive production and development programme (APDP), which is part of a broader government strategy called the SA automotive master plan (SAAM).
Both were written in 2018, before the Covid-19 pandemic wrecked every growth target. Only in 2025 is the local new-vehicle market returning to pre-Covid levels.
Industry employment, production, components localisation and racial transformation are all well behind schedule.
Industry officials say a scheduled 2026 reappraisal of APDP and SAAM content and targets has been brought forward to this year to urgently address imbalances.
The inclusion of NEV incentives is a priority. APDP manufacturing incentives are at present technology-neutral, meaning ICE and NEV investments enjoy the same benefits.
Now the argument is that EVs need special treatment. Finance minister Enoch Godongwana has said the government will offer 150% incentives for EV investments from 2026.
While the local production of EVs is a priority, it’s not the only one. As Ramaphosa pointed out, SA has the potential to go much further. Many of the minerals used in NEV battery technology — like lithium, cobalt, copper and manganese — are plentiful in SA and nearby countries.
In most of these countries, however, the minerals are exported raw for beneficiation in other countries, particularly China. SA not only wants that beneficiation to happen locally, but also the manufacture of related goods, such as batteries and components.
Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers (Naacam), said at the weekend that with the right incentives SA and its neighbours could become key players in the global supply chain.
He said: “Naacam welcomes the president’s announcement about government prioritising greater incentives for targeted battery localisation, EV components manufacture … and critical minerals beneficiation. This is recognition that the country has more to gain from deep localisation.”
Four SA motor companies — the local subsidiaries of Toyota, BMW, Mercedes-Benz and Ford — have already invested in hybrid-electric technology.
Van Binsbergen said global demand for plug-in hybrid versions of the latest X3 car range, launched late last year, showed the R4.2bn investment was money well spent.
The Rosslyn assembly plant is the only BMW facility in the world to build plug-in hybrid X3s, but also produces ICE versions. About 95% of production is exported to 75 markets about the world.
Germany and the UK are among the main destinations but there is no place for the US.
About 20% of Rosslyn’s previous-generation X3s, all ICE, went to the US but Van Binsbergen said that market’s lack of interest in hybrids made it an unsuitable candidate for the new range.
US demand for X3s is met from a BMW plant in South Carolina. The decision not to supply the US was a fortuitous one, given President Donald Trump’s subsequent decision to impose 25% tariffs on vehicles imported into the US.
The loss of that market appears not to have affected overall demand for Rosslyn X3s. Milan Nedeljković, the global BMW group’s management board member responsible for production, said on Thursday that Rosslyn expects to set an all-time production record in 2025.
The previous record, 73,000, was in 2015. Van Binsbergen said the aim this year is to approach the plant’s 79,000 capacity. To do this, however, will require the successful completion of a deal to export X3s to Canada, which has its own bitter automotive battle with the US.
Like most countries, Canada has specific technical standards for vehicles sold in its market and Van Binsbergen said engineers were busy completing homologation — obtaining official certification — for the X3 to be sold there.
Significantly, 60% of X3s built at Rosslyn are hybrids — a much higher proportion than predicted. “That’s a very big swing compared to expectations,” said Van Binsbergen.
Of X3s sold in SA, fewer than 10% are hybrids.
Van Binsbergen added that export demand for the hybrid showed that the SA motor industry was right to pursue EV development.
“We are an export-focused industry and with all the challenges we face, we are at a critical point.”
He added that it was not enough to incentivise existing motor companies to stay in SA. For a sustainable industry, it was also necessary to bring in new manufacturers.
“Government is aware that we face a very serious situation but with the right policy, we can make local manufacturing more attractive for newcomers,” he said.
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