South Africa’s car manufacturers have missed investment allocations from their parent companies to produce new-energy vehicles (NEVs) because of a government policy vacuum.
Neale Hill, president of the National Association of Automobile Manufacturers of South Africa (Naamsa), said this week at a Naamsa conference on NEVs in Pretoria that the government needed to announce its intentions on EV production urgently, because investment decisions depended on it.
“South Africa has already missed the upcoming round of EV model investment, for which the decision date is three years before start of production, and realistically will only be considered for the next round of investment around 2030.”
It was not a foregone conclusion that original equipment manufacturers (OEMs) would invest in South Africa because everyone was in a competitive position, he added.
The department of trade, industry & competition (DTIC) released the Auto Green Paper in May 2021 to establish a policy foundation for EVs. Since then it has received comments from sectors including the car industry, academics and research firms.
Earlier this month the DTIC said “further work to complement stakeholder consultations was commissioned to analyse what other countries are doing to support EVs, and exploring opportunities in related component production. Currently, measures to support the transition to e-mobility continue to be explored, evaluated and costed.” The department did not say when the policy would be finalised.
Malebo Mabitje-Thompson, the DTIC's acting director-general, said at the Naamsa conference that the government had made it clear the most viable way to help grow the sector was through a manufacturing-focused approach, starting with EV production.
“We want to ensure that what the transition doesn't do is undo all the benefits we have built together as partners.”
Without EV production, areas such as East London and Kariega (Uitenhage) may be disadvantaged, she said, adding: “We don’t want to risk South Africa becoming the last place where internal combustion engines [ICEs] are produced while other markets are busy with EVs.”
Mercedes-Benz makes some of its models in East London, while Volkswagen produces Polos in Kariega and is the biggest private-sector employer in the area.
We don’t want to risk South Africa becoming the last place where internal combustion engines are produced while other markets are busy with EVs
— Acting DG Malebo Mabitje-Thompson, DTIC
Toyota South Africa president Andrew Kirby said the country had a very good policy strategy, but the company would like to see interventions that support the introduction of EV manufacturing “so we can sustain production volumes and the key export market”.
He said South Africa had assembling skills, but the challenge was in the cost of EVs, supply chains, selling them and EV technology.
Carmakers in South Africa are gearing up to produce EVs to safeguard exports. About 60% of cars manufactured here are exported to Europe and the UK. European policymakers have banned the sale of petrol and diesel cars from 2035 to combat climate change and make way for NEVs.
NEVs include traditional hybrids, in which a petrol motor continuously regenerates an electric battery; plug-in hybrids, which have petrol motors, but need electric batteries recharged by an external power source; and battery-electric vehicles.
According to Naamsa, if the South African market is forced to transition to the use of NEVs without incentives and consumers are expected to bear high prices, the domestic vehicle market will “contract substantially, massively damaging the South African automotive industry”.
Given the price sensitivity of the market and the substantial subsidisation required to bring EV and ICE pricing more into line, the most appropriate incentive model to support the transition to NEV take-up appeared to be a direct, fixed, NEV purchase subsidy.
Such an incentive would optimise support for entry-level NEVs, which would diminish on a sliding scale for more expensive options.
George Mienie, CEO of AutoTrader, said an in-house study showed the “magic price point” was about R500,000.
Naamsa and the government’s vision was that the NEV sector, comprising almost exclusively EVs, would account for 20% of South Africa’s new vehicle market in 2025, rising to 40% in 2030 and 60% in 2035.
In 2022 the share of NEVs was less than 1% — 4,674 vehicles out of 528,963. Those included 2,711 traditional hybrids, according to the organisation. There are fewer than 400 public charging stations in South Africa.
Naamsa said according to the findings of a joint study with the DTIC, by 2035 the required number of charging stations could be as high as 262,000 if consumers switched wholesale to NEVs.
Delegates at the conference raised concerns about increased competition from countries such as Morocco, Kenya, Egypt and Thailand.
Hill said Thailand, which is aggressively pursuing trade agreements with the EU and UK, is the “biggest threat our industry is facing”.
In Africa, he said Morocco, Egypt and Kenya were progressing quickly and were ahead of South Africa in the EV sector. While South Africa was still ahead in terms of total vehicle production in Africa — 54% in 2022 — Morocco was far ahead in the passenger car segment.
Delegates also raised issues around batteries, the need to promote local production of components, charging stations, the high price and financing of EVs, and insurance structures for the vehicles.
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