EV MANUFACTURE
SA motor industry relief as electric vehicle manufacturing plans start to take shape
South Africa is at risk of losing export markets as major trade partners ditch gas-guzzlers. Our biggest markets are banning imports and sales of ICE vehicles within less than eight years and yet SA's hardly even started producing new energy vehicles.
They’re dirty and soon no one will want them. Traditional internal combustion engines (ICEs) are being phased out in South Africa’s biggest markets — Britain and the EU — and if the local automotive sector does not switch gears from ICE production to new energy vehicles (NEVs), it might as well close up shop.
Britain and the EU have set aggressive targets to phase out ICE vehicles: by 2030, neither will allow sales and imports of such vehicles and they are also planning to introduce heavy carbon taxes on imports.
That’s less than eight years away and South Africa’s motor industry has not rolled a single electric vehicle (EV) off the factory floor, and only a few manufacturers, including Toyota, Mercedes-Benz and BMW, are producing hybrids, which are classified as NEVs.
The motor industry’s anxiety over the issue has been stepping up for years, as it raised concerns that the market for ICEs was getting progressively smaller while the government’s promised EV roadmap to speed up sales and production progressed at a snail’s pace.
On 18 May 2021, the Department of Trade, Industry and Competition published the Green Paper on Advancement of New Energy Vehicles, after extensive industry consultations and with an undertaking to issue a White Paper by the end of the year.
The Green Paper explores levels of support and infrastructure investment needed to encourage electric vehicle uptake, within the context of wider economic recovery efforts through market stimulus and supply chain support measures.
It looks at an investment and tax system to build a resilient raw material supply chain to support the country’s efforts to be a global player in NEV manufacturing as well as how to retain preferential access to major trading partners to allow the country to maintain global competitiveness and foster innovation.
It’s September 2022 and there’s still no White Paper.
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But the Automotive Business Council, also known as Naamsa, is bullish about developments after Trade, Industry and Competition Minister Ebrahim Patel released details of a “working document” at the Presidential Climate Commission, making a “compelling” case for South Africa’s shift to NEVs.
Patel, as reported in Engineering News this week, insists the NEV roadmap is taking shape and will be led by production rather than consumption.
This is significant because the current market for NEVs in SA is almost nonexistent because of lack of demand — mainly because of the eye-watering cost of these vehicles, which are imported for the premium market. Also, there are plans for carbon taxes on imports.
Patel reportedly told the commission: “We have not closed our eyes to the other options; we have looked at them and we have concluded that it would be in South Africa’s best interest to move to electric vehicles.”
Finance Minister Enoch Godongwana recently met the automotive sector to discuss the Treasury’s approach to NEV production.
There is a huge tax burden on all new vehicles produced in South Africa — in total, the Treasury lumps 42% in taxes on every vehicle sold, including 15% VAT, ad valorem tax (because vehicles are deemed to be luxury items) and carbon emissions taxes.
Patel recognised the need for a support framework. Not creating it would put a lot of GDP at risk. He reportedly said the government intended to go for a production-led model, rather than a consumption-led strategy advocated by some stakeholders, whereby growth in domestic demand, supported by lower tariff barriers, triggers investment.
Mike Mabasa of Naamsa said not releasing the White Paper created significant uncertainty in the market. But Naamsa is aware government officials have been working behind the scenes on options and, based on the discussion and feedback, the organisation and others are comfortable that the department will “get us to the finish line”.
“We are hopeful that before the end of this year South Africa will certainly be able to announce very firmly the direction we are taking…”
Urgency
Motoring expert Mark Smyth says, though there has been delay, there is now a realisation that something needs to be done urgently. Time is of the essence. SA’s biggest markets have already decided to ban imports of ICE vehicles within less than eight years and the average lifecycle of a new model car is between five and seven years in terms of development time.
Smyth says most manufacturers have already invested in new plants, with other plants coming remarkably close to ending their tenure and being at risk if they fail to switch quickly.
The industry has become reliant on ICE and South Africa has been able to supply raw materials such as platinum catalytic converters used in petrol and diesel vehicles, but it has none of the raw materials required for switching to electric vehicles.
The manufacturers have invested significant amounts of money and resources in creating new facilities for EVs to be able to meet the demand, says Smyth, but there are already shortages worldwide, including chips and wiring harnesses from Ukraine.
It is furthermore uncertain whether the South African government will stump up financial support.
The automotive sector is a critical pillar of the South African economy — one of the country’s largest economic sectors by revenue with 4.3% to GDP (2.4% manufacturing and 1.9% retail). It accounts for 17.3% of manufacturing output and 18.1% of total exports.
A total of 298,020 vehicles, worth R138.3-billion, and R69.2-billion in automotive components, were exported in 2021.
At least 110,000 people are directly employed in the sector and the livelihoods of more than half a million more people depend on it. In October last year, Mabasa warned that, by 2030, 40% of all vehicle sales in Europe may be EVs, and that his association believes the number could increase to 80% by 2040.
“It is clear that we cannot ignore EVs if we want to continue doing business with Europe. It will have a huge impact on the country if we lose R201-billion in export earnings a year.
“We don’t want our main export markets to say that they are no longer interested in ICEs because of their emission targets, and that they are taking their business elsewhere. We need to remain relevant.
“The change in our industry is going to be driven by how we redefine mobility; the convergence of connectivity; electrification; and changing customer needs — not just for our local consumption needs, but for other markets around the world as well.” DM168.
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.
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“but it has none of the raw materials required for switching to electric vehicles”. So we will pollute the globe more by importing and shipping parts in. The producers of the local vehicles and local parts, will use coal fired power to produce the parts etc. The vehicles will then be shipped thousands of kilometers to other countries, using more carbon emissions. I don’t want to see us losing big employers, but there are always down sides to this planet saving exercise. The only answer is reducing the number of people on the planet over time, or at minimum stagnating population growth as a start. Basically spending money on educating the global youth about climate change & family planning, starting from a young age. Less consumers, less emissions.
If only …
Those with memories stretching back a decade or more might remember the South African Joule, our own electric vehicle. It was way ahead of its time and got as far as producing a small fleet of prototypes – which worked well. The Joule project eventually failed due to a complete lack of support from our government and development banks. If only we had invested the required R9 billion into this potential jewel instead of into the misguided PBMR (pebble bed modular reactor), we could have been a competitor to Tesla and all. Remember that Elon Musk is a South African born visionary and businessman. Come on South Africa recognise our own talent!
About time this is talked about. But the urgency to change is higher than many understand. We do not have 8 years to make the change. If no ICE will be sold in Europe by 2030, there will be a rapid taper off before then. Virtually no ICE will be sold in Europe by 2028. Who will want to purchase a car that is going to stop production in 2 years? In the meantime others are jumping in. Tesla’s Berlin factory will be able to make 2 million cars a year when fully built out. They started to build their Shanghai factory in Dec 2018. It has now made over 1 million cars and it is estimated that it will have a run rate of nearly a million cars a year by the end of this year. Our car manufacturers have a difficult task to transition to EV, including the supply chains. They also need to change to the latest manufacturing techniques pioneered by Tesla to get their costs down to be able to compete. Unfortunately Tesla will likely never open a plant here. They will not want to navigate our minefield of BEE and labour regulations.
Is the current SA Government actually managing to deliver anything it says it will, in the time it says it will? What happened to the performance contracts CR promised each of his many government ministers would have?
So we will end up with electric vehicle and no power to charge them. I will stick to ICE as long as I can. Climate alarmists can take a hike.