South Africa needs to kick-start electric vehicle production – or risk losing billions in exports

 ·5 Jul 2022

South Africa’s manufacturing sector needs to start producing and selling more electric vehicles (EVs), or risk losing out on billions of rands in exports, says the National Association of Automobile Manufacturers of South Africa (Naamsa).

Mike Mabasa, the chief executive officer of Naamsa, said that the push toward manufacturing electric vehicles was the most important recommendation put forward by a trade and industrial policy strategies report compiled for the Department of Trade, Industry and Competition.

Over last year 387,125 vehicles, worth R148 billion, along with R53.7 billion worth of automotive components, were exported from South Africa to 151 countries. The automotive industry had a record year producing 631,983 units domestically.

Mabasa said that the European Union, with exports of R129.7 billion, or 64.3% of the total export value of R201.7 billion, was South Africa’s main export region for cars. By 2030, Naamsa expects 40% of all vehicle sales in Europe to be EVs.

This 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 (internal combustion engines) because of their emission targets and that they are taking their business elsewhere. We need to remain relevant,” said Mabasa.

He said the change in the industry is going to be driven by mobility, connectivity, electrification, and changing customer needs – not only locally but also in other markets worldwide.

Naamsa, in collaboration with 40 CEOs – including leaders of South Africa’s seven local vehicle manufacturers and importers – is developing a roadmap to integrate South Africa into the global EV value chain.

“The reality is that the world is changing to EVs, and fast, and we need to embrace that change,” said Mabasa.

Cheaper EVs

The first pillar of the roadmap is to increase domestic demand for EVs by importing more of these vehicles to familiarise people with the new technology, said Mabasa.

“South Africa currently has four full EV models: the Jaguar I-Pace, the BMW i3, the Mini SE (launching this month), and the Nissan Leaf – although the Leaf has disappeared from showroom floors.”

Other manufacturers, such as Volkswagen, Porsche and Mercedes-Benz, are all testing models with the aim of local introduction, said Mabasa.

Affordability is a huge issue, with Mabasa noting that it currently it costs more than R600,000 for the cheapest available EV. As a result, the association is looking to source less expensive EVs from across the globe, decrease import duties, and push public transport to become electric.

“We also want to look at public transport, where there is a good opportunity for minibus taxis and buses to go electric,” he said.

Mabasa said Naamsa would urge the government to:

  • Make import duties zero per cent for three years to kick-start demand;
  • Exclude the battery cost from the ad valorem tax charged on motor vehicles.

“If a car costs R250,000, and the battery is R50,000 of that, then the government should only charge ad valorem on the R200,000,” he said.

Made in SA

Mabasa said that the local EV manufacturing is also in need of heavy investment.

Local manufacturers are already thinking about extending their production lines to include EVs, although their parent companies have not necessarily signed off on this yet, he said.

While the local manufacturers negotiate with their principals to make this happen, Naamsa will engage the government to revisit the Automotive Production and Development Programme (APDP) – the government’s support programme for the industry – to ensure that it also covers EV vehicles and components.

Charging Infrastructure and Eskom

Ensuring the necessary charging infrastructure is essential to enable drivers to drive from Phalaborwa to Pretoria without fear of getting stuck next to the road, said Mabasa.

“There is a need for more fast chargers that can charge an EV in 30 minutes or less. Facilities for a quick battery change should also be made available.”

Naamsa is set to meet with the country’s petroleum companies in an effort to convince them to roll out EV charging infrastructure.

For EVs to work in South Africa, the state of South Africa’s energy sector under Eskom needs to be considered.

“We need to see how we can accelerate the introduction of EVs without causing any issues around power supply,” Mabasa said, adding that Naamsa is in talks with independent power producers, as it believes some charging stations should be powered by clean energy.

“We cannot simply erase the benefit of zero-emission EVs by charging them with coal-powered electricity.”

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