Toyota sends a warning to South Africa
Suben Moodley, Vice President for Corporate Services at Toyota South Africa, has stressed the urgent need for South Africa to adapt to the global shift toward new energy vehicles (NEVs).
Speaking at the KwaZulu-Natal Investment Conference in Durban, Moodley stressed that the country must act decisively to secure its place in the evolving automotive industry.
He highlighted the need for South Africa to capitalise on its abundant raw materials essential for NEVs and to bolster its vehicle export capabilities, particularly across the African continent.
The global automotive landscape is undergoing rapid transformation, as evidenced by the exponential growth in NEV sales.
In recent years, NEV sales have surged—53% in 2021, 54% in 2022, and 35% in 2023—culminating in 14.2 million units sold worldwide.
Despite this growth, forecasts suggest that the pace will slow to around 10% in the coming years, making it even more critical for South Africa to position itself as a competitive player in the market.
Currently, NEVs account for 15.7% of global new vehicle sales, underscoring their growing importance.
South Africa, as Africa’s largest vehicle producer, manufactured 633,000 vehicles in 2023, representing only 0.67% of global production.
This figure falls significantly short of the industry’s master plan target of producing one million vehicles annually by 2035 to achieve 1% of global production.
Moodley pointed out that Africa remains an underdeveloped market in terms of vehicle ownership, with only 4% of the population owning vehicles compared to much higher rates in developed nations.
This disparity presents an enormous opportunity for South Africa to expand its footprint by leveraging the African Continental Free Trade Area (AfCFTA).
Despite Africa’s 14.5% growth in vehicle production in 2023, South Africa exported fewer than 13,000 vehicles to the continent, leaving a vast untapped market.
Moodley also emphasised the importance of local beneficiation of critical minerals such as lithium, nickel, and cobalt, which are abundant in South Africa and other African nations.
These materials are vital for NEV production, and their local processing could significantly enhance the country’s value chain and economic prospects.
Additionally, Moodley advocated for a balanced approach to decarbonisation, suggesting that hydro-electric vehicles could serve as a practical and affordable alternative to battery electric vehicles, especially in regions with limited infrastructure.
To achieve these goals, Moodley called for a collaborative effort between the public and private sectors, supported by strong policy frameworks.
He argued that reshaping the automotive industry to attract investment and localise NEV production would unlock substantial economic and job-creation opportunities.
However, he also warned that South Africa risks being left behind as global markets transition to NEVs, particularly as the European Union implements stricter environmental regulations and targets a ban on internal combustion engine (ICE) vehicles by 2035.
The automotive industry’s hesitancy to embrace NEVs is concerning.
Analysts have compared this reluctance to the failures of once-dominant companies like Kodak and Nokia, which were ultimately eclipsed by competitors due to their inability to adapt to technological advancements.
Without proactive measures, South Africa’s automotive industry risks losing its relevance in key export markets, jeopardising its long-term sustainability.
Recent data from Naamsa, the Automotive Business Council, underscores these challenges.
While domestic vehicle sales showed modest growth in October 2024—47,942 units sold, a 5.5% increase compared to the same month in 2023—exports painted a grimmer picture.
Vehicle exports plummeted by 42.6%, with only 23,342 units shipped in October 2024, compared to 40,666 units in the same period the previous year.
Cumulatively, vehicle exports for the first ten months of 2024 were 23.1% lower than in 2023.
This sharp decline reflects deeper structural issues, including the European Union’s stringent emissions regulations and the influx of competitively priced Chinese electric vehicles into the European market.
Mikel Mabasa, CEO of Naamsa, noted that these factors are reshaping the industry’s dynamics, creating additional pressures on South Africa’s ICE vehicle exports.
As global markets increasingly adopt NEVs, South Africa’s current approach appears insufficient to maintain its share in critical markets.
Toyota’s warning to South Africa is clear: adapt to the changing automotive landscape and benefit significantly or face major economic consequences.
By prioritising the beneficiation of raw materials, expanding exports to African markets, and embracing NEV technologies, South Africa has an opportunity to remain a relevant and competitive player.
Failure to act, however, could see the country’s automotive industry lose its footing in an increasingly electrified world.
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