Standox October
Ibis

South African policy makers and automobile manufacturing sector stakeholders need to develop a coherent strategy for the shift to the production of electrical vehicles (EVs), or fall behind global developments and lose their edge in the export market. 

This emerged as a key message from a report on the EV market compiled for the Department of Trade, Industry and Competition (DTIC) and the National Association of Automobile Manufacturers of South Africa (Naamsa).  

The report, entitled ‘Harnessing electric vehicles for industrial development in South Africa’, was produced by Trade & Industrial Policy Strategies (TIPS) and Change Pathways. 

The authors, Gaylor Montmasson-Clair, Anthony Dane and Lesego Moshikaro, argue that while EVs still account for a marginal share of global vehicle sales, the shift to EVs is evident in leading markets – especially in South Africa’s main export markets for vehicles, such as Europe. This shift, they argue, is likely to become more evident in the next decade or so.  

The global move to EVs stems from technological developments that have stimulated the move away from traditional internal combustion engines towards electric and other alternative drive trains.  Other factors relate to heightened environmental regulations, linked to climate change mitigation and air quality improvement.   

The TIPS report argues strongly that South Africa “must act now” and that the key stakeholders must develop an appropriate policy framework to facilitate this shift as South Africa is already “lagging behind” other countries in this regard.  

The report’s authors believe that South Africa has an opportunity to play a role in the development and production of EVs as the country has the minerals and potential productive capacity to do so, in a move which could ultimately benefit society and the ailing wider manufacturing sector. “The blunt reality is that the automobile manufacturers face significant risks if they do not transition. While this will not happen overnight, this is an unavoidable trend as South Africa’s export markets shift to EVs.” 

The report comprehensively covers how a transition to EVs can happen, with the authors stressing that such a shift is multifaceted and not only requires a comprehensive policy framework (which needs to be developed right now), but strong partnerships between the key stakeholders.  

Four key questions were considered, covering both market development and industrial development.  

On the market development front, the first question relates to how the offering of passenger car EVs to local South African buyers, which remain reluctant to buy EVs, could be improved. The report says it is critical to ensure that EVs are available on the local market and that customers are encouraged to buy them.  

The second question deals with the roll-out of EVs in South Africa’s public transportation system. 

On the industrial development front, the first question explores how to promote the manufacturing of EVs (cars, buses and BRIDGminibuses) in the country.  

The report then moves onto the final question, which unpacks South Africa’s ability to support the EV automotive value chain.  

This ranges from the mining and beneficiation of minerals (such as platinum group metals, manganese, nickel and rare earth elements), to the manufacturing of parts and components, and on to the manufacturing of vehicles.  

For each of these questions, the report’s authors believe that many options exist to support the industry, but with the emphasis that one option on its own will not enable the kind of transition that will deliver the intended benefits. The report notes that a reduction in the VAT and/or ad valorem excise duty on EVs could be an effective avenue to support the market.  

A partnership between development finance institutions and local banks to provide low interest rates to EVs buyers could also go a long way in improving the cost competitiveness of EVs.  

For passenger cars, addressing the tariff anomaly (higher on battery EVs originating from the EU than on many other car imports) would also assist with levelling the playing field.  

On the public transport side, the report states that demand should be supported by proactive procurement by municipalities and a reform of the Taxi Recapitalisation Programme.  

On the industrial development side, an addendum to government’s Automotive Production and Development Programme, aimed at enhancing support for EV manufacturing, would be the primary avenue to send a positive signal to industry. “This could support both EV manufacturing, as well as the development of component manufacturing, leveraging South Africa’s mineral resources. Increased local demand would also support domestic manufacturing. This is particularly evident with e-buses and e-minibuses. In addition, consideration should be given to a mineral beneficiation policy (such as an export tax) to support the manufacturing of EV-specific components, such as batteries, electric drivetrains and fuel cells.” 

The TIPS report concludes that “EVs represent the only platform to a modern, sustainable transport system in the country and globally. Coupled with the transition to renewable energy technologies (from solar and wind energy to green hydrogen), increased connectivity and changes to spatial development, they also are the road to smart cities, inclusive development, and a sustainable economy.”   

 

By Irma Venter