State policy stalling SA EV plans

Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of SA (NAAMSA), says while the government dithers over an urgently needed support policy for electric vehicles, more wide-awake countries such as Egypt and Morocco are gearing up to grab our overseas markets. 

“They are moving at a fast pace in terms of adopting policies around the production of new-energy vehicles. And their proximity to Europe is our biggest concern because those guys are going to eat our lunch,” he says.

This is because the UK and European countries have warned South African auto manufacturers, which export 64% of their output to these markets, that by 2030 they will no longer accept their internal combustion-engine vehicles, only EVs.

Without a policy from the department of trade, industry &competition (DTIC), and with barely seven years to go, local manufacturers have not produced a single electric vehicle. Only two have started producing hybrids and by 2035 these will also be on the banned list.

The DTIC was supposed to publish a white paper last year setting out plans to encourage local EV sales and manufacture, but this hasn’t happened.

An indication of how out of touch the government is with the fast-looming crisis, says Mabasa, is that instead of encouraging the take-up of EVs in SA, it is charging a 25% import duty on them, which is 7% more than that levied on internal combustion-engine vehicles.

“It makes absolutely no sense that carbon-neutral vehicles should attract far higher taxes than vehicles powered by dirty energy.

“It’s the opposite of what is happening in Europe, where the strategy is to stimulate demand for EVs by making import duties far lower than for the ICE.

“Our current policy is absolutely contradictory to the direction the rest of the world is moving in.”

The DTIC, whose officials have told him his constant chivvying over the issue is “irritating”, has cited fiscal challenges. But he points out that it’s not only rich European countries that are incentivising the move to EVs.

“We’ve seen countries like India, which has similar challenges, where the government has supported the production of relatively cheap EVs.”

The EVs SA does have are prohibitively expensive, with the cheapest model selling for more than R750,000.

“We want to move into the EV production cycle so we can produce cheaper models. The only way this will happen is if government incentivises it.”

Indian auto manufacturers are producing them at an industrial scale because the government has policies and tax-incentive programmes to support this and stimulate demand for EVs, says Mabasa.

“Currently, we’re playing a waiting game while we watch other markets move faster and faster, including many countries that are far poorer than we are, but are moving forward in leaps and bounds in terms of progressing their electro-mobility conversations.”

Countries such as Morocco and Egypt are ideally placed geographically to move into SA’s UK and European auto markets.

Once they start producing EVs at an industrial scale, the markets we are currently exporting into will switch completely to markets like Egypt and Morocco.

“Once they start producing EVs at an industrial scale, the markets we are exporting into will switch completely to markets like Egypt and Morocco.”

They’re even importing skills from SA to help them achieve this, he says, citing Mike Whitfield, former MD of Nissan in SA, who is now based in Egypt.

“They’re very aggressive in their approach and they’re working round the clock to ensure they grow their own markets and produce EVs faster than us.”

Morocco’s trade minister recently announced the country would be establishing a mega factory to produce batteries for EVs.

“You can clearly see by the policies they’ve adopted and their public announcements that they’re in a hurry to become industrial-scale producers of EVs as quickly as possible.

“They’re not hiding their intentions. They’re telling us this is what they want to do and are going to be doing, and our local manufacturers are frankly very nervous that we’re going to be playing catch up as opposed to leading the charge, which we certainly should be doing.”

Ghana and Nigeria have also “openly made clear their intention to play in the EV space”.

“And, particularly Ghana, they’ve put in place far more progressive policies and are positioning themselves far more strategically than you’re seeing in SA.”

The South African government’s response to increasingly urgent pressure from the industry has been “desperately slow”, Mabasa says.

Local auto manufacturers have indicated to the DTIC that if the situation remains as is in the next 18 months they'll be in a “very precarious position” regarding their future in SA.

“We’ve got an 18-month window to turn things around.

“The government is aware that if nothing happens in the next 18 months our local manufacturers will find it very, very difficult to justify (to their principals in Germany, Japan and the US) their current business case to remain in SA.”

The government appears to think the industry is being alarmist because the official cut-off date for exports of ICE vehicles is “only” 2030 in the case of the UK and Germany, and 2035 for other European markets.

“But we cannot wait until these countries ban ICEs. We need to start producing EVs and exporting them into these markets today, not in six or seven years.”

In some cases it’s already too late.

Markets in Scandinavia, where there’s a growing demand for EVs, are already moving away from SA as a source, he says.

Mercedes-Benz in Germany is “absolutely” going to move orders for its new-energy C Class away from its East London plant if it can’t meet the demand.

It’s already happening, he says. Orders from Germany are not coming through SA because markets are requesting the new-energy C Class, which East London cannot supply. They’re going to Mexico instead, which is producing the EVs markets increasingly want.

“The world is not waiting for us. We’re saying to government: ‘wake up and smell the coffee.’”

He fears that by the time it does it might be too late.