SA losing electric vehicles race

South Africa's motor industry risks getting outflanked by countries such as Egypt and Ethiopia as manufacturers continue to wait for the government's electric vehicle (EV) policy. 

Martina Biene, VW South Africa MD and chair, said this week in an interview with Business Times that “we are missing out on having the path for the future and investing”.

“Electric-vehicle policies are popping up everywhere. Egypt has one and even Ethiopia, a country that is not known for automotive industrialisation as South Africa is, has an EV policy.  

 “Volkswagen has to prioritise countries globally and because of a missing policy, South Africa doesn’t get high up on the list of countries to be prioritised, and why would we be? Every day and every month we are missing out on opportunities for investment that others are getting faster,” said Biene.

Vehicle makers in South Africa have been waiting for the government to finalise a policy for EVs to allow the country to produce them for the local market as well as for export.

The department of trade, industry & competition has not responded to requests for say, but Biene said indications now point to the finalisation of the policy by November 1.

“They have since said November 1, but there is that commitment to announce something. There has been engagement with DTIC, the minister of finance and the OEMs through Naamsa [National Association of Automobile Manufacturers of South Africa]. We will see them fighting to get it done, but you’re right, there is no publication of the policy and we don’t know what is in it,” Biene said.

Volkswagen has to prioritise countries and because of a missing policy, South Africa doesn’t get high up on the list 

—  Martina Biene, VW South Africa MD and chair

Biene said while VW remained committed to South Africa, it would need a business case to produce between 50,000 and 60,000 EVs to invest accordingly. She said the production of EVs in South Africa for export remains a long way off.

“I don’t see us producing EVs locally this decade. Because Egypt has an EV policy in place, I would say if I wanted the first electric vehicle produced in Africa, I would have to go to Egypt. Why would I go to a country that is not catering for EVs?” she said. 

She said other considerations include the lack of availability of synthetic fuels designed for hybrid vehicles, which would allow VW to introduce these vehicles and their technology to the local market. She said battery components for export were another area where South Africa could export and create jobs as it had the raw materials to do so. 

An electric-vehicle policy is crucial for car makers in South Africa that produce for export, as the UK and EU aim to end the sale of internal combustion engine vehicles from 2035. 

A British high commission spokesperson said: “In 2035, sales of new internal combustion engine cars and vans will be ended in the UK. The end-of-sale date is in line with other major global economies, including France, Germany, Sweden and Canada.”

Mark Raine, joint CEO of Mercedes-Benz South Africa and executive director at Mercedes-Benz Cars, said a concrete EV policy would support the inevitable evolution of the automotive industry to EVs.

“This policy needs to be implemented soonest. The focus needs to be on the market, stimulating local demand as well as manufacturing. Beyond the environmental sustainability benefits, EVs present a new ecosystem of automotive manufacturing and the pivot to EVs affords government [the opportunity] to increase local content, volume outputs and employment,” said Raine.

Raine said South Africa’s automotive manufacturing industry accounts for 6% of GDP and Mercedes-Benz South Africa is a net exporter to more than 80 markets. He said the company employs more than 4,000 people directly and indirectly in the automotive value chain.

He said another year with planning uncertainty due to a missing EV policy would further compromise South Africa as a global production hub.

“Stimulating the local demand should under no circumstances be underestimated. It is essential to ensure that there is an equal playing field for EVs in regard to customs and taxation, and in a second step a look at what customer incentives can be implemented to kick-start the transition into South Africa’s e-mobility future,” Raine said.

The import costs of EVs are prohibitive, attracting a 25% import duty compared to 18% on traditional motors, and while subsidies may not be politically opportune at this time there were other ways to increase demand, including price parity and increased charging infrastructure, he added.

He said the Mercedes-Benz Group established its own road map to the transition to electric mobility and intends to go all-electric, where market conditions allow, by the end of the decade.

“Based on our multiple discussions and engagements with various stakeholders we are hopeful that the right measures and initiatives will be taken. We have always been able to find solutions to key challenges and still deliver on our targets and contribute meaningfully to this economy,” he said.

The import costs of EVs are prohibitive, attracting a 25% import duty compared to 18% on traditional motors, and while subsidies may not be politically opportune at this time there were other ways to increase demand, including price parity and increased charging infrastructure, he added.

Hailey Philander, BMW South Africa manager of group automotive communications, said BMW Group South Africa has benefited from the successful adoption of the government-endorsed export programme and will continue to work within the confines of the current industrial policy when determining new model production, often several years in the future.

The group will produce the BMW X3 as a plug-in hybrid model that will be its first electrified model produced in South Africa. 

“The BMW Group will invest R4.2bn in the coming years to prepare the plant, its workforce and its supplier network, for the electric era,” said Philander.