As many as four in five of the original equipment manufacturers (OEMs) in South Africa’s automotive sector are not ready to meet the requirements of Europe’s carbon export tax, which is 15 months away from implementation.
Speaking at South Africa Auto Week, BMA Analysts director Meghan King said the group had surveyed OEMs recently about how ready they were for the EU’s carbon border adjustment mechanism (CBAM), which comes into force in January 2026.
About 20% of respondents said they were accurately reporting emissions, but the rest were not confident about the accuracy of their reporting. Only 13% believed that they were on top of their scope 2 and 3 emissions.
“Our suppliers are just not ready for this transition. So, we can talk about the costs and we can talk about moving towards financing this transition, but we’re not even ready in terms of the basics, like getting verifiable measurements in terms of understanding the next step in terms of decarbonisation, which is also the target-setting.”
CBAM, which will impose higher duties on carbon-intensive goods imported into the EU, makes it compulsory for suppliers to report their carbon emissions. While it is expected to mostly affect exports of hydrogen, steel, aluminium and fertiliser, there are fears that auto industry OEMs will struggle to decarbonise or even be able to meet the reporting requirements in time.
The expectation is that it will probably expand to other goods
— Heidi Barends, Absa
The BMA survey showed that suppliers lack clarity on decarbonisation requirements and require cost-effective solutions to address compliance. “Significant challenges to decarbonisation cited by suppliers show that they have not accurately measured or understood their carbon footprints,” King said.
The survey found that dependency on imported content and on coal-fired energy were the most significant barriers to decarbonisation.
King said CBAM would significantly increase costs for OEMs.
“Some of the implications are more immediate and not necessarily long-term costs. What firms are seeing right now is this pressure to decarbonise, and that pressure is coming immediately from the need to get OEMs to provide this information and provide it now.”
President Cyril Ramaphosa, who gave a speech at the event on Thursday, said the transition to a cleaner automotive industry was a priority for the government, and that the industry played a critical role in helping South Africa achieve its climate targets.
“The transition towards cleaner and more sustainable fuels together with stringent regulations in key markets put a number of automotive firms and sub-industries in what one could say are vulnerable positions,” he said.
“As many of our major trading partners rapidly shift towards EVs [electric vehicles], it is also imperative that we remain part of this global supply chain. If we don’t, we will be left behind.”
Heidi Barends, head of sustainable finance at Absa corporate & investment banking, said South African exporters needed to be ready for the likelihood that CBAM’s scope would widen in the long term to cover many more items.
“It doesn’t necessarily [apply] to all goods that we export into the EU at this point in time, but I think the expectation is that it will probably expand to other goods. So at the moment, it means people who export these specific goods to the EU will be impacted and they will need to report on what are the carbon emissions of the goods that they are exporting that fall within the CBAM policy.”
Ndivhuho Raphulu, director of the National Cleaner Production Centre, said OEMs can use the resources of the centre, which falls under the department of trade, industry & competition, to measure their emissions and reduce them in line with CBAM requirements.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.