Imminent electric vehicle policy makes auto industry jittery

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 25 Oct 2023
SA’s transition towards electric vehicles is a critical step, says the automotive industry.
SA’s transition towards electric vehicles is a critical step, says the automotive industry.

South Africa’s imminent national policy on new energy vehicles (NEVs) is a step in the right direction; however, the automobile industry is concerned about its lack of emphasis on stimulating consumer demand for NEVs.

This was the word from Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of SA (NAAMSA), speaking to ITWeb on the side-lines of the recent SA Auto Week event, organised by NAAMSA, also known as the Automotive Business Council.

The transition towards NEVs is a critical step to secure the future of the automotive industry in SA, so the policy should speak to the current barriers to adoption, he explained.

The long-awaited EV policy is expected to be delivered next week, when finance minister Enoch Godongwana tables the Medium-Term Budget Policy Statement in Parliament on 1 November, according to Mabasa.

The industry has over the years made several calls to urge government to hasten the policy. It warned that the lack of a regulatory framework could result in SA facing the threat of losing significant investment from local multinational players, such as BMW, Toyota and Mercedes-Benz SA – which have announced local plans for EV production and sales.

In 2021, the Department of Trade, Industry and Competition (DTIC) announced the Auto Green Paper, which focuses on the advancement of NEVs and battery-electric vehicles in SA.

In May 2021, the draft policy was gazetted for public comment and the policy proposals were submitted to Cabinet for consideration by October 2021.

While NAAMSA believes there has been progress on some of the policy statutes over the years, it believes there is room for improvement, particularly regarding commitment from government to enable a conducive market for increased adoption of NEVs.

“We are awaiting the formal policy pronouncements from the minister of finance on 1 November and later from the minister of trade, industry and competition, to better understand the commitments government is prepared to make.

“We do know that currently government will be announcing their stimulation support to promote production of NEVs in the country, but they are not talking about consumer demand stimulation and how they will support consumer demand.

“While we are encouraged that something is happening, we are not happy that there will only be one element of the announcement, which supports only the supply and leaves out the demand element, because we believe the two should be complementary,” commented Mabasa.

While several due processes should take place before the policy is enacted into law, NAAMSA believes in the interim, sufficient budget should be allocated to the industry to create a solid foundation for the roadmap to implement the NEV policy.

This should include funding for the local manufacturing of NEVs, as well as incentives such as tax exemptions for imported NEV vehicles and components, which will in turn boost consumer adoption, according to Mabasa.

Delivering a presentation at SA Auto Week, NAAMSA president Neale Hill emphasised the importance of a balanced policy that focuses on the supply stimulation element for automotive businesses, as well as demand stimulation from a consumer perspective.

The demand stimulation, he pointed out, includes developing a sufficient network of charging units along the main roads to encourage adoption, shaving off ad-valorem tax to stimulate demand, and expanding the NEV policy adoption to develop municipal and provincial strategies.

“We are happy that we’ve been able to step in and provide our constructive input to government over the years as the auto industry. We are hoping we will see those pronouncements coming out in the Medium-Term Budget Policy Statement.

“We are all eagerly anticipating the pronouncements and clarity in terms of what the EV policy will look like. We are very concerned about the fact that the longer we delay the introduction of the policy, the more we risk being at the back of the investment queue,” stated Hill.

NAAMSA has set a target for NEVs to account for 20% of SA’s new-vehicle market by 2025 and reach 40% by 2030.

Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa.
Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa.

To date, more than 20 countries have announced plans to phase-out combustion vehicle sales over the next 10 to 30 years. This includes Germany, France, Netherlands, Sweden and Italy, which have national policies and targets to encourage the NEV shift, according to a report by the International Energy Agency.

In Africa, Zambia, Kenya, Mauritius and Rwanda have either introduced tax incentives, or reduced various tax duties for NEV ownership.

SA’s draft policy seeks to develop a framework upon which a comprehensive and long-term automotive industry transformation policy on NEVs can be developed.

It focuses on the creation of a high-yielding business environment, including an appropriate fiscal and regulatory framework to make SA a leading and highly-competitive location, in Africa and globally, for NEV production, according to the DTIC.

In the months following the gazetting of the policy, NAAMSA, the National Association of Automotive Component and Allied Manufacturers and other industry bodies engaged with government, providing guidelines and direction on the green paper.

NAAMSA presented a position paper to government, raising five key concerns that needed to be addressed in order to create a favourable environment for EVs in SA:

  • Establishing manufacturing plants for local production.
  • The development of a clear policy framework providing guidelines on the local rollout of EVs and hybrid vehicles.
  • Better infrastructure provision throughout the country.
  • The reduction of the 25% EV import tariff.
  • Considerations around the type of technologies and components to be used in EVs.

“We would like to further work with government so that next week’s announcement is considered phase one of a much bigger programme, as opposed to government announcing a policy that is cast in stone, with no additional room for amendments at a later stage,” said Mabasa.

“The local automotive industry makes an extraordinary contribution to SA’s annual GDP – 4.9% − and that is why it is important to secure its viability and growth, now and into the future.”

According to NAAMSA, the local automotive industry employs 497 408 people formally and informally, which is 2.9% of the 16.2 million people employed in SA.

SA’s auto industry also exports products to 152 markets and generated R227.3 billion in export revenue for the country last year, it says.