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Govt commits to supporting local electric vehicle market

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Government is keen to ensure SA develops production capacity in what is anticipated to be a growing part of the car market.
Government is keen to ensure SA develops production capacity in what is anticipated to be a growing part of the car market.

The Department of Trade and Industry (DTI) is in talks with local car manufacturers on providing support for import and local production of electric and hybrid vehicles in SA.

This came to light when trade and industry minister Ebrahim Patel provided a parliamentary response to a question posed by the Democratic Alliance on whether government would subsidise the import and production of electric vehicles (EVs).

In his response, Patel explained: “I am in discussion with the automobile sector in SA regarding the production of electric or hybrid vehicles locally. We are keen to ensure SA develops production capacity in what is anticipated to be a growing part of the car market. On conclusion of the discussions, a formal statement will be made.”

Earlier this month, Mike Mabasa, CEO of the National Association of Automobile Manufacturers (NAAMSA), told ITWeb that the body’s EV advisory team – the Electric, Hybrid and Autonomous Vehicle Committee, which consists of representatives from local vehicle manufacturers – is working on a proposal aimed at drawing the DTI’s attention to help better prepare SA for the electrification of transport.

NAAMSA will present a position paper to government raising five key concerns that need 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; and considerations around the type of technologies and components to be used in EVs.

According to NAAMSA, there are around 12 million cars registered on South African roads, with around 1 000 being EVs.

Locally, Nissan Leaf was the first EV introduced in 2013, followed by BMW’s i3 in 2015 and Jaguar Land Rover’s Jaguar i-Pace early this year.

Local vehicle manufacturers produce around 610 000 vehicles annually in SA, with around 58% of these being exported, according to NAAMSA. SA’s automotive manufacturing industry contributes about 7% to national GDP.

“Our export market is higher than our local market and global countries are beginning to set tight targets of up to 30% reductions in their carbon emissions. This means they are shifting their focus to having more EVs on their roads to meet these targets. While local EV production is not something that will happen tomorrow, we need to start having these conversations to understand how we can better prepare ourselves for when the time comes,” explained Mabasa at the time.

In its parliamentary reply, the DTI said while there are currently no auto manufacturers assembling electric or hybrid vehicles in SA, support for the production of motor vehicles, under which electric vehicles would ordinarily fall, is covered under the Automotive Production and Development Programme (APDP).

“Under the APDP, light motor vehicles, including EVs, can be imported into the country with the use of rebate credit certificates earned. Such certificates allow the importer to offset import duties, where the importer assembles vehicles locally. This incentivises the development and expansion of vehicle production in SA,” it explained.

EV import tariffs are currently at 25%, much higher than the 18% import tariffs for combustion engine vehicles, says NAAMSA.

Hiten Parmar, director of uYilo e-Mobility Programme, run by the Technology Innovation Agency, points out that while the APDP is support for driving economic investment and activity into the country, it has no direct incentive for manufacturers to assemble EVs locally.

“The APDP does not directly include any incentive for local manufacturing of EVs, as is the case with traditional petrol/diesel vehicles, hence there are no EVs being manufactured locally as yet,” he explains.

The ideal scenario, notes Parmar, would be to include manufacturing incentives for local production of electric vehicles, enabling the local manufacturing industry to maintain its employment levels and even grow in order to supply increased global demand for EVs.

Norway is the world’s biggest EV market. In 2018, battery electric vehicles accounted for 30% of market share, with plug-in hybrids at 19%.

Since the 1990s, Norwegian vehicle owners have enjoyed a raft of incentives designed to promote the use of zero-emissions vehicles in that market. The list includes exemption from purchase and import taxes, exemption from VAT on discounted toll and parking fees, and access to bus lanes for EVs.

Trade and industry minister Ebrahim Patel.
Trade and industry minister Ebrahim Patel.

Accelerated range

EVs and hybrid EVs will account for an estimated 30% of all vehicle sales by 2025, according to a TrendForce report.

This year, there will be over 20 new fully electric or upgraded fully electric models introduced in Europe, including Kia, Jaguar, Hyundai and VW, says Clean Technica, a US-based clean energy site.

The UK government has stipulated that 60% of all cars and small vans need to be electric vehicles by 2032 and completely carbon-free by 2035.

Nissan, Jaguar Land Rover and BMW all confirmed to ITWeb that they have no immediate plans in place to manufacture EVs locally. However, they admitted to recognising the value.

Wonga Mesatywa, executive director of corporate affairs at Nissan SA, believes that in order to establish local production, a local market must exist with sufficient local demand, while infrastructure development will drive future investment decisions.

“Nissan will look to expand its footprint over the medium- to long-term, but market demand will determine future investment decisions. For now, there is not a significant enough EV market in SA for viable local production.

“Government is heavily invested in the local automotive industry, which is core to the country’s industrial growth strategy. Future EV production will therefore rely on government’s strategic direction,” notes Mesatywa.

Brian Hastie, network director and electrification project lead for Jaguar Land Rover SA, explains that an EV framework which appeals to the South African consumer will play an important role in helping SA to become a relevant automotive market that matches global counterparts.

“It is likely that local production plants will have to have EV capability at some stage. There is recognition that export markets will require more and more EV derivatives in future, and the fear is that South African plants producing for the export market may not be fully viable if there is almost no local uptake of EVs.

“This would cause a difficult logistics and production scheduling environment, among other inefficiencies. This assumption requires further analysis, and that is part of what our work includes as the Electric, Hybrid and Autonomous Vehicle Committee,” explains Hastie.

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