SA may export its own electric cars by 2026
In January, "the architecture of the incentive package" and draft amendments to the Automotive Production Development Programme (APDP) - the government’s flagship programme for the vehicle manufacturing industry - will be published.
The government wants to offer producers of EVs manufacturing incentives to both produce and sell affordable EVs in South Africa for both the local and export markets. About 1 500 electric vehicles were sold in SA during the second quarter of 2023, according to the Automotive Business Council, the manufacturing industry body previously known as the National Association of Automobile Manufacturers of SA. In the same period, about 82 000 new passenger vehicles were sold.
Speaking during a media briefing in Pretoria, Ebrahim Patel, the Minister of Trade, Industry and Competition (dtic), said SA could produce its first EVs for the export market by 2026.
"The technology changes alone are not enough to facilitate the transition of the road transport sector, and public policy is playing an important role in enabling the transition towards zero-emissions options, improving fuel efficiency, readying power systems for electric vehicles, and reducing overall passenger vehicle dependency," the dtic's White Paper on Electric Vehicles reads.
"The dtic and National Treasury are to manage the cost-effectiveness and affordability of the incentives," said the department. The dtic will seek to ensure that the funding support drives outcomes such as localisation, jobs, and deepening the value chain."
Government will then conduct a review after five years of implementation to assess the continued necessity of the levels of investment funding. "Among other things, the review will consider the availability of funds by government, the levels of investment being made by the industry for EVs and batteries, and the responsiveness of OEMs to the transition."
The aim is for SA to support the transition and to attract investments during the migration to electric vehicles to maintain and increase the country's position as a vehicle manufacturing and export hub. This was revealed by the dtic when it published its White Paper on Electric Vehicles on Monday. In February, the dtic will publish amendments to the Automotive Investment Scheme guidelines.
The department said the automotive industry accounted for 4.9% of SA's gross domestic product and 12.4% of total exports in 2022. Vehicle manufacturers directly employed about 110 000 people last year, said the dtic, quoting the Automotive Business Council. This represents about 8% of manufacturing employment.
The European Union bloc and the UK have passed laws phasing out the acquisition of new internal combustion engine vehicles over the next 12 years, as part of their plans to achieve net zero emissions by 2050.
SA exports more than half the 500 000 vehicles it built last year to these countries and would lose a significant market share should it not be able to migrate to electric vehicle manufacturing. The electric vehicles should be part of the production and consumption mix by 2035, said the department, without stipulating the desired product mix. SA exported vehicles worth R208 billion last year, industry statistics show.
"As a larger number of countries transition both their consumer and production markets to EVs, the impacts will be significant for South African producers," said the dtic. "The effective bans on [internal combustion engine] vehicles in key markets like the EU and UK will be profound, as they absorb nearly half of South African auto production."
The department said the success of China in producing more than half of all the electric vehicles on the world’s roads in 2022 was "from more than a decade of sustained policy support for early adopters". This was in addition to non-financial support for the sector, including infrastructure layout, such as the rollout of charging infrastructure.
"These global trends will have a significant impact on South Africa and its economy," said the dtic.
A failure to do this risks a decline in the automotive industry, a vital component of the country’s manufacturing capacity accounting for approximately 10% of total manufacturing output, the dtic says, adding:
Given the importance of the automotive manufacturing value chain in regional economies of several provinces across the country – particularly Eastern Cape, Gauteng, and KwaZulu-Natal – a decline in the automotive industry may have devastating effects.
While SA is capable of producing vehicles, it requires working and reliable logistics and electricity, said Patel.
"There are thousands of components that make up a vehicle, and when components are stuck at the port, they undermine the ability to cost-effectively produce vehicles," he said, referring to the current ports and railways crises that have resulted in tens of thousands of shipping containers stranded at the country's ports of entry.
Producing electric vehicles also requires the country to stabilise its electricity supply, said Patel. "Every OEM does need a functioning ecosystem. We do need to solve the energy and logistics issues urgently," said Patel. Stabilising the supply of electricity would also help with the roll out of electric vehicle charging infrastructure.
One of the most expensive components of electric vehicle re the batteries, which add a significant cost to the vehicle's production. SA says it will tap the region to develop a supply chain for the critical minerals that are needed for the production of the batteries. The dtic hopes to use these to increase the local component of EVs to 60%.
"Historically, Africa's mineral base has been exported for industrialisation elsewhere in the world," says the department. "This White Paper posits a strategy in which African countries more actively and in coordination with one another leverage their mineral resource base to secure partnerships with major manufacturers in a range of countries."
Development funding institutions, such as the Industrial Development Corporation (IDC), will play a major role in the research and funding of battery development in the region.-Fin24