They are dirty and soon no one will want them. Traditional internal combustion engines (ICEs) are being phased out in South Africa’s biggest markets – Britain and the EU – and if the local automotive sector does not switch from ICE production to new energy (NEV), it might as well close shop.
Britain and the EU have set aggressive targets to phase out ICE vehicles: by 2030 neither will allow the sale of these vehicles and they also plan to introduce hefty carbon taxes on the imports.
It’s less than eight years away and the South African auto industry hasn’t rolled a single electric vehicle (EV) from the factory, and only a few manufacturers, including Toyota, Mercedes-Benz and BMW, are producing hybrids. , which are classified as NEV. .
The auto industry has worried about the issue for years, raising fears that the ICE market is gradually shrinking and the government’s promised roadmap to speed up sales and production is progressing at a snail’s pace.
On May 18, 2021, the Department of Trade, Industry and Competition published the Green Paper on Advancing New Energy Vehicles, after extensive consultation with industry and with a commitment to publish a book white by the end of the year.
The green paper explores the levels of infrastructure support and investment needed to encourage uptake of electric vehicles, in the context of broader economic recovery efforts through market stimulus and chain support measures supply.
It examines an investment and tax system to build a resilient raw material supply chain to support the country’s efforts to become a global player in NEV manufacturing as well as how to retain preferential access to major trading partners. to enable the country to maintain its global competitiveness and Encourage innovation.
It’s September 2022 and there’s still no white paper.
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But the Automotive Business Council, also known as Naamsa, is optimistic about developments after Trade, Industry and Competition Minister Ebrahim Patel released details of the deal. a “working paper” to the President’s Climate Commission, making the “convincing” case for South Africa’s switch to NEVs. .
Patel, as reported in Engineering News this week, insists the NEV roadmap is taking shape and will be production-led rather than consumption-led.
This is important as the current market for NEVs in South Africa is almost non-existent due to lack of demand – mainly due to the exorbitant cost of these vehicles, which are imported for the premium market. In addition, there are plans for carbon taxes on imports.
Patel reportedly told the commission, “We haven’t closed our eyes to the other options; we looked at them and concluded that it would be in South Africa’s interest to switch to electric vehicles.
Finance Minister Enoch Godongwana recently met with the auto industry to discuss the Treasury’s approach to NEV production.
There is a huge tax burden on all new vehicles produced in South Africa — in total, the Treasury levies 42% tax on each vehicle sold, including 15% VAT, the ad valorem tax (because vehicles are considered luxury items) and carbon emission taxes.
Patel recognized the need for a supportive framework. Not creating it would put a lot of GDP at risk. He reportedly said the government intended to opt for a production-driven model, rather than a consumption-driven strategy advocated by some stakeholders, in which growth in domestic demand, supported by tariff barriers weaker triggers investment.
Naamsa’s Mike Mabasa said the non-publication of the white paper created significant uncertainty in the market. But Naamsa is aware government officials have been working behind the scenes on the options and, based on the discussion and feedback, the organization and others are confident the department will “get us to the finish line”. .
“We hope that before the end of this year, South Africa will certainly be able to announce very strongly the direction we are taking…”
According to automotive expert Mark Smythe, although there was a delay, it is now realized that something urgently needs to be done. Hurry up. SA’s biggest markets have already decided to ban imports of ICE vehicles in less than eight years, and the average life cycle of a new car model is between five and seven years in terms of development time.
Smythe says most manufacturers have already invested in new factories, with other factories remarkably close to ending their tenure and at risk if they don’t change quickly.
The industry has become dependent on ICE and South Africa has been able to supply raw materials such as platinum catalytic converters used in petrol and diesel vehicles, but it does not have any of the raw materials needed to switch to electric vehicles.
Manufacturers have invested significant sums and resources in creating new facilities for electric vehicles to meet demand, says Smythe, but there are already shortages around the world, including chips and wiring harnesses from from Ukraine.
It is also uncertain whether the South African government will increase its financial support.
The automotive sector is a key pillar of the South African economy – one of the country’s largest economic sectors by revenue with 4.3% of GDP (2.4% manufacturing and 1.9% selling by retail). It represents 17.3% of manufacturing production and 18.1% of total exports.
A total of 298,020 vehicles, worth R138.3 billion and R69.2 billion worth of automotive components, were exported in 2021.
At least 110,000 people are directly employed in the sector and the livelihoods of more than half a million more people depend on it. In October last year, Mabasa warned that by 2030, 40% of all vehicle sales in Europe could be electric vehicles, and that his association estimates that number could rise to 80% by 2040. .
“It is clear that we cannot ignore electric vehicles if we want to continue doing business with Europe. It will have a huge impact on the country if we lose R201 billion in export revenue per year.
“We don’t want our major export markets saying they are no longer interested in ICEs because of their emissions targets and are moving to other markets. We need to stay relevant.
“Change in our industry is going to be driven by how we redefine mobility; the convergence of connectivity; electrification; and changing customer needs, not only for our local consumption needs, but also for other markets around the world. » DM168.
This story first appeared in our weekly newspaper Daily Maverick 168, which is available nationwide for R25.