Auto sector gets insistent about policy certainty on new energy vehicles

Auto manufacturers in South Africa are increasing the pressure on the government to finalise its policy on new energy vehicles (NEVs).

Mikel Mabasa, CEO of automotive business council Naamsa, said on Thursday that plant decisions need to be taken three years before the start of production, which means that NEV plant decisions for the next generation NEVs “are taken now”.

He noted that SA-based original equipment manufacturers (OEMs) compete with overseas sister plants within the global OEMs’ production network and need policy certainty to commit to investing in NEV production locally.

Read: Is SA definitely headed in the new energy vehicle direction?

Mabasa said Naamsa will be releasing the industry’s ‘Thought Leadership Discussion Document on New Energy Vehicles’ by the end of this month.

He said NEV plant decisions require, and are influenced by, the availability of:

  • Low logisticsCO2 footprint;
  • Green and low-cost energy;
  • Investment and infrastructure support;
  • Competitiveness versus other international plants; and
  • A suite of government support incentives to lower the cost of production and stimulate demand.

“Logically, South African OEMs would require at least similar support as their overseas sister plants in order to compete equally for plant decisions,” said Mabasa.

“It is for this reason that the industry has proactively worked on its proposals which will be shared with other social and business partners in order to accelerate our NEV roadmap without further delay.

“It is clear that NEV transition support is urgently required for positive plant decisions to be taken. OEMs require a lead time of at least three to four years to motivate to their parent companies before any potential production could start and to align with existing production cycles,” he added.

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Mabasa said that over and above making a contribution to reduce CO2 emissions, South Africa has an important obligation to ensure that the auto manufacturing base is protected, retained and strengthened.

Mabasa warned that the country risks losing more than 50% of its automotive production volume between 2025 and 2035 due to the banning of internal combustion engine (ICE) drivetrains in almost all the European countries.

The banning has become an important consideration for South Africa’s automotive industry because 64% – or three out of every four – of the vehicles produced in South Africa are exported to Europe.

Mabasa said the Naamsa CEO Advisory Council will be meeting on Friday (2 December) to make its final amendments to the thought leadership paper before it is released and shared with other social and business partners before the end of the year.

Missed targets

Minister of Trade, Industry and Competition Ebrahim Patel published a Green Paper in May 2021 on the advancement of NEVs in South Africa.

The stated aim in the Green Paper was for the strategy to be finalised within 90 days following its gazetting, to allow the policy proposals to be submitted to cabinet for consideration by October 2021.

This target was missed and Department of Trade, Industry and Competition automotives chief director Mkhululi Mlota said during a Nedbank electric vehicle webinar in November 2021 that a refined NEV policy should be presented to Cabinet before the end of 2021.

That also did not happen.

Patel told an SA Auto Week conference in October that “there is no debate in government on the need to shift to electric vehicles” if South Africa is to have a large and growing auto sector.

However, Patel failed to provide any specific timelines about when the Green Paper will become a White Paper and then official government policy.

Stimulating demand 

Auto industry insiders have indicated that government only wanted to provide support for the manufacture of NEVs while the OEMs are adamant that support also has to be provided to stimulate demand for NEVs to enable the industry to justify the investment in localising the manufacturing.

Toyota South Africa Motors (TSAM) president and CEO Andrew Kirby, who is a past president of Naamsa, said in October 2021 at the launch of production of the hybrid Toyota Cross at the company’s plant in Prospecton in Durban that TSAM is anticipating the government will provide a support package to reduce the price of NEVs to make them more accessible and drive volumes.

Read: Toyota anticipating SA government support to reduce the price of new energy vehicles

Mabasa said on Thursday the automotive industry has been discussing and consulting extensively during the past 12 months around the country’s path to NEVs.

“The South African automotive industry appreciates the importance of working diligently to contribute to the decarbonisation of road transport in support of achieving carbon neutrality by 2050.

“We also recognise that no single government policy or industry commitment alone will achieve this ambitious goal,” said Mabasa.

“We must work collaboratively – at all levels of government and across all economic sectors – to identify the range of approaches necessary to establish sustainable pathways to carbon neutrality across sectors and the unique circumstances of the South African economic landscape.”

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