The Department of Trade, Industry and Competition (DTIC) has issued a Draft Green Paper on the Advancement of New-Energy Vehicles in South Africa.

New-energy vehicles (NEVs) includes hybrids, battery electric vehicles (EVs) and fuel-cell vehicles.

Minister of Trade, Industry and Competition Ebrahim Patel said in his budget vote on Tuesday that his department was seeking public comment on the document, with the aim to finalise the strategy within 90 days.

In a media briefing that followed his budget speech, he noted that it was important that South Africa didn’t “simply become a market for EVs produced elsewhere in the world, relegating our car-making to internal combustion engines (ICEs).

“Then, as the world shifts more and more to EVs, we are left with stranded assets in the form of large assembly plant capacity that has not been adjusted to EVs.

“It is quite important to us to get the production side ready.”

Patel added that it was also necessary to “step up efforts to build full EVs in South Africa”, in order to maintain the local industry’s capacity to export to key markets, such as the European Union (EU) and UK, both of which have set new targets and deadlines to reduce the number of fossil-fuel reliant vehicles on their roads.

The global forecast is for NEV passenger car sales to exceed those of ICE passenger cars by 2038.

Of significance to the South African automotive industry, however, is the forecast that 40% of new vehicles sales in Europe would be EVs by 2030, and for this number to increase to 80% by 2040.

Three out of four South African manufactured vehicles are currently exported to the EU.

The Draft Green Paper, therefore, looks at ways of expanding the support provided to vehicle and components makers under government’s Automotive Production and Development Plan (APDP), in order to kickstart the production of EVs.

Such new production processes promise to be a costly exercise, however, especially as a number of the components needed to produce EVs are not currently made in South Africa.

The current APDP provides support to local vehicle manufacturers based largely on the volume of locally made components used, as well as the number of vehicles produced.

“EV production and value chain development policy should consider that there will initially be a cost premium to [vehicle manufacturers] in South Africa based on the higher component import costs needed for EV assembly,” states the Draft Green Paper.

“Temporary support in addition to what is already known under the South Africa Automotive Masterplan 2035 and associated APDP, can help to bridge the gap and support the necessary local competency development. The policies are technology agnostic at present.

“To that extent a key step would be the identification of a set of unique EV component technologies that are currently not considered feasible for localisation.”

The paper also notes that the local industry may need to consider battery production as a “medium to long-term ambition”.

“Government, industry and labour are in agreement on the need for South Africa to seriously consider EV battery manufacturing, which can comprise nearly half the cost of the vehicle, as part of the 60% rules of origin requirement under the current free trade arrangements with the EU and the UK.”

The automotive industry is South Africa’s biggest manufacturing sector.

Consumer Incentives

Patel said the Draft Green Paper also focused on addressing sluggish local EV demand.

Globally, consumers have been offered a number of incentives to buy EVs. However, that has not been the case in the South Africa and the domestic EV market has remained insignificant.

EV sales in South Africa comprised only 92 units, or 0.02% of the total 380 206 vehicles sold in the domestic market in 2020, down from 154 units in 2019.

Hybrid vehicle sales accounted for 232 units in 2020.

“There is currently a considerable premium when a consumer buys an EV,” said Patel.

“This is principally driven by the cost of...