South Africa’s plan to make electric cars cheaper than petrol cars – TopAuto
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Tuesday / 19 October 2021
HomeFeaturesSouth Africa’s plan to make electric cars cheaper than petrol cars

South Africa’s plan to make electric cars cheaper than petrol cars

In the near future, the majority of South Africa’s vehicle production and sales are expected to be electric cars.

This is according to the green paper on the advancement of new energy vehicles (NEVs) in South Africa that the Department of Trade, Industry, and Competition published in May.

The report outlines South Africa’s plans to bolster the local transition to NEVs.

While there were no specific dates mentioned, the green paper said that “consideration is also needed of the SA Autos Masterplan 2035 objectives to ensure these are not negatively impacted”.

The masterplan states: “South Africa is likely to lag the development of energy-efficient vehicle (EEV) markets across major developed economies, but the economy will absorb many EEVs by 2035.”

With respect to the masterplan, the department also set forth its proposals to introduce EVs into South Africa.

The details

The department first detailed the available strategies which South Africa can “leverage to minimise disruption and transition to EVs seamlessly”.

The core principles include:

  • Incentivising consumer transition to electric vehicles.
  • Stimulating the production of EVs for the local and export market.
  • Increasing foreign investment to bolster employment, upskill workers, and promote a healthier environment.

The following steps will then shape the proposal framework, said the department.

“First, the current charging infrastructure in the domestic market should be expanded to incentivise motorists to switch to EVs.”

The role of expanding the charging network will fall on the private sector, which will need to follow the common standards provided by the SA Bureau of Standards.

“Second, in the domestic market, the full value of carbon-reduction can only be achieved in tandem with a shift in the country’s energy mix.”

An increased proportion of renewable energy is needed in the national grid to not negate the positive environmental effects of EVs.

“Third, while the principle of a technology-agnostic framework has been set out, it is recognised that innovation may provide market-driven advantages to particular technologies, which may require a revised policy approach.”

Technological advancement may lead to more severe price gaps between EVs and internal combustion engine (ICE) vehicles, and the extent to which support measures will be required must still be determined.

“Fourth, it is widely accepted that, subject to technology developments that can reduce costs, the use of fuel-cell technologies based on platinum-group metals catalysers can play to the country’s strengths and provide potentially significant demand for its raw materials.”

The department said it will also pay special attention to the private sector’s efforts to pilot green hydrogen, and that the development of these technologies will be encouraged in South Africa.

“As the green hydrogen technologies mature, they are expected to become the technology-of-choice in South Africa and across the world,” it said.

“Finally, the value-proposition for the country needs to be clearly established in the form of additional jobs, stimulation of local industrial capabilities, and expansion of production for new markets.”

The proposals

To incentivise and accelerate local production of EVs and related components, the department set forth two “sunset clause” proposals that will only be in effect for a limited period of time – as well as two additional proposals that will run indefinitely.

The first sunset clause would be to remove or reduce the 20% tax on imported EV components.

“Careful analysis will be undertaken on the commercial case for such duty reduction,” said the department.

The second is to include the value of imported EV components into the company’s volume assembly localisation allowance (VALA).

This allowance recognises imported EV products as “local” content that the company built into the car, and the company is then rewarded accordingly.

Upon conclusion of the sunset clauses, and assuming the EV components have been “localised”, the department will consider possible forms of continuing to support EV production in South Africa, it said.

An alternative proposal to the sunset clauses is to implement a credit programme for locally-developed products.

These credits can be used to offset import duties and can be traded with independent importers to support demand-related development.

A final proposal would be to award manufacturers duty credits for their local investment into EVs rather than their production output.

According to the department, this minimises the risk of cheaply-assembled products and motivates the local development of unique EV components.

“The future of the automotive industry in South Africa lies in large-scale vehicle production and component exports,” said the department.

“If South Africa does not want to lose its major export markets and face significant job losses at plant level, export revenue, as well as a substantial drop in the automotive industry’s contribution to the GDP, which currently stands at 4.9%, it must accelerate its EV transformation in the country.”

To find out more about the department’s plan to drive EV growth, TopAuto reached out to prominent car manufacturers with a strong EV presence in the country.

BMW

BMW said that by the end of 2021 it will have five fully-electric series-production model lines – the BMW i3, iX3, iX, and i4and the Mini Cooper SE – all of which will be available in South Africa from the first quarter of 2022.

By 2023, the brand will have 25 hybrid or full-electric models on offer globally, it said.

“As BMW Group South Africa, we are committed to supporting the growth of the electric vehicle segment in this country and will continue to honour our commitment with an increased range of electrified vehicles,” said BMW Group South Africa.

“We will continue to increase the number of electrified models across all brands and model series. This includes Rolls-Royce, BMW M, and Mini John Cooper Works.”

“While there are currently no government incentives to encourage customers to purchase EVs, the Auto Green Paper published earlier this year by the DTIC points to a wide-reaching shift in policy,” said the company.

“We welcome any developments that can help to speed up the adoption of electromobility in South Africa.”

Jaguar Land Rover

Jaguar Land Rover South Africa has said that it expects exponential growth in the local EV market, and that the company will offer a pure-electric derivative of each of its model lines before the end of the decade.

“Jaguar will be a fully-electric brand from 2025, and the first all-electric Land Rover will be introduced in 2024,” said Jaguar Land Rover South Africa.

The company added that the automotive industry is engaging with the government to facilitate incentives – such as reduced or preferential import duties on EV components.

“Currently, all EVs sourced from Europe are hit with a 7% import duty penalty (25% versus 18%) over regular internal combustion vehicles,” said the company.

In addition, Jaguar said that common misconceptions about EVs are slowing down consumer adoption of this vehicle type.

Consumer education is therefore key to the advancement of the technology.

“By Jaguar’s calculations, energy costs to fuel an I-Pace work out to between one-third and one-quarter that of a diesel vehicle with similar power outputs and performance.”

“Another benefit is that EVs are immune to the volatile price fluctuations of petrol and diesel.”


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