If South Africa does not restructure its car production sector to meet export demands, it risks losing this valuable automotive segment in the coming years.
This is according to Simon Woodward, Automotive Sector Head at RMB, who said that South Africa “must act now” to avoid losing the European car export market by 2030.
“South Africa’s major export car markets such as the UK and Europe will no longer allow importation of internal combustion engine (ICE) vehicles by 2030, which means there is an urgent need for added investment to shift to electric vehicle (EV) manufacturing,” said Woodward.
“It is important to note that the potential impact of not making these investments may have dire consequences for our export-led car sector, which is the envy of many globally.”
Top exports
Woodward stated that “three out of every four South African-manufactured vehicle exports were destined for European Union countries in 2020”.
With a shift to EVs, however, South Africa’s automotive sector risks losing out unless they change their production lines to produce these new-energy vehicles.
“The existing domestic automotive value chain needs to pivot towards EVs. Many of the tier one suppliers are multinational entities, which would be familiar with the emission reduction commitments its original equipment manufacturer clients have made.”
Fortunately, said Woodward, the government’s Automotive Green Paper is a step in the right direction from a policy perspective.
“There is optimism that the SA government will use the feedback from the Automotive Green paper to promulgate regulation and formal state assistance,” he said.
Additionally, certain local manufacturers have already secured investment and “adapted domestic production plants to ensure the flexibility to produce vehicles with alternative powertrains”.
To justify the investment needed in skills and plants to move closer towards EV production lines, however, car manufacturers will require support from the government, banks, and organised labour.
Price gap
Another challenge to tackle is the vast price gap between EV and ICE models, said Woodward.
“One [company] mentioned that its small SUV costs about R500,000 in SA, whilst the imported cost of the EV derivative would be about R750,000.”
This difference in price must not be ignored, as the development of the local EV retail market is required to support the country’s move to producing electric vehicles.
“This is a critical component for SA to pivot from an exclusively ICE production market to an EV producer,” said Woodward.
“A good starting point would be for the government to consider tax incentives for the purchase of new, domestically-produced EV vehicles.”
“The current import tax regime for EVs is punitive and adds tens of thousands of rands to the cost of even the most basic EV vehicle.”
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