Trade, Industry, and Competition Minister Ebrahim Patel has released the country’s White Paper on electric vehicles (EV) that outlines a comprehensive roadmap and suite of policy interventions meant to support the domestic auto manufacturing industry in the shift to a greener future.
Through successful implementation of the legislation, South Africa will be able to produce its first locally-made EV “as early as by 2026,” said Patel.
While the specifics of the document will only be released in the February 2024 Budget Review, the minister said it will support investments in the development and expansion of new and existing manufacturing plants to incentivise the domestic production of battery-electric vehicles, hydrogen fuel-cell vehicles, and internal-combustion vehicles running on synthetic fuels.
Hybrids will not be part of this new framework as these are covered under the existing Amended Automotive Production & Development Program (ADPDP2), said the minister.
According to Engineering News, who attended the minister’s presentation on Monday, the 10 goals of the White Paper are:
- Implementing reforms to freight rails and ports
- Leveraging research and development on tax incentives to deepen domestic value addition
- Commercialising green hydrogen production in South Africa as a source of sustainable fuels
- Refurbishing the rail line between Gauteng and Ngqura to improve overall cost competitiveness
- Developing an EV certification programme in collaboration with industry for skills development
- Implementing energy reforms, including executing interim solutions for energy in partnership with industry
- An increase in levels of investment and funding, including the development of improved cost-effective incentive support
- Securing or maintaining duty-free export market access for vehicles and components produced in South Africa to support the resilience of the industry
- The introduction of a temporary reduction on import duties for batteries in vehicles produced and sold in the domestic market, to improve cost competitiveness
- The facilitation and development of an electric battery regional value chain, including raw material refining, battery active materials and component production, and cell manufacturing
“The primary goal of the White Paper is to set a course to transition the auto industry from primarily producing internal-combustion-engine (ICE) vehicles, to a dual platform that includes EVs in the production and consumption mix alongside ICE vehicles in South Africa by 2035,” said Patel.
“The compelling reasons behind this transition are numerous. Foremost is the urgent need to reduce greenhouse gas emissions and combat climate change. Additionally, we recognise the pivotal role the automotive industry plays in South Africa’s economy, as a major employer and a driver of economic growth.”
Automakers including Ford and VW have sounded the alarm on government’s reluctance to implement EV-friendly policies, warning that this has already, and will continue driving away investment to other countries that have more accommodating legislation until the White Paper is fully implemented.
Markets such as the Euro-zone, which accounts for approximately half of all domestic vehicle exports, are planning to ban the sale of ICE vehicles by as early as 2035.
Therefore, if South Africa does not have the correct policies in place to allow automakers to affordably transform their local factories into EV plants, it risks losing a sizeable portion of export revenue when the ban goes into force in addition to hundreds of thousands of jobs supported by the automotive manufacturing industry.
Ford and VW also highlighted persistent issues like load-shedding and congested ports as major roadblocks to doing business in South Africa.
Patel said his department will execute various policy actions in the coming years to address these hindrances, including the implementation of freight logistics reforms, accelerated measures to improve the supply of electricity, as well as the refurbishing of the railway lines.
Now is not the right time to buy an EV
Phase two of the EV roadmap will focus on motivating consumers to purchase these cars and will only take place in approximately seven years, said Patel at a media briefing on the White Paper, IOL reported.
This is because mass adoption of EVs will put more strain on the failing Eskom grid, and the fact that the vast majority of South Africa’s electricity is still sourced from coal will mitigate the environmental benefits of driving a battery-powered car.
A drop in revenue from the substantial taxes and levies placed on petrol and diesel is, of course, another concern; as is a loss of import revenue from EVs sourced from Europe. Currently, EVs shipped from Europe to South Africa attract 7% higher import duties than those procured from other countries.
“At an appropriate point in time we will look at [adjusting those taxes] as a measure. Doing that right now and bringing a lot of electric vehicles onto the market in 2024 is probably not smart given the grid challenges that we face,” said Patel.
Fortunately, there will be no ban on petrol and diesel cars in South Africa in the near future, the minister said.
This will afford government enough time to develop a broader EV framework that includes the necessary policies for charging infrastructure, electricity upgrades, skills development, and the transition of state-owned and public transport fleets.
Join the discussion