S Africa Seeks to Boost Electric Vehicle Manufacturing

The South African government has launched a public consultation on how to boost domestic production of electric vehicles (EVs) and increase the country's competitiveness in the global automotive market.

The Department of Trade and Industry (DTI) has issued a draft policy paper that aims to place South Africa at the forefront of the global race to transition to electric mobility technologies. It said it wants to create an appropriate fiscal and regulatory framework, as well as a business environment conducive to making South Africa a leading location globally for the manufacturing of EVs. The policy paper seeks to encourage the expansion and development of manufacturing plants to support the production of new energy vehicles (NEVs) and components within South Africa, as well as help the country transition towards cleaner fuel technologies that are available globally. Stakeholders and interested parties have until the end of May to comment. The DTI wants to submit the policy proposals to the cabinet for consideration by October.

The automotive industry is South Africa's largest manufacturing sector. Vehicle and automotive component production accounted for 19pc of overall manufacturing output in 2020, down from 28pc in 2019 due to the impact of the Covid-19 pandemic. Nearly 64pc of the domestic industry's vehicle production was exported last year, with the EU being the main buyer. In 2020, some 197,355 vehicles, or nearly 73pc of South Africa's total car exports, were destined for Europe. Given that three out of every four vehicles exported are currently shipped to Europe, it is clear that the domestic automotive industry has to transform in line with the global EV revolution if it wants to continue doing business with the continent, the DTI said.

Various countries have banned the sale of new internal combustion engine (ICE) vehicles from as early as 2025. The UK, which is South Africa's top vehicle export destination, is banning sales of new gasoline and diesel cars from 2030. Global sales of NEVs accelerated last year, rising by 43pc from 2019 to 3.2mn units, despite the overall fall in new vehicle sales because of the pandemic. NEV car sales are forecast to exceed ICE sales by 2038 globally. Europe has superseded China as the centre of NEV growth, with 40pc of new vehicles sales in the EU forecast to be electric by 2030 and 80pc by 2040.

For South Africa to keep its edge in the export market and avoid significant job losses at plant level, it must accelerate the shift to the production of EVs, according to the DTI. Otherwise, the domestic automotive industry's GDP contribution, which currently stands at 4.9pc, could drop substantially. South Africa's EV sales comprised just 92 of the 380,206 vehicles sold in the domestic market last year, while hybrid vehicle sales accounted for only 232 units. An increased EV uptake would weigh on South Africa's consumption of fossil fuel-based road fuels. The country consumed 10.8bn litres of gasoline and 12.9bn l of diesel in 2019.