Mercedes-Benz South Africa co-CEO Mark Raine has urged South Africa to move with greater speed in finalising its electric vehicle (EV) support framework, which he argues should be “holistic” and include measures that both sustain local production and stimulate domestic demand.

The South African government has already indicated that it plans to support a manufacturing transition from internal combustion engine (ICE) vehicles to so-called new energy vehicles, including EVs, and is currently consulting on a roadmap for the sector.

It has also indicated that its approach is likely to be production- rather than consumption-led and that it will seek to build on the Automotive Production and Development Programme rather than replace it.

The immediate focus under the proposed roadmap will be on safeguarding the country’s export markets, which are aggressively transitioning away from the ICE vehicles that the South African industry currently assembles.

The UK and the European Union currently absorb some 45% of South Africa’s yearly passenger vehicle production and both markets have announced that they will bar the sale of ICE vehicles and soft hybrids from 2030 and 2035 respectively.

In an interview with Engineering News, Raine said that ongoing domestic production did definitely require attention.

“[But] we need to look at it holistically. We need to look at production, but we also strongly need to look at the consumer market and everything that comes on the back of that.”

He added that, given the high proportion of exports from the industry of about 95%, a greater balance was required by growing domestic consumption.

PRICE PARITY

Raine is particularly keen for South Africa to embrace “price parity”, by reducing the prevailing import duties on EVs from 25% to the 18% currently in place on ICE imports.

“What we need to have in the South African context is not to put an EV at a disadvantage, and if we rule that out, I think we as manufacturers and sellers of these vehicles can convince any consumer of the benefits of electric vehicle besides the obvious environmental aspects.”

The key argument in favour of EVs, once there was parity, would relate to the cost of ownership, which would “more than offset” the initial higher capital cost, or the higher monthly instalments.

“Therefore, for me the main request is do not disadvantage electric vehicles.”

Raine said the other element required for stimulating domestic demand related to infrastructure, especially charging infrastructure.

Given South Africa’s current load-shedding crisis, he said the expansion of the EV market should be closely aligned with a domestic energy transition in which solar plays a far more prominent role in providing the energy required for charging.

“South Africa has all the necessary prerequisites for the EV revolution, but it has to go hand in hand with solar energy.

“We cannot rely on traditional electricity sources, there needs to be transformation in both areas and its vitally important to have solar energy, including solar charging stations,” he argued.

Raine expressed enthusiasm for a speedy resolution to the policy debate, saying that while South Africa was in a good position to learn from markets that had already moved assertively to finalise their EV strategies, policy certainty was required to facilitate implementation and investment.

He also argued in favour of government adopting a “holistic ecosystem” approach, whereby the value of automotive manufacturing was assessed not only by the economic value and jobs created in production, but also took account of the associated spinoffs in finance, sales, information technology, servicing and the aftermarket.

Speaking ahead of the interview at an event hosted at the Gordon Institute of Business Science, in Johannesburg, acting director-general at the Department of Trade, Industry and Competition Malebo Mabitje-Thompson stressed that discussions regarding the future support framework were ongoing and involved not only the original-equipment manufacturers, but also component suppliers and workers.

She stressed that, despite South Africa’s fiscal constraints, the industry continued to receive support from government “for good reason”, given the role it played in the manufacturing sector and in providing direct and indirect jobs.

Mabitje-Thompson also argued, that even though discussions were still in progress with the industry and other stakeholders, it was already clear that government stood ready to incentivise hybrid and EV manufacturing.

“We are working with the OEMs and we are getting to understand what their plans are.

“We are working with the component manufacturers and at the level where the tyre hits the road,  we are looking at how best to build the system.

“The big challenge that we are going to face is the potential for job losses and South Africans asking us as government how we can continue to support a sector that is shedding jobs and the question that we have to answer back to South Africans is what value will we deliver to South Africans as a business case, for this continued support.”