Automotive transition presents value chain opportunities

13th October 2023 By: Schalk Burger - Creamer Media Senior Deputy Editor

Automotive transition presents value chain opportunities

The transition of the automotive industry to new-energy vehicles holds potential to impact on many other industries, including mining, manufacturing, freight and energy, but collaboration and a policy framework are urgently needed, as current choices will affect the efficiencies of transport for the coming decades.

These are some of the topics discussed by automotive industry professionals during the intermodal transport roundtable discussion held on October 11, in Midrand, during the South African Auto Week.

Developing sustainable mobility as part of the transition to net-zero is a huge challenge across the world, as all transport solutions must also be economically viable and transportation must be affordable. The transportation sector also accounts for about 25% of global greenhouse gas emissions, emphasised industrial equipment and technology company Robert Bosch director Björn Noack.

"A key recommendation, which will however not see a payoff within 12 months, is for companies to look at which state of the art trucks they should add to their fleets, as the powertrain efficiency of the trucks that we populate now will be in use for more than the next ten or twenty years and have a direct impact on the efficiency of the transport sector. This is not the time to hesitate," he emphasised.

Special economic zone (SEZ) the Coega Development Corporation (CDC) hosts a range of industrial companies, including automotive companies. Part of its strategy to grow the automotive sector and automotive companies present in the SEZ is to collaborate with institutions, including national and provincial government institutions, as well as research organisations, universities and private sector organisations and companies, said CDC CEO Khwezi Tiya.

"Part of this is to ensure we can respond effectively and swiftly to demands and needs, such as by providing high-level industrial skills training, of our tenants and potential investors, including in the automotive manufacturing sector."

Further, collaboration between companies and even industries is important to stimulate innovations and to bring in new technologies into the SEZ and the country more broadly, he said.

"However, our collaboration with other SEZs and our work to help incubate new ones also boost the confidence of businesses to make investments in SEZs," noted Tiya.

The presence of an original equipment manufacturer (OEM), such as automotive manufacturer Ford, can have a significant impact on provinces' economies as well as the national economy, with Ford directly contributing 1% of South Africa's gross domestic product, highlighted Gauteng economic development MEC Tasneem Motara.

Gauteng is developing three SEZs as part of efforts to revive or reinvigorate the mining and steel industries to support manufacturing in the province, she said.

"As the smallest province, but the largest provincial economy, we need to support manufacturing, as this is the core of what we do in Gauteng. We cannot rely on agriculture for example, but can instead focus on agroprocessing," she illustrated.

Further, the automotive OEMs in Gauteng and in South Africa have to produce the vehicles required by their European markets, despite the country not having electric vehicle legislation yet. Therefore, the province must support the OEMs in line with the markets they serve, she emphasised.

"SEZs are catalysts to revitalise economies. Gauteng has two functional SEZs already, namely the OR Tambo SEZ and the Tshwane Automotive SEZ. Historically, there was considerable mining on the West Rand and steel production in the south of the province. We are developing SEZs there as part of our core SEZs strategy," she said.

The province's manufactured goods will need to be exported and Gauteng must ensure its road, rail, inland ports and transportation systems are in place to ensure that it not only maintains its productivity but grows and continues to compete as a small province, Motara noted.

Intermodal transportation is one of the key pillars to stimulating South Africa's economy and is part of the issues the National Logistics Crisis Committee aims to address, said Toyota South Africa Motors CEO Andrew Kirby.

"There have been many challenges over the years relating to infrastructure investment and maintenance. This has had a significant impact on us because it increased logistics costs and the negative consequences for the economy and ourselves," he noted.

"If the logistics infrastructure network of a country is like the skeleton of a person, then we are missing a limb. There is no rail from Johannesburg to Gqeberha and the rail link from Johannesburg to Durban is not functioning as it should and the roads were not designed for the volume of road transport," he said.

The central rail corridor from Gauteng to Durban will require a substantial amount of investment to make it operational, and State-owned Transnet cannot fund this amount, said Transnet Port Terminals CE Jabu Mdaki.

"The central corridor is not operating as efficiently as it should, and the number of trains have been reduced. However, we can try to improve shorter hauls, such as from Cato Ridge to the Port of Durban to help to decongest the city. Further, by linking the Transnet Freight Rail Esselen Park to the southern corridor, it can become feasible to move automobiles along those corridors," he noted.

However, the central corridor is already economically viable, including for moving cars from Tshwane to Durban, but is only functioning at 10% of its capacity, emphasised Kirby.

"If we can get it right, we can generate revenue from it so that Transnet is in a better position to tackle new projects," he said.

One the critical corridors where South Africa can move more freight to rail is the central corridor, Mdaki said in a separate presentation earlier in the day.

"Currently, 80% of goods are moved on our roads and we need to get much of that onto rail, which will positively impact on the cost of doing business. We are working closely with the private sector and industries to identify the areas that need attention and the areas where we can cooperate, with a focus on ensuring that these initiatives are executed as quickly as possible," he said.

South Africa needs to create a beter balance across modes of transport, he added.

Meanwhile, Gauteng's masterplan will integrate road and rail networks, said Motara.

"Our roads were not built for the heavy loads they are currently taking and merely adding more lanes will not solve the challenges. We cannot just build our way out of our transport problems.

"It is more about behavioural changes. We have to consider how we must change the design of our logistics network and how we can improve it by ensuring the rail connections work," she said.

Further, Transnet has issued a request for proposal for the design and construction of the Gauteng to Eastern Cape High-Capacity Rail Corridor for Automotive Volumes, called Project Ukuvuselela, said Mdaki.

"However, Project Ukuvuselela will be costly and funding for the project is required and Transnet is not in a position to fund this," he said.

"Similarly, for the central corridor from Gauteng to Durban, let's look for someone who can take over the entire corridor. We have issued a request for proposal for this and have secured initial proposals. We expect this to yield positive results and, if we can unlock this corridor, it will be a game changer in terms of logistics," he noted.