Opinion: South Africa urgently needs to move towards local EV manufacturing

23rd March 2022

Opinion: South Africa urgently needs to move towards local EV manufacturing

E-Mobility Congress South Africa event director Robert Walker

In this opinion article, E-Mobility Congress South Africa event director Robert Walker writes about the urgent need for the local manufacture of electric vehicles (EVs) in South Africa.

Demand for EVs is rising exponentially and there is an urgent need for local manufacturing of EVs in South Africa.

A study conducted by the University of Cape Town shows that EVs and plug-in hybrids could account for more than 20% of the new car market in South Africa by 2030.

Meanwhile, a survey by AutoTrader and Smarter Mobility Africa revealed that consumer appetite for EVs is on the increase, with 72% of more than 2 800 surveyed South Africans saying they are planning to buy an EV within the next five years.

Local manufacturing will not only meet the demands of South Africans who want to switch to EVs, but will also comply with European emission standards.  South Africa currently exports more than 60% of the vehicles it produces to Europe; however, by 2030, this market will no longer allow importation of internal combustion engine (ICE) vehicles. If we don’t quickly accelerate the roll-out of EVs, we risk losing this market.

South Africans who are importing EVs currently pay an import tax of about 25%, compared with the 18% import tax that applies to ICE vehicles. Local manufacturing has the potential to eliminate or reduce the high import taxes.

To respond to the increase in demand, original-equipment manufacturers (OEMs) including BMW, Hyundai-Kia Group, Jaguar Land Rover, Mercedes-Benz, Mazda, Nissan, Toyota Motors, Volkswagen Group and Volvo are developing EV manufacturing capacity.

As we’ve seen recently, with Volkswagen group announcing their plan to invest more than R1-trillion in a new automotive technology plan, which is expected to result in up to 50% of the group’s total sales by 2030 being EVs, increasing to 100% by 2040.

In South Africa, Toyota South Africa Motors recently launched its Corolla Cross hybrid (combined ICE and electric motor), which was manufactured at its Prospecton plant in KwaZulu-Natal. Toyota is the second company to manufacture a hybrid vehicle in South Africa, after Mercedes-Benz South Africa.

The 2016 Mercedes-Benz C350e plug-in hybrid, was the first ever locally manufactured hybrid vehicle in Africa, and South Africa.

Toyota is also investing R2.6-billion in the production of the Corolla Cross hybrid, which has already generated a total of 575 new jobs at its plant while over 1200 direct jobs were created in the component supply base. The project also contracted 56 local suppliers to provide parts.

This shows South Africa’s enormous potential for economic development through local manufacturing. The transition to EVs comes with massive opportunities for growth in future. It will also allow the country to remain competitive in the automotive industry.

However, OEMs cannot be expected to make these investments on their own. Collaborative efforts are required with government, industry and citizen to make the transition a success and boost the country’s economic development.

Government needs to develop adequate policy frameworks and support emerging entrepreneurs from the local manufacturing sector. We have businesses such as Mazibuko Motors which recently launched their first electric bakkie prototype, and is now planning to start production of two models by 2023 – a sports utility vehicle and an electric bakkie set to be South Africa’s first ever electric bakkie.

There’s also Golden Arrow bus services company, which recently launched two fully electric buses in its bid to reduce carbon emissions and use renewable sources of energy. The public transport operator is currently looking for local manufacturers to produce about 60 electric buses.

There is no doubt that EVs are no longer a possibility but an inevitability.

AutoTrader revealed that the growth in searches for EVs in South Africa has increased to 211%, while EV enquiries are up 44%. The trade, industry and competition auto green paper on the advancement of new energy vehicles in South Africa shows that global sales of new energy vehicles accelerated in 2020, rising by 43% to 3.24-million units, compared with the 2.26-million units sold in 2019.

The numbers are increasing rapidly each year and we can’t afford to lose this opportunity to attract investors in this fast-growing industry.

The South Africa’s automotive industry is a significant contributor to gross domestic product, with a contribution of more than 6%. The sector accounts for more than 100 000 jobs in assembly and component manufacturing, which makes it a big magnet for foreign direct investment.

The automotive industry, government,  and the entire country need to recognise that the nature of vehicles is changing dramatically and we need to catch up or lose global markets, opportunity to penetrate new markets, develop new skills and generate new jobs.

Developing adequate policy frameworks must be an urgent point of focus for government to catalyse the transition of electric mobility. Collaborative efforts are needed to modify existing manufacturing plants. The government also need introduce incentives for electric vehicle purchases and manufacturing.