Securing the country’s car sector is critical with the global shift to a cleaner transport industry. (Andrew Aitchison / In pictures via Getty Images)
South Africa’s car industry is grappling with policy uncertainty to support its shift to new energy vehicles (NEVs), said the National Association of Automobile Associations of South Africa (Naamsa).
“The challenge that we have is that at our level the competition for NEVs [is] no longer about a company competing with another company — it’s government to government,” said Naamsa chief executive Mikel Mabasa at the quarterly meeting of the Presidential Climate Commission (PCC) earlier this month.
NEVs include traditional and plug-in hybrids, in addition to fully electric cars.
“If China is able to put out policy pronouncements that are clear, solid and predictable, they will obviously move faster compared to other markets in relation to the evolution to NEVs. We are working with the minister from the department of trade, industry and competition to try to accelerate, but the pace at which we are moving is absolutely pedestrian relative to what is happening globally.”
The decisions for moving production lines to markets are taken at the headquarters of each original equipment manufacturer. “They would obviously look at different variables and whether the policy climate in those markets where they want to produce, specifically these NEVs, is fertile or not,” said Mabasa.
“We know that there is an appetite for our government to play but the players they are playing with are running a lot faster than we are currently running.”
Mabasa said earlier this year that the vehicle industry knows the introduction of NEVs is important to decarbonise road transport to help achieve carbon neutrality by 2050.
He said the global transition to NEVs is also a critical step to secure the future of the vehicle industry in South Africa. “Our rapid adoption to newer technologies is critical for the domestic automotive industry’s long-term success and growth.”
He added that the local industry cannot be running on one development technology track while the rest of the world is way ahead.
The rapid technological advancement in the vehicle industry and the global commitment by economies to a greener future mean the evolution in vehicle production will rapidly develop in the next 10 years, far more than it did in the last 100 years. “This evolution requires a clearly thought out public policy regiment and prudent fiscal planning,” Mabasa said.
The Eastern Cape is the country’s biggest vehicle manufacturing hub, followed by Gauteng and KwaZulu-Natal. The sector contributes just under 5% to the country’s GDP and in terms of the entire manufacturing output of the country, it contributes about 22%.
“When you look at our export earnings, just in 2022, we brought into the country about R227 billion and we continue obviously to invest very expensively in the export market, particularly because 64% of the vehicles we produce in South Africa today are not sold in the country,” Mabasa told the PCC.
He said this was a vote of confidence in South Africa’s ability to produce high-quality vehicles.
The country exports to 152 markets around the world, a figure that has risen in the past five years, and the sector is eyeing three new markets.
But South Africa’s market share on the continent in terms of production is on the decline.
A decade ago, it accounted for 76% of production of vehicles in Africa, a number that has fallen to 54% and is tumbling “at an aircraft speed”.
“We’re beginning to see countries, particularly in the north — countries like Morocco, Egypt, Ghana, Nigeria — beginning to eat our lunch very aggressively and their proximity to Europe is absolutely one of our concerns.”
It takes Morocco just four hours to move vehicles across the channel into Spain, while it takes South Africa about eight days to move vehicles and vehicle services from Europe into the Durban port.
“We’ve also seen the evolution of policy in those markets, in particular in Africa, and those markets are moving at a very high pace in terms of developing their automotive policy to drive some of the work that they do,” Mabasa added.
He said the industry is also working in a tough environment because of load-shedding, adding that 10 component manufacturing companies will close shop and leave the country this year because of electricity constraints.
“There are livelihoods that are sitting in those 10 companies that are also going to be impacted upon. And it also impacts very directly on our ambitions in relation to localisation because we are very clear that we want to strengthen the country’s industrial policy,” said Mabasa.
Yet the uptake of NEVs is starting to gain traction in South Africa. Sales showed a significant year-on-year increase of 431.7% from 896 units in 2021 to 4 764 units in 2022 — but still remain negligible as a percentage of total new vehicle sales.
Mabasa said the importance of the sector extended beyond the production of NEVs; it has identified 10 minerals it needs for the battery and cell production of electric vehicles. But the minerals are exported.
“Six of those minerals are here in this country. And we’re working with our mining industry to be able to accelerate our beneficiation ambitions because currently we do what is called from ‘pit to port’. Our minerals are mined from the ground and moved to Durban or to the ports and then they go to China for final beneficiation.”
He said the goal was to have a “pit to plant” strategy and so “create a new industrialisation story for South Africa”.