Fiat has been showing off its cool new Uno in different parts of the country. Made in Brazil, the Fiat Flex can run on both petrol and ethanol. So clever is the technology that the car has a single tank. You sommer throw either petrol or ethanol into it and the engine is smart enough to work out what it is using and adjust accordingly.
Well, there is another, small vessel (probably too small to be called a tank) that stores only petrol and is used to start the car on cold days.
Fiat and other leading manufacturers, including VW and General Motors, make flex cars in Brazil, where most new cars sold these days can use either petrol or ethanol. Brazil is poised to supply other potential biofuel markets with these made-in-Brazil cars, in South Africa’s case, a right-hand drive.
A single Fiat Flex was on display at an auto show in Durban. It looks exactly like any other Uno, but would cost R2Â 000 to R3Â 000 more than the standard Uno, according to one Fiat brand manager. The brand is expected to be relaunched in South Africa later this year after an absence from this market since 2004.
Ethanol is produced in South Africa, in fact about 70% is exported. Fiat bought 250 litres of ethanol from NCR in Durban in order to drive the car with sugar-fuelled energy.
Sasol Solvents sells ethanol in Johannesburg. I called to see if I could buy some and what the minimum order would have to be. Orders start at 5Â 000 litres, or five tons. Before I could place an order, I’d have to regisÂter with the South African Revenue Service (Sars), where I would pay the fuel levy, and with Sasol, which would take about a week.
The cost — based on June prices, as the initial administration would take a few weeks — would be R7Â 502 a ton; the full order would cost me R35Â 000. Still, I could form or join a cooperative, or, if there was sufficient demand, I am sure Sasol would sell ethanol by the tank on its forecourts. You wouldn’t even have to register with Sars to buy the stuff.
At the price I was quoted, ethanol works out at R5,92 a litre — pricey when you consider that you need about 20% more ethanol to travel the same distance using petrol (ethanol has less energy, but gives more power). So running a car on ethanol means it should be priced about 15% cheaper to be equivalent to petrol.
But the real problem is that, at R5,92 a litre, I have not paid the fuel levy of R1,21 a litre.
A source familiar with the figures tells me that, internationally, ethanol trades between 50c and R1 a litre more than petrol. This is a premium of 12,5% to 25% above the current local base price of just more than R4 a litre, before taxes and various imposts are added.
Expressed in dollar-per-barrel terms, this means that ethanol costs the equivalent of $73 a barrel compared to the ruling $65 for Brent crude this week.
Would motorists pay 50c to R1 a litre more for the privilege of using a renewable energy source? Would investors stump up tens or hundreds of millions to produce non-fossil fuels, which are up to 25% more expensive than the basic fuel (petrol) price, for the South African market? The answer to both questions is no.
Biofuels, lest anybody forget, are an important policy option for South Africa. They constitute an important building block of government’s over-arching economic plan, Asgisa.
The draft biofuels strategy document says this renewable energy source can make a significant contribution to meeting South Africa’s international environmental commitments while reducing pressure on the balance of payments, creating jobs, stimulating the rural economy, boosting agro-industry, making use of surplus sugar and maize, improving the country’s energy security through diversifying our energy supplies and improving our technological base.
At current prices, it appears that the only way to make biofuels a starter is for government to forgo the fuel levy of R1,21 a litre. Treasury has a track record in fighting against special deals and subsidies, preferring a one-size-fits-all model that is easier to administer and less subject to special interests and pleadings. Judging by its record, it is unlikely to agree to such a sweetener for biofuels.
The draft biofuels strategy document recommends the country targets using 5% of the national consumption of petrol and diesel. This is as much as one billion litres, suggesting that the treasury could be asked to forgo perhaps R1billion in fuel tax revenue, something it is unlikely to do.
My information is that treasury has already let it be known that it will not support the level of tax break required to price ethanol more attractively relative to petrol. Treasury spokesperson Thoraya Pandy declined to comment, saying the ministry only discussed tax policy once a year.
Things may change. Increased biofuel production worldwide, mainly from developing countries, some chasing new markets in the United States and Europe, could see international prices fall, perhaps even bringing fossil fuel prices down with them.
The Southern African Biofuels Association (Saba), which speaks largely for established interests such as the sugar and maize industries, says in a draft document that biofuels should receive a 100% fuel levy rebate until the industry is established, after which the rebate can be reduced.
At ethanol prices the equivalent of up to $81 a barrel, you’d think Saba’s members would be chasing this export market and not need local incentives. I called Saba to find out more about this, but my calls had not been returned by deadline.
There will be new Unos in the market at year-end. I can’t see anyone paying a R2Â 000 premium for a Flex model that may never use ethanol and, as such, would predict, based on current information, that the flex will not be offered as an option. This car will not run here.