Apr 20, 2023 Grant West Naamsa / The Automotive Business Council, SA’s Transition to New Energy Vehicles (NEV’s), Mikel Mabasa,
Thought Leadership roundtable discussions hosted by Naamsa / The Automotive Business Council
The first of a series of thought leadership roundtable discussions hosted by naamsa / The Automotive Business Council and powered by FirstRand took place in Pretoria today.
This first edition in the series focused on “SA’s Transition to New Energy Vehicles (NEV’s)” with an additional three episodes scheduled for Johannesburg (Transformation beyond Compliance), Gqeberha, and Ethekwini respectively over the balance of 2023. Mikel Mabasa, CEO naamsa / The Automotive Business Council, welcomed delegates, officials from government and stakeholders and prefaced the discussions with a brief background on origins of the local industry and its 127year history.
Mabasa reminded delegates that electric vehicles were first introduced to South Africa in 2005 with the Toyota Prius, the Joule in 2008 with an initial R300 million investment - however the additional R9 billion required to further develop the vehicle was not available and the plant closed. This was followed by the introduction of the Nissan Leaf in 2013.
Jacques Celliers, CEO FirstRand, in his address as hosting partner, described the industry as in a “transitional phase” that requires total stakeholder commitment in order for the SA auto industry to continue to play on the global stage. Internationally the road into the future has been mapped out and the rules have been changed. The choice not to play by the new rules will be dire.
The Auto Green Paper published by our government in May 2021, aimed at finalizing the strategy on the advancement of NEVs locally, was scheduled to be submitted to Cabinet by October 2021 – to date this policy has still to be finalized. Interestingly, the Minister of Trade, Industry and Competition, Ebrahim Patel, cancelled his planned and confirmed attendance and participation in this roundtable discussion at the last minute – using his need to attend a cabinet meeting as the excuse. This in the face of the imperative and urgent need for a policy announcement by government in terms of NEVs and BEVs.
Our local industry has already missed out on the opportunities to benefit from any of the current round of NEVs investments for the near future – and unless Government releases its NEV policy immediately, the industry will probably miss the next round due in 2030.
Neale Hill, naamsa President, highlighted the SA Auto Industry position on New Energy Vehicles, saying the local industry is export orientated with almost 67% of manufactured vehicles finding markets outside of the country. Our top export destination has been the UK since 2014 and when combined with the balance of Europe accounted for nearly 3 out of every 4 vehicles exported from SA. The UK has scheduled a ban on sales of internal combustion engines (ICE) vehicles for 2030 and the European parliament has approved a ban on the sales of ICE vehicles effective 2035.
Analysis of the automotive trade export figures for the UK and Europe shows a decrease of almost 50% from R837 million in 2021 to R421 million in 2022. Hill said the impact of these forthcoming ICE bans was already being evidenced by the local industry and that it is imperative for domestic vehicle production to be aligned with the technology shifts to safeguard our exports.
The price differential between the average cost of an ICE vehicle and a full battery electric vehicle is currently 52% and the local auto industry needs both to be sustainable, whilst continuing to achieve 60% in exports and 40% domestic market sales. Hill concluded saying, time is critical – the clock is ticking rapidly and support in demand as well as supply is crucial to survival.
Alec Erwin, chairman of Uba Holdings and former minister of Trade and Industry, said technology changes in the automotive industry should not be seen as a threat to South Africa, but as an opportunity because the country has the capacity and advanced manufacturing facilities to go with it. The industry faced and dealt with “profound structural change in the 1990’s.” Africa can play a vital role in the Electro Dynamic Value Chain and is growing to become a massive market, said Irwin. Naacam member component manufacturers should be looking at collaborative technology partners in the fields of Batteries, E axles and drivetrains, Energy control modules and Hi-voltage wiring harnesses with a view to enticing them into coming to South Africa. Due to new production methods a number of the minerals available in SA are now more viable, and that there is no way Africa and South Africa will repeat “the Imperial error” by sending ores to other countries for beneficiation.
Erwin said South Africa should be thinking about these new partnerships that have to be made and urged the industry “not to wait on government but get on with it.” He believes that South Africa needs to move quickly into dialogue with confidence and that the changes to regulations and facilities are not huge. With some clever tweaks, we can adjust and go forward.
Irwin commented that the African Auto Industry is aware of the powerful vested interests within the “Grey import” sector, and there are even some used 1stgeneration electric vehicles landing on the continent. but other automotive manufacturing countries in Africa are playing catch-up with South Africa in terms of policies towards these ‘dumped grey imports’ and some countries are going as far as incentivising sales of NEV’s.
Malebo Mabitje-Thompson, Acting Director-General, Department of Trade, Industry and Competition said that government did not want the SA Auto industry to be the last country globally to be manufacturing ICE vehicles whilst our competitors move ahead into NEV production. Mabitje-Thompson believes that initially the most viable means of government supporting and assisting the local industry to grow, stay abreast and competitive with the move to NEV’s globally, is via a focused manufacturing approach beginning with the production of NEVs in South Africa.
She commented that a substantial portion of the current APDP2 is “technology agnostic” and currently in place, meaning that there was no policy constraint on the production side currently that prevents the local industry from producing vehicles with an element ICE technology. Mabitje-Thompson said, “that is the reason why we are saying let’s start here to begin.”
The first panel group consisted of Alec Irwin, Mike Whitfield – President African Association of Automotive Manufacturers (AAAM) and Andrew Kirby – CEO Toyota Motors SA with Mabasa facilitating the discussions across all of the panels. In answer to the subject ‘NEV Transition- what do we do together, today to prepare for tomorrow’ the panel kicked off with opening remarks from each panellist, In response to the questions of ‘How do we support the local supply of NEV components and How do we retain export markets? The consensus was that Africa needs to be the focus – and that SA should be a major player in supplying CBU’s into the African market.There are some used 1stgeneration electric vehicles landing on the continent and taking into account the state of the market in Africa, a focus should be on providing affordable NEV vehicles for Africa. In response to the question of reducing the carbon footprint the panel agreed Hybrids would be the fastest, but in terms of Zero Emmission – BEV’s are the answer.
The second panel comprised Martina Biene – Chairperson VWSA, Neale Hill – MD Ford Motor Company Africa, Malebo Mabitje-Thompson and Renai Moothilal – Executive Director NAACAM and was tasked with discussing ‘How do we make SA attractive – Investment, Policy, Production, Infrastructure.’ Comments included making use of the material beneficiation we have, a focus on localisation with the need to capture more than the current 39% local supply into production. It is vital that the industry build on the framework of MIDP, APDP and APDP2 and make use of the Africa Continental Free Trade Agreement (AfCFTA). Moothilal stated that already some local component manufacturers were exporting components for Hydrogen Propulsion systems.
Neale commented that SA was very poised to benefit from supplying to African countries with our competitive advantage due to the level of maturity in other African markets. Biene agreed that in terms of her company, VW found localisation attractive but factors like economies of scale, logistics costs and load shedding were key to investment decision making. The panel agreed that standardisation of batteries and charging plugs for NEV’s was important in adoption of NEV’s. It was stated that standard plugs were ‘on the way.’ Additionally they agreed that there is an awareness amongst component and vehicle manufacturers that identifying, building of skills and re-skilling is necessary going forward.
Ghana Msibi - CEO Wesbank, Gary Scott – CEO KIA SA, George Mienie – CEO Auto Trader and Edward Makwana – GM Legacy Motor Group (LMG) made up the final panel and this panel addressed the question of ‘How do we stimulate demand for NEV’s in S.A.’ (adoption and affordability). Msibi talked of the restraints in place within the Financial services act that impact on beneficial financing for NEV’s. Scott remarked on the fact that purchasing of NEV’s continues to be an emotional choice and that the dealerships still had an important role to play in the future with NEV’s. Mienie highlighted that the current advertising and marketing of BEV’s had very little focus on the benefits of Bev’s. Makwana commented that with the high-end NEV’s marketed by his company the cost differential had less of an impact, but that it was still early days to be able to present any relevant data.
Mabasa closed off the event, thanking all of the delegates for their attendance and support and invited everyone to the next episode in June.
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