Is SA definitely headed in the new energy vehicle direction?

South Africa’s automotive industry is disappointed with the “snail pace” finalisation of government’s policy on the advancement of new energy vehicles (NEVs).

The finalisation of the policy is of vital importance to allow global original equipment manufacturers (OEMs) to take investment decisions about the possible production of NEVs in South Africa in the future.

The policy will also spell out what incentives, if any, are available to OEMs to reduce the cost of NEVs to consumers in South Africa, thereby improving sales and investments in charging infrastructure.

Read: Toyota anticipating SA government support to reduce the price of new energy vehicles

Most developed countries provide subsidies to reduce the cost of NEVs in their countries.

Mikel Mabasa, CEO of automotive business council Naamsa, said automotive companies around the world are accelerating their plans for the transformation to NEV “very very fast”.

“The challenge we have is that many of the local manufacturers must take decisions very soon in terms of whether they will be changing their lines to NEVs or not in terms of their new capital requirements,” said Mabasa.

“Many of them need to prepare their business cases now so that they are able to present those to their respective principals in different markets, whether its Japan, Germany or US.

“In the absence of a very firm policy position, it could damage that position.

“That is why are absolutely concerned that the process is definitely moving at a snail’s pace,” he said.

Policy certainty required

Mabasa said it is disappointing it is taking so long to finalise the policy because the automotive industry is keen to move forward and wanted to go to the recent SA Investment Conference with some level of policy certainty that South Africa is definitely pursuing “the NEV direction”.

“In the absence of that policy certainty, it obviously means there is vagueness in the market,” he said.

Seven investments by the automotive sector collectively worth R20.37 billion were announced at the 2022 SA Investment Conference.

However, the largest of these investments was the R16.4 billion by the Ford Motor Company for the next generation of the Ranger, which was previously announced.

Read: Ford SA injects R600m into its Gqeberha engine plant

Timelines missed

Minister of Trade, Industry and Competition Ebrahim Patel published a Green Paper in May 2021.

The stated aim was for the strategy to be finalised within 90 days following the gazetting of the Green Paper to allow the policy proposals to be submitted to cabinet for consideration by October 2021.

Department of Trade, Industry and Competition (dtic) spokesperson Bongani Lukhele said on Thursday the finalisation of the policy is “still work in progress” and the NEV proposals have not yet been submitted to cabinet.

Lukhele said it is envisaged a NEV policy view and direction will be finalised during the current year.

“The process of developing policy has brought to the fore a variety of complex and varied issues to be considered, resulting in delays.”

Lukhele said that since the publication of the Green Paper, the following inputs were received from stakeholders and interested parties:

Industry experts were jointly appointed by the dtic and Naamsa to provide support towards policy development and a report was completed at end-February 2022.

The dtic engaged another consultancy group to synthesise available information, explore various scenarios and advise on policy options to support NEV production in South Africa, taking into consideration the country’s economic reality, with this report expected before the end of April 2022.

All key stakeholders, including Naamsa, are kept informed as they are part of the policy development.

“While some individual persons may feel the policy process is taking too much time, it should be noted that the quality of the outcomes is more important,” said Lukhele.

Industry in the dark

However Mabasa said this week that the process has “taken a very quiet posture at this time”.

“We are not sure where government is at at this time because we are still waiting for them to give us an update… [and] have not even seen the comments that were made by different stakeholders on the original draft that the minister published,” he said.

Mabasa confirmed that Naamsa is scheduled to have a meeting with the dtic next week, at which it hopes to get an update.

Patel is aware of the urgency of finalising the policy.

In his budget vote speech in May 2021, Patel said the Green Paper sets out a vision for the need to be able to produce electric vehicles.

“We need to do that with urgency because the reality of climate change is such that countries are setting targets of how many fossil fuel vehicles they want on their roads and we want investors and headquarters of OEMs to see South Africa putting up its hand very early in the decision-making process about where production will be located in future.

“You miss that bus, then others would have a consolidated presence in the electric vehicle market,” he said.

Mabasa said there were four pure battery electric vehicle brands present in the South African market in about 2018 but this has increased to 13 today and Naamsa estimates it will grow to 22 by the end of 2022.

National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal said it has had engagements with the dtic on specific issues that arose following the publication of the green paper, but has not seen the finalisation of those policy processes.

“We have been advised it is taking a bit longer than originally planned due to various different sources of information and consultation that is ongoing.

“In an ideal world, we would like to see some finalisation to remove any elements of policy uncertainty that exist as the process continues to unfold,” he said.

Moothilal said automotive component manufacturers obviously take the lead from OEMs in regard to the initial localisation of NEVs.

However, Moothilal said the current Automotive Production and Development Programme (APDP) is technology-neutral and Naacam believes component manufacturers are ready and willing to supply whatever platforms the OEMs choose to invest in in the future.

“If it is in the NEV space, then the positive of policy certainly will allow the OEMs to make those announcements and at the same time start calling for localisation responses from the component manufacturers,” he said.

“The quicker the level of finalisation, the better, because everybody can plan accordingly.”