TIPS



Shifting to electrical vehicles in South Africa – the time is now South African policy makers and automobile manufacturing sector stakeholders need to proactively engage and develop a coherent strategy to create an enabling environment for the shift to the production of electrical vehicles (EVs) or fall behind global developments and lose their edge in the export market.This emerged as a key message from a report compiled for the Department of Trade, Industry and Competition (the dtic) and the National Association of Automobile Manufacturers of South Africa (NAAMSA). The report entitled “Harnessing electric vehicles for industrial development in South Africa” was produced by Trade & Industrial Policy Strategies (TIPS) and Change Pathways.The authors, Gaylor Montmasson-Clair, Anthony Dane and Lesego Moshikaro, argue that whilst EVs still account for a marginal share of global vehicle sales, the shift is evident in leading markets especially in South Africa’s main export markets for vehicles, the United States and Europe. This shift, they argue, is likely to become more evident in the next decade or so. This largely stems from technological developments which have provided the space for the move away from traditional internal combustion engines towards electric and other alternative motors. Other factors relate to heightened environmental regulations, linked to climate change mitigation and air quality improvement. They argue very strongly that “we must act now” and the key stakeholders must develop an appropriate policy framework to facilitate this shift as South Africa is already “lagging behind” other countries in this regard. The authors believe that South Africa has an opportunity to play a role in the development and production of EVs as the country has the minerals and potential productive capacity to move in this direction, which could ultimately benefit society and the ailing manufacturing sector. The blunt reality is that the automobile manufacturers face significant risks if they do not transition. While this will not happen overnight, this is an unavoidable trend as South Africa’s export markets shift to EVs.The report comprehensively covers how a transition to EVs can happen with the authors stressing that such a shift is multi-faceted and not only requires a comprehensive policy framework (which needs to be developed now) but strong partnerships between the key stakeholders. Four key questions were considered, covering both market development and industrial development. On the market development front, the first question related to how the offer of passenger EVs could be supported. This is critical to ensure that, firstly, EVs are available on the local market, and secondly, customers are enticed to buy them. The second question dealt with the rollout of EVs in South Africa’s public transportation system – key to this is ensuring society-wide benefits by bringing the technology to all, particularly low-income households. On the industrial development front, the first question explored how to promote the manufacturing of EVs (cars, buses and minibuses) in the country. A transition of the local manufacturing industry is fundamental to its long-term sustainability. The report then moves onto the final question which unpacks South Africa’s the ability to support the automotive value chain. This ranges from the mining and beneficiation of minerals (such as PGMs, manganese, nickel and rare earth elements) to the manufacturing of parts and components, to the manufacturing of vehicles. The authors highlight that South Africa’s automotive value chain is highly connected to global dynamics and dependent on worldwide trends from an import and export perspective while the automotive manufacturing industry is ranked 22nd in global vehicle production with a market share of 0.7%. The success of the sector is largely attributed to the support provided as a result of the Automotive Production and Development Programme (APDP). For each of these questions, many options exist to support the industry and the authors explain that one option on its own will not have the desired effect and deliver the kind of transition that would deliver the intended benefits. For example, promoting an equitable rollout of EVs depends on simultaneously tackling the private and public passenger transport markets, where the high upfront cost of EVs represents the biggest barrier. A reduction in the VAT and/or ad valorem excise duty on EVs would be an effective avenue to support the market. A partnership between development finance institutions and local banks to provide low interest rate to EVs buyers would also go a long way in improving the cost competitiveness of EVs. For passenger cars, addressing the tariff anomaly (on battery EV originating from the EU) would also assist with levelling the playing field. On the public transport side, demand should be supported by proactive procurement by municipalities and a reform of the Taxi Recapitalisation Programme. Fleet-level targets would also help getting tractions for both markets.On the industrial development side, an addendum to the APDP, aimed at enhancing support for EV manufacturing would be the primary avenue to send a positive signal to industry. This could support both EV manufacturing as well as the development of component manufacturing, leveraging South Africa’s mineral resources. Increased local demand would also support domestic manufacturing. This is particularly evident with e-buses and e-minibuses. In addition, consideration should be given to a mineral beneficiation policy (such as an export tax) to support manufacturing of EV-specific components, such as batteries, electric drivetrains and fuel cells. The report concludes that “EVs represent the only platform to a modern, sustainable transport system in the country and globally. Coupled with the transition to renewable energy technologies (from solar and wind energy to green hydrogen), increased connectivity and changes to spatial development, they also are the road to smart cities, inclusive development, and a sustainable economy. “Issued by: TIPSFor more information, contact Gaylor Montmasson-Clair on gaylor@.za or 071 31 99?504. The full report is available on the TIPS’s website: . ................
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