Virus looks set to stall EVs uptake

• Nevertheless, SA motor industry needs to position itself for an electric future as most of its exports go to countries where sales will rise again, says report

Cost-cutting and survival measures driven by Covid-19 are likely to lead to more mergers and acquisitions in the global motor industry and encourage it to focus less on expensive new technologies in the short-term and more on operational efficiencies.

Cost-cutting and survival measures prompted by Covid-19 are likely to lead to more mergers and acquisitions in the global motor industry and encourage it to focus less on expensive new technologies and more on operational efficiencies.

A new report by consultancy firm KPMG says the pandemic is likely to delay parts of the industry’s long-term transformation. For example, lower oil prices have reduced ownership costs of cars with petrol and diesel engines and slowed demand for electric vehicles (EVs).

Covid contagion fears may also have a lasting effect on public transport. In China, says KPMG, there is renewed demand for private cars as “paniclike fear of disease and fever” encourages consumers to abandon trains, buses and other shared transport.

The forecasts are contained in KPMG’s the 2020 global automotive executive survey published on Friday. Research is based on interviews with more than 1,100 industry executives and 2,000 consumers from 30 countries, including SA.

In SA the industry exports two-thirds of the vehicles it produces, and investment strategy depends on what happens in the rest of the world. KPMG SA senior manager Dex Machida said on Friday despite the temporary cost advantages of petrol and diesel engines, SA must position itself for an electric future. The UK accounts for more than 25% of SA exports, and EV sales there are rising steadily. The same applies to other major destinations.

“We have to cater for global demand,” Machida said.

SA sales of EVs are minimal.

Despite avowed government support for low-emission vehicles, SA is the only country where EVs attract more tax than petrol vehicles, MD of EV infrastructure specialist GridCars Winstone Jordaan, said.

“EV companies looking at Africa would rather talk to Ghana, Ethiopia or other countries with EV-friendly policies.”

A new SA motor industry investment strategy, the SA automotive masterplan, is to be launched in 2021. Based on the existing automotive production and development programme (APDP), it is designed to double production and employment by 2035, and increase local content in SA-made vehicles by 50%.

Tobias Naujoks, KPMG automotive strategy head for Europe, Middle East and Africa, said SA must have a clear future vision before finalising any strategy. It should know which vehicles will be in demand in Africa up to 2035 and beyond. Though most SA exports go to Europe, multinational motor companies look to SA as the long-term supply base for Africa.

It is disappointing that global industry executives have downgraded emerging markets on their list of strategic priorities.

Renai Moothilal, director of SA’s National Association of Automotive Component and Allied Manufacturers (Naacam), is not surprised. Nearly a century after multinational motor companies began building vehicles in SA in expectation of significant sales in Africa, it remains a “potential” market.

“The African market still hasn’t unlocked itself,” Moothilal said. Most African countries still welcome the dumping of used cars from the northern hemisphere. Until that changes and countries agree on a muchdiscussed African automotive pact, “we will continue forever to talk of Africa as a potential market”, he said.

However, the SA components industry is ready for whatever decisions are taken by the local and global motor industries, he said.

“Most SA component technologies are not exclusive to a particular power-train, so there’s no immediate danger of losing production if we move from combustion engine to electric,” Moothilal said.

He noted that nearly all major suppliers in SA are multinationals that are able to import the latest technology, “whatever it is”.

Despite the Covid-19induced delays, the KPMG report says most executives believe vehicles powered exclusively by internal combustion engines will be in the minority by 2030. Most will work in tandem with electric engines. By the same date, it is forecast that Western Europe — once the hub of global vehicle manufacturing — will account for less than 5% of the world’s car production.

The report also predicts that by 2025, 20%-30% of motor dealerships around the world will close because of falling sales and increased online and digital marketing.

Naujoks said sales will return to pre-Covid-19 levels only in 2022 or 2023.

SA IS THE ONLY COUNTRY WHERE EVS ATTRACT MORE TAX THAN PETROL CARS

WE WILL CONTINUE FOREVER TO TALK OF AFRICA AS A POTENTIAL MARKET