Edging towards electric cars strategy

The government and the motor industry are edging towards a strategy to encourage the local use and manufacture of electric vehicles. Executives say a series of meetings with trade, industry & competition minister Ebrahim Patel have brought the two sides closer.

The government and motor industry are edging towards an agreed strategy to encourage the local use and manufacture of electric vehicles (EVs). Industry executives say a series of meetings with trade, industry & competition minister Ebrahim Patel has brought the two sides closer on how to incorporate EVs into automotive policy.

Mikel Mabasa, CEO of the Automotive Business Council, has warned of huge job losses and a collapse in exports if the motor industry does not switch to EV manufacture.

Sascha Sauer, head of Audi SA, last week became the latest industry official to say SA will be left behind by the global motor industry if it does not change its attitude.

Government policymakers, however, deny they have ignored EVs. They say they were considered throughout preparation for the new SA Automotive Masterplan, which will come into being on July 1 and govern the industry until 2035. They say they are negotiating to bring down the cost of importing EVs and thereby make them more affordable to SA consumers.

Nearly two-thirds of SAmade vehicles are exported, many to countries intending to outlaw the sale of cars and vans equipped with diesel and petrol internal combustion engines (ICE). Britain, the main destination for SA vehicles, is among countries planning a ban by 2030. That could directly affect the next generation of vehicles built by SA’s seven big vehicle manufacturers. The ban will not immediately affect bakkies, which account for most SA exports and are considered small trucks.

In 2020, while car sales were falling 14% because of Covid-19, EV sales grew 39% to 3.1-million. Research company Canalys says this will grow to 30-million by 2028 and that EVs will make up nearly 50% of all car sales by 2030. Another report says electric and hydrogen-powered vehicles will capture 35% of combined car and truck sales by 2040. ICE vehicles, however, will be around for decades.

Volkswagen SA says it is unlikely to build EVs after the generation of ICE-based Polo and Vivo cars reach the end of their life cycles in about 2024.

Mercedes-Benz SA is the only local company building an EV — a “hybrid” C-Class car powered by a combination of ICE and electric battery. But it is for export only. Later this year Toyota SA will become the first manufacturer to build a hybrid for local use with the launch of its Corolla Cross.

Hybrids sold in SA use petrol engines to recharge the electric battery. Other EVs include plugin hybrids recharged from external electricity sources, and “pure” battery-electric vehicles which do the same. Many engineers consider hybrids a “halfway house” and say battery-electric and hydrogen vehicles are the future. But South Africans have shown little interest so far, buying fewer than 3,000 EVs in the past decade.

George Mienie, CEO of online retailer AutoTrader, last week said South Africans would buy EVs if they could afford them. He believes that if they were available for R500,000 or less, sales would flourish. The cheapest, however, is nearly R650,000.

Mienie blames government failure to incentivise EV sales. In many countries, taxes and duties are reduced or waived. In some cases, buyers receive cash incentives. In SA EVs attract a 25% import duty, compared with 18% for ICE equivalents.

Policy advisers say this is not due to the government’s reluctance but because EVs are not included in SA’s trade agreement with the EU, which reduces the duty on EU-sourced vehicles from 25% to 18%. EVs were not an issue when the agreement was signed.

An adviser says: “With the increased interest in EVs, we have asked the department to open negotiations with the EU commissioner to add them to the 18% list of vehicles. They have not yet done this.”

The auto master plan is based on an updated version of the eight-year-old Automotive Production and Development Programme (APDP). A government consultant says the new policy, such as the one it replaces, is “technology-agnostic”. Whether vehicles are ICE or EV, “incentives are based on local value addition, not the underlying drivetrain technology”.

Policymakers say new technologies have been considered at every stage of the master plan debate. Reports and discussion documents bear this out. The problem, as with all rapid technological change, is that no-one can be certain where it is going. It is, as Audi SA planning head Asif Hoosen put it last week, “a calculated guess”.

According to the master plan report: “The types of vehicles likely to be consumed in 2035 are difficult to gauge. It is likely that the product strategies of the world’s leading motor companies will evolve quite dramatically ... though what specific technology changes this will manifest in over the next few years are still not certain.”

The report adds: “It is critical that SA invests in alternative technology infrastructure to enable the transition to energyefficient vehicles.”

So what does all this mean for the local vehicle manufacturing industry? Of the big producers, only Ford and Volkswagen build their own engines, mostly from imported components. BMW, Isuzu, Mercedes-Benz, Nissan and Toyota import ready-built engines.

To replace these with imported EV engines will not have a big impact on the vehicle assembly process. Vehicle bodies will be lowered and bolted onto engines as before.

At Toyota, for example, vehicles destined for cold countries already require additional coldclimate engine parts. Where there will be a difference is in cost. Engineers say the electric battery makes a basic hybrid engine up to R80,000 more expensive to build than an ICE. A plug-in hybrid costs R160,000R170,000 more, and a fullelectric engine up to R300,000.

Renai Moothilal, director of the National Association of Automotive Component and Allied Manufacturers, says investigations are under way to see what EV components can be made locally, to bring down costs. Parts unique to electric and hydrogen vehicles include a traction battery pack, power inverter, electronics controller, traction motor, generator, thermal converter and thermal cooling system.

The ICE-EV price difference will shrink as rising EV volumes reduce unit costs. Nevertheless, it will be some years before prices reach parity.

That is why proponents say the government must follow other countries in offering price incentives to consumers. Audi’s Sauer says multinational motor companies will hesitate to invest in SA EV manufacture until there is a sustainable domestic market for the vehicles.

But it is not just about price. For EVs to gain market share, SA motorists must be convinced their cars will reach their destination. Most plug-in vehicles have limited range between battery charges. Some owners charge at home, others at car dealerships and other charging stations are dotted around SA. Away from city centres and big national roads, however, these are scarce.

At the moment, there are about 300 stations in country. These will need to grow into the thousands if EV sales progress as marketers hope.

The master plan says: “It is critical that the industry develop a technology and associated skills development road map to support the evolution of the industry.”