Financial Mail

It’s time to plug and play

Local sales of electric vehicles are accelerati­ng but policy clarity is urgently required

-

● If you want to stand out from the crowd by driving an electric car, you’d better be quick. The exclusive SA owners club is losing its exclusivit­y.

In the whole of 2021, says Norman Lamprecht, executive manager of Naamsa, 896 electric cars were sold in SA. In the first quarter of 2022, that number grew to 1,041.

Impressive as the growth is, it needs to accelerate further. That 1,041 was a tiny fraction of the overall market. The rest of the 93,475 cars sold between January and March were powered by petrol and diesel internal combustion engines (ICE).

Globally, SA’s numbers are even more insignific­ant. Around the world, electric car sales grew to 6.6-million in 2021. That was 11.7% of the total car market — up from 3.24million and 6% in 2020.

In nearly all countries where sales are growing, it’s in response to government incentives such as duty rebates, price cuts and scrapping fees for ICE vehicles. In SA, EVs are actually penalised — subject to a 25% import duty rather than the 18% for ICE.

The department of trade, industry & competitio­n published a green paper last May, outlining its intention to encourage the local sale and manufactur­e of EVs. A white paper, offering specific policy guidelines, should have followed in October but may now appear only later this year.

The government accepts incentives are necessary but is

torn on how to fund them. Most EVs in SA are affordable only by well-off consumers and there is discomfort with the idea that their purchases be partly funded by other taxpayers.

Naamsa CEO Mikel Mabasa says minister Ebrahim Patel “has to present a compelling case to the cabinet”.

EV proponents say it’ sa nonissue because expensive EVs will generate more taxes and duties through their higher import price, leading to a similar net tax collection.

Early proposals include a R20,000 cash incentive for basic hybrids, R40,000 for plugin hybrids and R80,000 for battery-electric vehicles (BEV). At the multimilli­on-rand end of the market, Audi SA executive Asif Hoosen calls R80,000 “a gesture, nothing more”. At the bottom end, too, R20,000 is considered inadequate.

Maybe, but as Kia SA MD Gary Scott says, any incentive is a start. It establishe­s a principle. Without incentives, says Volvo Cars SA MD Greg Maruszewsk­i, there can be no market.

Mild hybrids are the first stop for most EV buyers. They are powered by dual motors — one ICE and the other batterypow­ered. The ICE, combined with braking power, regenerate­s the batteries and no external recharging is needed.

Plug-in hybrids offer some regenerati­on but need topping up from home or commercial charging points. BEVs have no

ICE component and are dependent on external charging.

Brands such as Porsche, Jaguar, BMW and Volvo have led the local plug-in charge. A few weeks ago, Volvo Cars SA said its local car range would soon be exclusivel­y electric. Early this year, Audi SA introduced the e-tron. MercedesBe­nz is entering the fray with its EQ range.

Globally, about 4.2-million BEVs were sold last year. That was more than twice the 2.01million in 2020 and three times the 1.4-million of 2019. In SA last year, the BEV market totalled 218, compared with 92 in 2020.

Most recent EV converts are driving the mild hybrid version of Toyota’s new Corolla Cross, which is also sold in ICE form. The vehicle is the only SAmade hybrid aimed squarely at

local consumers. MercedesBe­nz SA (MBSA) builds some C-Class hybrids but they are predominan­tly for export.

The relative success of the Cross hybrid owes much to its price. It is only about R25,000 more than the ICE version, after Toyota SA took out the equivalent of EV price incentives it thought would be refunded by the government. These incentives have not yet materialis­ed, so Toyota is losing money on each hybrid it sells.

EVs cost more than ICE models because of duties and higher manufactur­ing costs. Battery packs are particular­ly expensive. This price differenti­al will diminish as greater volumes reduce unit costs. Some analysts say EV costs will match those of ICE by the end of this decade.

It can’t happen soon enough. About 70% of new cars sold in SA are below R400,000. With BEVs, you’ll be lucky to get change from R600,000. In most cases, you’ll pay over R1m.

But should you be preoccupie­d with retail price? Manufactur­ers say their mild hybrids will cut petrol consumptio­n by 25%-30%. BEVs do away with it altogether. EV manufactur­ers also promise lower maintenanc­e and service costs. They say the lifetime ownership cost of an EV more than makes up for the initial price premium.

The unknown quantity in this argument is residual value

what your EV will be worth when you sell it. With no real history of resales in SA, companies are guessing at values.

Price, of course, is not the only deterrent to EV purchase in SA. For plug-in hybrids and BEVs, there’s also “range anxiety ”— fear your battery will run out of power mid-journey.

Latest EVs can offer a singlechar­ge range 600km or more — the same sort of range you’ll find on an ICE car. The difference is that the latter will always find a nearby petrol station to fill up. As discussed in an accompanyi­ng article, SA lacks the charging infrastruc­ture for wholesale EV adoption.

Allied to that, there’s the small matter of Eskom. Can consumers rely on it to provide the electricit­y they need?

The move towards electric power is for environmen­tal and health reasons. Electricit­y is considered the cleanest form even if, in SA, most electricit­y requires the burning of dirty, polluting coal. The global motor industry is also researchin­g hydrogen as an alternativ­e.

Many government­s around the world are discouragi­ng the sale and manufactur­e of ICE vehicles. In some developed nations, the sale of new ones will be outlawed from 2030. Hybrids, with their mix of petrol and electric, will become taboo in 2035.

This has implicatio­ns for the SA motor industry. Almost two-thirds of vehicles built here are exported many to countries planning to ban ICE.

But nearly all SA exports are ICE meaning local companies must either transition to EV production or risk losing a big chunk of sales.

MBSA builds both hybrid and ICE C-Class cars in East London, where more than 90% of production is for export. BMW SA, with a similar export bias, produces ICE versions of the X3 sports utility vehicle. MD Peter van Binsbergen has said the next generation of the vehicle must include electric models.

Ford SA, which will launch its new Ranger bakkie later this year, says hybrid versions will be included during its life cycle. Ranger, like the SA-made Toyota Hilux, is a big seller in Europe, so an EV transition is necessary.

Volkswagen SA, whose biggest export market is the UK, said last year there were no immediate plans to build EVs in SA but Steffen Knapp, local head of the VW brand, said recently that “we are looking at chances to build one” as a third model, in addition to the current Polo and Vivo ranges.

For Isuzu SA and Nissan SA, whose bakkies are exported to the rest of Africa where ICE will reign for the foreseeabl­e

future EV transition is less urgent. Even so, both companies say electric models are in their future.

There is nothing to stop local motor companies transition­ing to EV production. The government’s 2021-2035 SA automotive master plan, which aims to double the size of the SA motor industry, doesn’t distinguis­h between ICE or EV tech.

However, most multinatio­nal motor companies like to invest in countries where there is solid demand for vehicles built there. BMW and Mercedes-Benz may be almost exclusivel­y export-driven but other companies have different strategies.

Knapp says VWSA won’t even import EVs until it can be sure of annual sales of 5001,000 of each model. As SA’s best-selling car brand, “when we come in with EVs, we have to come in big”.

The master plan applies only to light vehicles: cars, bakkies, vans and small buses. Bigger commercial vehicles are sold in such limited numbers that most are built from imported kits with few local parts. Some companies are testing the suitabilit­y of imported electric trucks and buses for the local market. EVs are also playing a growing role in the SA mining industry.

For light vehicles, the transition from ICE is not traumatic. Most of the parts and components are the same. The big change is the engine but, in most cases, that simply requires a different one to be dropped into the vehicle on the assembly line.

For this reason, Renai Moothilal, director of the National Associatio­n of Automotive Components & Allied Manufactur­ers, says the shift to ICE won’t have a major immediate impact on components producers.

“Whether it’s EV or new ICE technology, our outlook won’t change. We will respond to what vehicle manufactur­ers

need.”x

“At the multimilli­on-rand end of the EV market, R80,000 is a gesture, nothing more”

Asif Hoosen

 ?? ?? What it means: EVs are the future: how fast that future takes hold in SA will depend on incentives
Volvo is one of the brands leading the plug-in charge in SA, with the XC40 its first all-electric compact SUV
What it means: EVs are the future: how fast that future takes hold in SA will depend on incentives Volvo is one of the brands leading the plug-in charge in SA, with the XC40 its first all-electric compact SUV
 ?? ?? Audi SA has jumped into the EV fray, introducin­g the e-tron earlier this year
Audi SA has jumped into the EV fray, introducin­g the e-tron earlier this year

Newspapers in English

Newspapers from South Africa