The Government is playing ‘Russian Roulette’ with the auto industry by being painfully slow in finalising its New Energy Vehicle (NEV) governance and policy transformation priorities, according to naamsa, The Automotive Business Council.
The introduction of NEVs does not seek to replace traditional internal combustion engines but to decarbonise road transport and purchasing for carbon neutrality.
According to the International Energy Agency (IEA)], transport contributed 37% of the global CO2 emissions from end-use sectors in 2020, while road transport (cars, trucks, and buses) accounted for 76% of the transport sector. As a result, 28% of the global CO2 emission is, according to the IEA, attributed to the road transport sector.
Toyota Corolla Cross Hybrid
The global transition towards NEVs is a critical step to secure the future and growth of the automotive industry in South Africa.
The South African automotive industry cannot run on one development technology track if it wishes to grow and compete globally. Migration to NEVs has since become inevitable.
The country needs to urgently enhance existing auto policies to facilitate a high-yielding business environment, including developing an attractive fiscal and regulatory framework that makes South Africa a highly competitive and compelling location for NEV production.
The Minister of Trade, Industry and Competition drafted and delivered the NEV Green Paper publicly in Parliament on May 18, 2021. Subsequently, the DTIC pronounced that a White Paper on NEVs would see the light in October of the same year.
Audi e-Tron
With this in mind, the auto industry is proactively releasing the comprehensive NEV Thought Leadership Paper to support and strengthen the country’s long-term strategy towards NEV.
As revealed by the president in his State of the Nation Address, the automotive industry eagerly awaits an announcement to inform the NEV Roadmap going forward.
NEV sales for last year showed a year-on-year increase of 431,7% from 896 units in 2021 to 4 764 units in 2022 but remain negligible as a percentage of total new vehicle sales.
| 2018
| 2019
| 2020
| 2021
| 2022
|
Plug-in hybrid
| 89
| 72
| 77
| 51
| 122
|
Traditional hybrid
| 55
| 181
| 155
| 627
| 4,050
|
Electric
| 58
| 154
| 92
| 218
| 502
|
Total NEVs
| 202
| 407
| 324
| 896
| 4,764
|
% of total new vehicle sales
| 0,04%
| 0,08%
| 0,09%
| 0,19%
| 0,88
|
Despite lower running costs, the high upfront purchasing cost of NEVs remains the primary inhibitor to increased NEV uptake in South Africa.
Additional price influencers include the effects of VAT, the ad valorem excise duty based on a sliding scale of up to 30%, the import tariff and limited product availability.
The fundamental challenge to NEV market growth in South Africa is the uncompetitive pricing of NEVs relative to ICE vehicles. The average international pricing gap for NEV models parallel to their ICE equivalents is 12% for hybrids, 43% for plug-in hybrids, and 52% for battery electric vehicles.
The NEV segment needs incentives to experience growth in South Africa. Given the price sensitivity of the South African market, as exhibited by its price elasticity profile and the substantial levels of subsidisation required to equilibrate NEV and ICE vehicle pricing, the most appropriate incentive model to support the transition to NEV consumption in the South African automotive market appears to be the provision of a direct, fixed NEV purchase subsidy.
An incentive of this kind would optimise support for entry-level NEVs, with less benefit for more expensive NEVs. If the South African vehicle market were to transition NEV sales equal to 20% of the total market in 2025, 40% in 2030 and 60% in 2035, the profile of NEVs might shift quite dramatically over the period. Hybrids would likely dominate in the period to 2025 (10% of the 20% total), with plug-in hybrids and battery electric vehicles ending the period in a similar market position (5% each).
Mercedes-Benz EQS 450+
The transition to eco-friendly vehicles via government regulation, the pricing of carbon in the form of a tax on ICE vehicles, government-provided consumer incentive schemes, the availability of charging infrastructure, and an even stronger environmental consciousness among society in the EU are driving developments in the domestic automotive industry to a large extent.
