Government policy on EVs likely only by February

Government incentives for electric vehicles (EVs) are likely to favour manufacturers over consumers, according to trade, industry & competition minister Ebrahim Patel.

Eskom’s inability to provide reliable electricity was among the reasons for not following the lead of countries that have offered generous price incentives to accelerate the market shift to zero-emission vehicles, Patel told delegates at the SA Auto Week conference in Kyalami on Thursday.

However, he said  government was unlikely to reveal its EV policy before next February — 16 months later than expected. In May 2021, it published a green paper on new-energy vehicles, which are predominantly EVs but also include hydrogen and other forms of emissions-free power.

A policy white paper was due to follow last October. Instead, Patel said an announcement was likely to coincide with next year’s national budget, which would include incentive details. Patel said the government initially favoured subsidising the purchase price of EVs. They are more expensive than vehicles powered by petrol and diesel internal combustion engines (ICE) because of the cost of battery packs and EV production volumes still being low.

EVs account for about 7% of global car sales. As volumes rise and unit costs reduce, it is estimated that EVs and ICE vehicles will reach price parity by the end of this decade. Patel said after the green paper was published, a cost analysis revealed that price incentives were not the right priority for SA. “It showed us we had to change the idea we had in mind and move [incentives] from consumer to production.”

Further enticements

EVs and their components now enjoy the same benefits as ICEs under the country’s automotive production and development programme, which allows manufacturers to reclaim up to 30% of production-based investments. Manufacturers say they need further incentives because of the increased cost of the switch to new vehicles and technologies. The government has made it clear that limited financial resources must be spent where they will be most effective. 

Patel said the government also had to take into account that Eskom was unable to cope with demand for power and that a wholesale switch to EVs requiring regular battery charging, would make the situation worse. The latest delay will disappoint the SA motor industry, which is desperate for policy clarity. The industry exports 63% of the cars and bakkies it builds — 48% to the UK and the EU, which will outlaw the sale of new ICE vehicles in the next few years. SA exports are almost exclusively ICEs.

“Half of our production is at risk,” said Toyota SA president Andrew Kirby. BMW SA CEO Peter van Binsbergen said: “To secure the industry’s future, we have to switch to EVs.”

Some multinational vehicle companies with SA subsidiaries still have to be convinced to invest in manufacturing EVs in a country where such sales are insignificant — of the 6.99m such vehicles sold worldwide in 2021, fewer than 1,000 were in SA.

“We have to go to parent companies with a compelling argument [to build EVs] but to do that, we need a policy,” Van Binsbergen said. BMW, which exports more than 90% of its X3 cars, has started discussions with its German parent over the model mix from 2025, when the current X3 is due for replacement.

Patel acknowledged industry frustration but said: “We can’t just flick a switch. You have to be able to navigate this carefully and create a sustainable environment so we can prepare for the future.”​