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Picture: SUPPLIED
Picture: SUPPLIED

Motor companies want new trade, industry & competition minister Parks Tau to unpick key elements of predecessor Ebrahim Patel’s electric vehicle (EV) policy to create a local market for EVs and protect the future of the motor industry.

Not only do they want manufacturing incentives to include hybrid-electric vehicles but they also want consumers to be financially encouraged to switch to emissions-free automotive technology and away from petrol and diesel internal combustion engines (ICE).

In a white paper published in December last year, Patel proposed that only battery-electric vehicles (BEV), which rely exclusively on plug-in recharging, should benefit from manufacturing incentives.

Andrew Kirby. Picture: ROGAN WARD/REUTERS
Andrew Kirby. Picture: ROGAN WARD/REUTERS

In an interview, Toyota SA Motors CEO and president Andrew Kirby said the industry wanted Tau to extend this to hybrid vehicles, which are driven jointly by ICE and electric-battery power. Some — known as plug-in hybrids — rely mainly on ICE technology but also use battery packs that are replenished by external recharging through plug points. 

Then there are traditional hybrids, the battery packs of which are continuously recharged by ICE motors and require no outside intervention. These typically use about 25% less petrol and diesel than a standard ICE vehicle.

Two-thirds of cars and light commercial vehicles (mainly bakkies) built in SA are exported, most to markets that plan to outlaw ICE technology by 2035. Since most SA-made vehicles are ICE, government is anxious for the industry to switch to BEV manufacture.

Regrets

There are a number of problems with this. One is global consumer resistance to BEVs. The rapid pace of the transition has slowed considerably as consumers question the benefits of BEVs. Range anxiety — the fear of running out of electric power mid-journey — is an ever-present issue, but there are also more practical concerns, such as the poor resale value of BEVs, running costs and that many cities lack sufficient charging infrastructure.

A study by business consultancy Accenture shows that half of French BEV owners regret buying the vehicles. In SA, the main problem is that almost no-one can afford a BEV. Last year, fewer than 1,000 were sold here. Plug-in hybrids are also scarce, for the same reason, but demand for traditional hybrids is escalating fast.

The December 2023 EV white paper recommended that from 2026 local motor companies should enjoy a 150% rebate on BEV-related manufacturing investments. The trouble is that most multinational motor companies are loath to invest in countries where there is no demand for products built there.

German automaker Volkswagen, whose SA subsidiary is the country’s biggest exporter, has decided it will stop using SA as an export base to Europe at the end of the decade. The main markets are all going electric, but without local demand for products there is no point in investing in EV products.

Instead, VW Africa, the Eastern Cape-based manufacturer, will shift its export focus to Africa and other electric-shy regions. The only way to persuade local consumers to go electric, particularly for BEV products, is to make it worth their while. It still costs considerably more to build a BEV than an ICE vehicle and this is reflected in prices. In most major markets worldwide, governments have offered financial inducements to make the BEV switch.

Kick-start

These have included tax breaks, exemption from motoring charges and inflated buyback values for ICE vehicles replaced by BEVs. These were all intended as temporary measures, to kick-start BEV adoption. Demand growth has slowed considerably almost everywhere once these incentives are withdrawn. SA has steadfastly refused to offer consumer incentives.

Patel insisted the country simply can’t afford it. In his February budget speech this year, finance minister Enoch Godongwana estimated that the 2026 BEV manufacturing incentive would cost R500m in the 2026/27 tax year. That figure is certain to increase if more companies switch from ICE.

But will they? So far, Toyota SA builds traditional hybrids, and Mercedes-Benz SA, BMW SA and Ford Africa have all undertaken limited production of plug-in hybrids. The international Toyota group has argued that governments should be less obsessed with BEVs and more accommodating to all forms of new-energy vehicles, including hybrids and hydrogen.

Kirby said no formal contact had been made yet with Tau on the issue but that it was incumbent on the industry to try to change white paper policy.

Without incentives for multinationals to invest in EVs beyond BEVs, the local vehicle manufacturing industry could shrink — an unthinkable prospect while it was at the forefront of efforts to reverse a general deindustrialisation of the SA economy.

Volkswagen Africa MD Martina Biene said current proposed EV policy was short-sighted. No-one would want to invest in a country in which local consumers had no interest in buying its products. “We have to try to persuade the new minister to look at this policy again,” she said.

furlongerd@businesslive.co.za

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