MARK RAINE: High EV import duty blocking industry transition

For decades SA has held the enviable status of being Africa’s biggest vehicle market by sales and exports. As a leader of one of the luxury automotive brands in SA, one of my many responsibilities is to maintain, if not exceed, this status quo.

To achieve this, one must look beyond the confines of this market. If we do not take care to look beyond our immediate challenges, we risk missing the transformation that is sweeping the global automotive industry and all the opportunities that come with it. 

According to Bloomberg, if you include plug-in hybrids (PHEVs), electric vehicle (EV) sales more than doubled globally in 2021 to almost 10% of the global market, with 70% of those sales being battery-electric vehicles (BEVs).

According to the International Energy Agency (IEA), more EVs were sold weekly in 2021 than in the whole of 2012. In the last quarter of the year, 9% of all new cars sold globally were pure BEVs, and in Europe, BEVs outsold diesel cars in December 2021 and made up 12.5% of all new cars sales in the first half of 2022. 

Luxury brands are at the forefront of this automotive revolution. It is only natural that the company that invented the car, Mercedes-Benz, is at the heart of an industrywide disruption that will deliver clean and safe mobility. By 2030, and where market conditions allow, we will only sell zero-emissions vehicles, and that means here in SA as well. That’s how we deliver on our net-zero emissions promises, and do our part to stick to the targets of the Paris agreement. 

In every way, electric cars represent an improving technology. They are cleaner in terms of the air we breathe and produce fewer greenhouse gas emissions in any energy environment. It is easy — too easy — to dismiss the technology as redundant in SA because of our energy constraints. In fact, EVs will help flatten the typical energy demand curve and, in time, assist energy companies plan their future. 

Natural step

Mercedes-Benz is a global brand and our customers are connected to international networks and trends, care deeply about the environment and expect the cars they buy to have the latest and best technologies as standard fit.

In SA, some of our first-time EV buyers have two concerns — driving range and battery longevity. Every new BEV we sell will come with a free wallbox charger installation at home (or wherever the customer prefers), a free battery health check twice a year and an eight- or 10-year battery certificate, dependent on the Mercedes-EQ model chosen.

Our research also tells us that many of our customers and those in this segment are off the grid, and that many more plan to follow.

Electric mobility is a natural next step for our customers and the technology for the automotive industry’s future. That’s why, despite the challenges, we’re committed to the EV revolution in SA and why, by 2026, we’re planning for half our volume to be made up of BEVs.

Looking elsewhere, it can certainly feel that SA is behind the curve on the electric transition. That’s not always a bad thing; we can avoid the expensive mistakes and dead-ends that have been made in some developed markets, while enabling the electric transition through price parity for EVs, charging infrastructure coverage to cater for a growing car park and a holistic ecosystem to service for the needs of electric vehicles, such as first-responder training and aftersales services.

We have now reached a time where it is critical to act.

Job creation

The additional import duty EVs attract at the border is becoming unbearable. It is drifting into the realm of the absurd that I can import a V8 SUV or V12 sports car into this market that attracts an 18% border duty, while paying 25% for an electric Mercedes-EQA. Unequivocally, SA’s automotive industry will be unable to transform until this is addressed.

We are fortunate to have missed the expensive and early days of limited battery range and slower charging speeds some early adopter markets experienced in the electric transition.

A thriving local EV market holds the promise of sustainable economic development, local content, job creation and the advancement of the local green economy.

Now, on the national level, we need to urgently look at making sure that charging infrastructure is widespread and its rollout is co-ordinated and strategic, ensuring that the right equipment is in the right place. Getting this right and developing a holistic EV ecosystem, inclusive of aftersales support, will be industry- and jobs-positive, allowing motor companies, dealers and customers to move into an electric future with confidence.

As global sales figures illustrate, demand for electric cars has outstripped even the most optimistic forecasts. I believe that this is because many analysts sensibly focus on critical topics such as the environment (a key concern for Mercedes-Benz), emissions regulations, and their role in the electric transition. Perhaps insufficient thought has been given to the usability and the superiority of the technology in making EVs so appealing. It seems we forgot to plan for people to buy electric cars because they are great to drive.

Our global experience — that we cannot build EVs fast enough — has been playing out here too. We have sold everything we can get, and order books for future Mercedes-EQ models are as healthy as those for our traditional cars. I am confident that reaching tax parity across the ICE and BEV technologies is something all local manufacturers can agree on. Any discussions about possible incentives should come after parity has settled into the market. With EVs approaching total cost of ownership parity with traditional cars in other markets, it’s my hunch that when this happens EVs will sell themselves anyway.

The transition to an EV automotive market bears many opportunities for SA. We have now reached a time where it is critical to act by laying the foundation for this inevitable transformation.

Raine is co-CEO of Mercedes-Benz Cars and executive director: Mercedes-Benz SA.