THABANG MAHLANGU: SA journeys towards electric vehicle transition
Focusing on more affordable EV segments will be the key to unlocking mass adoption
The automotive industry is a cornerstone of the SA economy, contributing 5%-6% to GDP and 30% of the country's manufacturing output. In addition, 15% of total exports stem from this sector. Within this industry there is a network of component manufacturers, original equipment manufacturers (OEMs), distributors, dealers and aftermarket service providers.
The SA storyline offers a fascinating subplot as the global automotive narrative shifts towards electric vehicles (EVs). Unlike their counterparts in the developed world, emerging markets such as SA may see the harmonious coexistence of EVs and traditional internal combustion engine vehicles for some time.
However, this transition is not without its challenges. A structured policy and incentive mechanism will be the linchpin to woo OEMs into investing in local EV production lines. And for this the business case must be compelling.
An aspect that must be considered is the export-orientated nature of SA vehicle production. The majority — more than 60% — of the vehicles produced in SA find homes on foreign shores. Interestingly, an enormous 73% of production caters for the UK and EU markets. With these regions’ escalating policy pronouncements for EVs, it has become imperative for SA to attune its production strategies to these shifting sands.
After all, the clamour for EVs transcends mere environmental concerns; the economic ramifications for SA’s vehicle manufacturing sector cannot be overemphasised. The introduction of luxury EV models by OEMs to the SA markets is commendable, yet focusing on more affordable EV segments will be the key to unlocking mass adoption.
With their sheer volume, value chain players such as the government and large fleet owners can act as significant change agents. By embracing EVs in their fleets these giants can considerably expedite EV adoption in the SA setting.
Sub-Saharan Africa is rich in essential minerals such as cobalt, manganese, graphite and lithium, all pivotal to the EV revolution. However, while the mineral wealth positions the region advantageously, harnessing this potential isn't without its challenges. Reliable power, streamlined logistics, robust infrastructure and effective beneficiation processes are all critical. The Africa Continental Free Trade Agreement (AfCFTA) offers a collaborative framework, creating a regional edge.
Investors around the globe place a premium on policy stability and continuity. They naturally lean towards areas offering a favourable environment for their investments. Intriguingly, even in places marked by perceived political uncertainties, such as Democratic Republic of Congo, the allure of high-quality resources still draws continued investor support. Considering that a complete shift to EVs isn’t on the immediate horizon, both traditional vehicles and EVs will find their space under the SA sun. As such, policy-making should be inclusive, ensuring every stakeholder feels represented.
Given SA’s impressive vehicle exports, the nation boasts a production capability that aligns with international quality standards, a testament to its top-tier automotive manufacturing that routinely matches global benchmarks. We understand the economic value of sustainable practices within the automotive sector. We strongly support the just transition and remain committed to navigating the evolving landscape alongside our stakeholders and clients as the EV transition gains momentum.
SA stands as a key player in the Sub-Saharan Africa EV mineral supply chain, by leveraging its rich mineral resources, international manufacturing standards and the finalisation of EV policy and incentive frameworks. However, mere reliance on natural resources endowment isn’t the only piece of the puzzle; it’s the proactive integration of these assets with strategic planning that makes the difference. The nation’s domestic automotive industry not only serves as a foundation for major OEMs eyeing African expansions but also underscores SA’s strategic geographic importance in the global automotive supply chain.
In the EV ecosystem collaboration between stakeholders including regulators, industry bodies, OEMs and financial institutions, among others, is essential to achieve comprehensive progress. Financial institutions play a critical role by offering financial mechanisms supporting green transitions and actively engaging with various industry bodies. Furthermore, understanding client insights is paramount to navigate the dynamic EV domain. Adopting financial instruments that align with green initiatives and integrating client insights can provide a road map for the ongoing transition in the automotive industry.
SA is on the brink of a transformative shift in the automotive sector. The journey forward presents both challenges and opportunities. Through collective stakeholder efforts, a dedication to sustainable mobility practices and an understanding of the fiscal impact, SA can navigate a path that merges economic growth with environmental responsibility.
• Mahlangu is sector lead for automotive, transport, freight & logistics at Nedbank Corporate & Investment Banking.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.