As SA export markets steer car manufacturers away from fossil fuel-based transport, our policymakers in the trade & industry department need to move with speed to position the local car manufacturing industry for this transition.
In an interview with Business Day a week ago, Peter van Binsbergen, the CEO of BMW’s SA division, said the next generation of the German car company’s output at its assembly plant in Pretoria must include electric models to retain its share of the export market.
To put it bluntly, it would be almost impossible to defend the economics of keeping the Rosslyn plant running when the cars it is churning out are no longer needed in the European market, where the commercial logic is greatest.
BMW exports more than 95% of X3 cars built at the assembly plant, which has annual capacity for 76,000 vehicles, and all use the traditional internal combustion engine (ICE) powered by petrol or diesel.
Some of the vehicles are shipped to the UK, which recently unveiled plans to ban the sale of new petrol and diesel cars from 2030. Other countries in Europe and elsewhere in the world have pitched the idea of blocking the sale of petrol or diesel powered vehicles by the end of the decade.
Just as with coal and other fossil energy sources, the market for the ICE cars is in irreversible decline. That has set off a race by carmakers such as BMW, which wants at least half of its global sales to be zero-emission vehicles by 2030.
Our automotive industry policy, which has for years been an example of what can be achieved in sectors such as mining with coherent, investor-friendly messaging, needs to reflect these global shifts. There is a lot at stake. The auto industry contributes more than 6% to GDP and employs more than 100,000 people. The numbers are much higher considering the sector’s value chain, including finance, insurance and logistics.
The value of exports topped R200bn in 2019 — making up almost 16% of all SA exported products. But this could drop to about R40bn by 2040 if the plants are not adapted to the growing demand for electric vehicles, Mike Mabasa, head of the industry body group Naamsa, has warned.
To keep this vast industrial base intact, the latest version of the automotive master plan, which comes into effect in June, and runs until 2035, should take into consideration bets by the industry against the fossil-fuelled cars.
In its current format, SA risks being left behind as one of the suppliers of cars to developed countries because it focuses on increasing the output of diesel and petrol cars from about half a million now to 1.4-million units by 2035. There are no specific goals for electric vehicles (EVs).
It is incomprehensible to set goals to increase output of fossil-fuelled cars when our export markets are moving in the opposite direction. The global sales of EVs increased from 540,000 to 3.24-million units between 2015 and 2020.
We cannot count on Sub-Saharan Africa to take up the slack when Europe starts banning the sale of these cars because most consumers in the region, especially after the pandemic put millions of them into poverty, cannot afford a new car.
As the start date for the automotive master plan looms, policymakers should make necessary changes to reflect trends in its export markets. One of them should be to incentivise the take-up of EVs in the country by removing duties on imported cars as is the case in other countries. In nearly all markets in which demand is growing, governments offer purchasing incentives, including duty rebates.
We do the opposite by penalising buyers of EVs. While an ordinary car attracts an 18% import duty, an EV is hit with 25%.
Another change would be come up with a carrot to encourage more companies to follow in the footsteps of Mercedes-Benz SA, which builds hybrid cars for export, and Toyota, which has said it will start assembling its own later this year.
The automotive industry policy is at the heart of President Cyril Ramaphosa’s plans to revive the flagging economy but it urgently needs to be updated to reflect a climate-conscious world.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.