EDITORIAL: Act now to protect the motor industry

SA’s automotive industry is constantly held up as a shining example of what smart policy can achieve in other sectors, such as mining. It has attracted billions of investments and created tens of thousands of jobs. It has also boosted our exports and supported much downstream activity.

But the economics of exporting to the EU was shaken up when the bloc agreed on a carbon border tax in late 2022. This policy will make foreign importers pay for their carbon emissions associated with the product that is being imported into the EU — an alarming development for local exporters who use carbon-heavy Eskom power.

Worse still, late last month the EU — one of the largest markets for SA vehicles accounting for almost a quarter of total exports — set a 2035 date to wind down the sales of new passenger vehicles with internal combustion engines. The policy remains contested, but EVs made up almost a quarter of all new car sales globally last year. No matter what policy the EU adopts, a relevant auto manufacturing hub needs to be able to build EVs.

These developments should spur SA to align its automotive policy with the global shift to EVs. The stakes could not be higher: The auto industry is the single largest manufacturing sector of the economy with a 17% slice of the pie, contributes anything between 4% and 6% of GDP, employs more than 30,000 people directly, and exports R200bn-plus worth of products. Add adjacent support industries such as finance, logistics and insurance, and the numbers are staggeringly high. 

The auto industry is crying out for a clear and coherent EV policy. Last week, Ford Africa head Neale Hill warned against complacency, telling an industry conference that those who thought multinational companies such as Ford are so embedded in SA that they will not leave could be in for a rude awakening.  Not long ago, Peter van Binsbergen, the CEO of BMW SA, said the next generation of the German car company’s output at its assembly plant in Pretoria must include electrified models to retain its share of the export market.

The sobering upshot is that auto manufacturers will go where the balance of labour, logistics, energy and other costs are most favourable — revealing a potentially frightening scenario that could punch a devastating hole in important cities such as Durban, Pretoria and Gqeberha — and potentially toss thousands of people into poverty. 

But instead of acting swiftly to update its policy and map out an EV plan, the government has been dragging its feet. It was supposed to publish a white paper on EV strategy in 2021, but it has not done so yet. Trade & industry minister Ebrahim Patel said on Friday that his department would finalise the strategy by March 2024. That is not good enough. The industry needs a strategy now, not in the next year.  

We still have a chance to secure our globally small but domestically important position in the fast-evolving global auto manufacturing market. But that opportunity is slipping away, and we need to act fast and act smart. The future of this vast industry and an anchor tenant of our industrial economy depends on it.