DAVID FURLONGER: Why South Africans aren’t buying electric vehicles
But things will get better for car buyers (after getting worse)
As President Cyril Ramaphosa was being paraded around London this week in a horse-drawn carriage, I wonder if it crossed his mind that with the South African economy in crisis, half the population unemployed, disposable income shrinking and fuel prices almost out of sight, this was a foretaste of how South Africans will travel in the future: a return to four-legged horsepower instead of the automotive kind?
Politicians, naturally, will be drawn in golden carriages like the one Ramaphosa shared with King Charles — a sort of equine waBenzi. For most of us, a wooden donkey cart is probably the best we can hope for — exposed to the elements and shorn of all the comforts we take for granted, like airbags, cruise control, windscreen wipers and heated seats.
All is not lost, however. WesBank CEO Ghana Msibi reckons we’ll be able to afford something better in a couple of years. After a further period of intensified consumer belt-tightening, including more interest rate increases, he thinks the economy will “normalise” in 2024 and that new vehicles will become more affordable.
I’m not sure what “normal” is in the South African context but I’m assuming it’s better than what we’re seeing now.
To be fair, the new-vehicle market has done its damnedest to be normal in 2022. After a sprint start to the year, it has struggled to maintain momentum, but it’s still doing much better than it did in 2021. Though hopes are dying that it might return this year to pre-Covid levels, it has outperformed many forecasts.
It’s too soon to guess with any certainty what 2023 will bring but Naamsa, in its latest quarterly briefing published last week, thinks combined sales of new cars and commercial vehicles will hit 464,493 this year, then 505,000 in 2023. It’s a sign of our uncertain times that a senior market analyst for a major manufacturer thinks 490,000 is a more realistic 2023 target.
To put these numbers in perspective, the 2019 market was 536,612. Five years earlier, in 2014, it was sitting at 644,257.
The market this year would have been stronger but for shortages of vehicle components that left motor companies unable to fulfil thousands of orders. Most notable among these have been semiconductor microchips, leading to the nonproduction of millions of vehicles worldwide.
Msibi, who describes himself as a “quintessential optimist”, believes the worst will soon be over. He says: “We expect the supply shortage of certain automotive components such as semiconductors to improve in the medium term and for the current logistical turmoil in the world to ease, together with lower shipping costs. These developments will help world economies, including South Africa, by cutting operating costs.”
What he does not expect to see is the government agreeing to consumer and industry appeals for duty and tax cuts on new vehicles, to make them more affordable. Given its “constrained” finances, where will it find the money to make these concessions, he wonders.
It is already struggling to fund proposed incentives for the transition to electric vehicles (EV). Trade, industry & competition minister Ebrahim Patel recently indicated that the government has dropped plans to offer direct price incentives to EV buyers, and will focus instead on manufacturing incentives.
This hasn’t stopped George Mienie, CEO of online vehicle retailer AutoTrader, from repeating his plea for duty cuts on imported EVs. He wants South Africa to copy Australia, which has just approved legislation exempting EVs from import tariffs and fringe benefits tax. There is also talk of converting the entire Australian government fleet to EVs.
Behyad Jafari, head of Australia’s Electric Vehicle Council, describes the decision as “a landmark moment for EV policy in Australia”.
Copying Australian automotive policy is not always wise. Had South Africa followed advice and done so a few years ago, the South African motor industry would no longer exist. Having reduced import duties on all vehicles to rock-bottom levels, the Canberra government seemed surprised when every major vehicle manufacturer disinvested because it was cheaper to import vehicles than to make them locally. By the time Australia woke up to the consequences, it was too late.
Nevertheless, there’s little doubt that South Africa must do something to shake up the local EV market. Naamsa reports that in the first nine months of this year, 3,092 EVs were sold in South Africa. That’s a big leap from the 898 sold in the whole of 2021, and 324 in 2020, but utterly insignificant in the global EV market.
The 3,092 includes 2,638 plain hybrids — mainly South African-made Toyota Corolla Cross cars using dual petrol and electric motors — a number that would have been greater but for the four-month shutdown of the Toyota plant because of flooding.
That leaves just 454 plug-in EVs sold in 2022. However hard EV advocates push their benefits, it is clear that, apart from the high price, South African motorists are still nervous of relying on Eskom power for charging their EV batteries. Solar power remains a minor factor for now.
Load-shedding, lack of diesel to run power stations, and recent warnings that electricity shortages will last for at least another five years (those are the optimistic forecasts) are powerful deterrents. EV buyers need incentives, not disincentives.
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