Calls for government to finalise SA’s new energy vehicle policy Asap

South Africa needs to look beyond just the production of new energy vehicles (NEVs) and stimulate demand for them – and there must be price parity between the import duties charged on these and internal combustion engine (ICE) vehicles, says Mark Raine, co-CEO of Mercedes-Benz Cars and executive director of Mercedes-Benz South Africa (MBSA).

Raine says there is also a need for the government to finalise its policy for NEVs as soon as possible.

The government in May 2021 published an Auto Green Paper on the advancement of NEVs in South Africa, with its stated aim being to finalise the strategy within 90 days to allow the policy proposals to be submitted to cabinet for consideration by October 2021.

Almost a year has passed since the latter date – and the strategy itself has not been finalised.

Raine and Mikel Mabasa, CEO of automotive business council Naamsa, both told a panel discussion on ‘South Africa’s Electric Automotive Future’ on Wednesday that discussions are still taking place with original equipment manufacturers (OEMs).

Mabasa says the government has been saying very consistently that it is consulting with stakeholders and is talking to OEMs individually.

“Government has been procrastinating [on this] for far too long.

“The consultations and the things they have done up until now do not justify the amount of time they have taken to get us where we are,” says Mabasa.

“We have not seen anything that says this is the direction they want to take.”

Read: Is SA definitely headed in the new energy vehicle direction?

He says Minister of Trade, Industry and Competition Ebrahim Patel has indicated that the government is focusing on manufacturing-led interventions and wants to support manufacturing in particular so that South Africa retains and does not lose its manufacturing base.

“But at the same time we don’t think you can do that exclusively and not also stimulate demand for vehicles.”

‘Put things in place’

Raine says MBSA’s request is for government to put the policies and framework in place and it will work with it, although it is also absolutely essential that the policy also makes provision for the supply industry, including tier 1, 2 and 3 suppliers and the battery industry.

With South Africa at the southern tip of Africa, far from the major global markets, the domestic vehicle manufacturing industry needs a strong supply base in the country, he says.

“Plus you do not turn a blind eye to the market – which means [import duty] price parity, infrastructure in the country, and a holistic approach to the ecosystem to drive local demand because you can’t be an EV production hub and not have any EVs in the country.

“That doesn’t stack up,” he says.

Electric vehicles (EVs) are subjected to import duties of 25% while import duties of 18% are paid on ICE vehicles.

“I don’t understand how the taxation on an electric vehicle can be higher than an internal combustion engine vehicle.”

Raine believes it is inevitable that price parity will come and says the government could address this issue before finalising its NEV policy.

“It’s more that they want to do it in one big wash rather than in bite-sized chunks, but I think there is a clear understanding that it is a necessity.”

Read: Mercedes-Benz SA opposes plan for electric vehicle subsidies

He counters suggestions that consumers have to pay a 50% premium to buy an EV, which makes them only for “the elite” and stresses the need for EVs to be considered in terms of total cost of ownership rather than the initial purchase price, particularly as the largest monthly cost item with ICE vehicles is fuel.

Raine maintains that it is cheaper to run an EV than an ICE vehicle.

Government’s ‘biggest concern’

Malebo Mabije-Thomson, an acting director-general in the Department of Trade, Industry and Competition, says it is important that the transition to NEVs not be led by the importation of EVs into the country because this will lead to job losses.

She says there is a need for domestic vehicle production volumes to be maintained, adding that government is working with OEMs and component manufacturers to make sure the transition favours South Africa.

The government wants a balance between EVs and ICE because there is a need to provide both in the market and the biggest concern is the potential for job losses, she adds.

Mabaso, while admitting there may be areas in the automotive value chain that will disappear, says a large part of what is produced in South Africa will still be required for EVs. “There is not a risk of wiping out the entire value chain in South Africa.”

Lead, or play catch up?

Collins Makhado, a director at KPMG responsible for strategy, people and change, doesn’t believe there is sufficient foresight of the new reality and what is coming, particularly as there will be winners and losers.

He says all factors need to be taken into consideration to determine which parts of the value chain will disappear, and to be prepared for this.

Raine says SA as a country needs to “play to win” – it must focus on and grab the production and market opportunities rather than looking at risks and job losses.

Mabasa points out that South Africa’s tax base has not been reviewed for a long time and that 42% of the price paid for a new vehicle goes to the fiscus through a basket of taxes, including value-added tax, ad valorem tax and the tyre levy.

“As soon as you bring down vehicle prices, the sooner you will stimulate demand.”