SA drives ahead with policy framework to support local new energy vehicle assembly

The government is driving ahead with the development of a support framework for new energy vehicles (NEVs) that includes the production of electric vehicles in South Africa and the components that go into them.

Department of Trade and Industry and Competition chief director for automotives Mkhululi Mlota confirmed this during a recent presentation to the parliamentary select committee on trade and industry, economic development, tourism, employment and labour.

It follows Minister of Trade and Industry and Competition Ebrahim Patel on May 21 publishing a green paper on the advancement of new energy vehicles in South Africa.

The aim is for the strategy to be finalised within 90 days following the gazetting of the green paper to allow the policy proposals to be submitted to cabinet for consideration by October.

Difficult, expensive, necessary

Mlota admitted that NEV technologies are quite difficult to get into because the technologies and products are expensive, but said it is important that South Africa is not left behind, otherwise the local automotive industry might find it does not have a large enough market to supply. The demand for NEVs in South Africa would then be met through imports.

The idea is to localise the production of NEVs so that South Africa’s automotive industry will be able to continue to supply both the export and local market, he said.

Mlota added the department understands that with any new technologies, original equipment manufacturers (OEMs) can place investments elsewhere and where there is “quite significant support” for such developments, such as China and Europe.

“China is pumping serious resources into the development of EVs [electric vehicles],” he said.

Mlota said electric vehicles are already being imported into South Africa and are on the country’s roads, including the Nissan Leaf, BMW i3 and Jaguar I-Pace.

“There are more that are coming in but our interest is on localising the production of those vehicles and their components in the country,” he said.

Mlota said the department is looking at developing a new energy vehicle road map flowing from discussions that led to the publication of the green paper.

Read: Government takes first step toward mapping out electric vehicle strategy for SA

“The idea is that shortly we should have a firm policy on how we are supporting electric vehicles, not only their distribution but local manufacturing,” he said.

Mlota said the department is largely looking at electric vehicles but the policy will include hybrid vehicles too, and possibly also fuel cell vehicles.

He stressed that alignment of policy is key, which is the reason the work on NEVs includes other stakeholders, such as the Department of Science and Technology and educational facilities such as the Nelson Mandela Metropolitan University and its uYilo e-Mobility Programme.

This programme was established in 2013 as an initiative of the Technology Innovation Agency to enable, facilitate and mobilise electric mobility in South Africa.

Mlota said it had also inherited some of the products and machinery that was made by Optimal Energy when it was attempting to develop an electric vehicle, the Joule.

He said the department is also working in close cooperation with Eskom, which is studying the impact of electric vehicle fleets on the electricity grid.

Regulatory certainty needed

Mikel Mabasa, CEO of automotive council Naamsa, said during a virtual Indo Africa Summit panel discussion on electric vehicles in March that many global multinational automotive companies need regulatory certainty about where South Africa is moving and what its position is on EVs.

“It’s a very big deal for us because we produce vehicles that in the main are going into Europe. We export 64% of what we are producing in South Africa and three out of every four vehicles that is exported goes into Europe.

“Many European countries have already given us notice so we know for a fact that in the next nine to 15 years those vehicles [produced in South Africa] will not be going into those markets, which will have massive implications for our production capacity.

“The time for procrastination has come and gone,” he said.

“We need to now firm up and make decisions that are firm [on EVs].”

Mabasa told Moneyweb last week that the government responded to the threat posed by the acceleration of the global automotive industry to NEVs through the publication of the green paper.

“That process has also addressed some of the concerns we had and we are very confident that through that process that issue will also be managed properly,” he said.

Component manufacturers

National Association of Automotive Component and Allied Manufacturers (Naacam) executive director Renai Moothilal said the work being done to further unpack how the automotive sector transitions to NEV production is of interest to component manufacturers.

Moothilal said Naacam believes that any additional or new policies that are developed to support any NEV production in South Africa have to be anchored in the wider objectives of the Automotive Masterplan and, for component manufacturers specifically, the need to grow localisation in the NEV space.

“The South African component space is one that can adapt to new production methodologies and technologies and for our membership it will be a simple case of being able to understand what that assembly outlook is like and respond accordingly.

Localisation

“It’s really important that as we transition to NEV production … we always keep at the back of our minds the localisation objective,” he said.

Moothilal stressed that one of the reasons Naacam believes so strongly that component suppliers should be able to respond to any change in assembly requirement as a sector is because South Africa currently is not a significant producer of a particular powertrain technology, such as engines or transmission, which are typically imported.

“But if there is a change to NEVs, we should not assume that the component production base in South Africa is not ready to take advantage of all other systems of production.

“I see no reason why we cannot quite easily transition into whatever the main propulsion technology is for future platforms,” he said.

SA’s mineral resources advantage

Moothilal added that South Africa has significant advantages in terms of the mineral resources that are required for the production of battery packs or for NEVs.

“There is a huge opportunity for us as a country and we should ensure that we push for as much localisation of these new platforms as possible because we have, in theory, got a sufficient base of supplies that can end up producing these different technologies.

“It will be travesty if we don’t find a way of doing that,” he said.

Moothilal said some Naacam members are already exporting sub components into global NEV assembly platforms and organically transitioning into products that will eventually become electric vehicles.

“It’s easy to say we [South Africa] don’t have the skills or technology … but the reality is these things are happening and we should be smart in how we expand access for others into these kinds of markets,” he said.

Naamsa and Naacam both confirmed that they have already submitted their comments on the green paper to the department.