South Africa has been manufacturing hybrid EVs for a few years now. Last November, the government released an EV plan championing the idea of producing pure EVs in the country. The plan included various policy drives, such as a temporary reduction on import duties for batteries in vehicles produced and sold domestically, and boosting grid capacity to support EV uptake. The following month, trade minister Ebrahim Patel announced that South Africa will likely manufacture its first pure EV in 2026.
However, momentum appears to have slowed. Making EVs did not feature as a significant issue during the national elections in May. Though Patel remains trade minister, the new coalition government is yet to state its position on the issue.
The country’s car industry appears cautious on EVs. Some executives have said they will continue to focus on making cars with internal combustion engines (ICEs) due to a lack of export demand for EVs. Amid these challenges, and with less than two years to go, can the country and new government realise the goal of pure EV production?
Incentivising EVs
Despite the seeming pause on political discussion of the issue, several factors may yet drive progress towards an SA-manufactured EV. One is burgeoning national demand. In the first quarter of 2024, South Africa’s car makers’ association NAAMSA reported a nearly 83% year-on-year increase in sales of electric and hybrid vehicles.
The country has also been making broader moves to incentivise the shift towards cleaner energy. In 2019, the government implemented a carbon tax targeted at heavily emitting companies. In 2021, it signed a USD 8.5 billion Just Energy Transition Partnership agreement with wealthy nations to boost the clean energy transition, including by developing an EV industry.
The attitudes of trade partners are changing. The EU, South Africa’s largest automotive export market, aims to achieve carbon neutrality by 2050, and from 2035 sales of new ICE vehicles will be banned there. Bobby Peek is director of Groundwork, a South African environmental justice non-profit. He told Dialogue Earth that auto makers need to transition towards EV manufacturing “to preserve export market access and aid in decarbonising the South African transport industry.”
Finance Minister Enoch Godongwana proposed a new subsidy in his February budget speech to encourage EV making in South Africa. For a year from March 2026, manufacturers would be able to claim from the government 150% of any investment they make into electric and hydrogen-fuelled vehicles. This move is expected to cost the government about ZAR 500 million (USD 26.4 million), Godongwana said. The government hopes to “transition the automotive industry from primarily producing internal combustion engine vehicles, to a dual platform that includes electric vehicles,” he added.
In the budget, the government also “reprioritised ZAR 964 million (USD 50.8 million) over the medium term to support the transition to EVs.” But the exact policy mechanisms have not yet been specified, and are a task for the new coalition government.
Challenges remain
Despite the various incentives offered to manufacture EVs in South Africa, there is scepticism among local subsidiaries of big auto companies. In June, Volkswagen indicated that expansion of its operations in the country was limited by power outages, Bloomberg reported.
Power shortages due to ageing grid infrastructure and inefficiencies at state power company Eskom pose a significant challenge. The company’s load shedding has for decades resulted in frequent blackouts, which manufacturers have blamed for causing productivity losses.
It also discourages drivers from purchasing EVs, says Theo Malele of the National Taxi Alliance. “The whole concept of electric vehicles is appealing only when there’s a constant and regular electricity supply, which is a rare commodity in this country,” he said.
Sufficient production capacity in Europe, and lower transport costs there, meant that Europe would not call on South Africa to produce EVs, Martina Biene, chairperson and managing director of Volkswagen South Africa, told a conference in Gqeberha, Eastern Cape province, as Bloomberg further reported. She indicated that the company would instead likely focus on selling ICE cars domestically and to other African nations.
The carmaker indicated in April that it has no plans to manufacture EVs in South Africa until 2035 – nine years after Patel’s goal.
A role for China?
In the face of these challenges, South Africa has been seeking an ally in its largest trading partner, China. On a visit there in March, trade minister Patel met EV automakers and battery producers looking to invest in EV factories in South Africa.
The trade delegation held meetings with big players in the global EV industry, including Shanghai Automotive Industrial Corporation, BYD, Foton, and BAIC Group. BYD has reportedly been in talks to open a new factory in South Africa after entering the African market in June 2023. Patel’s visit came months after an agreement was signed by President Xi Jinping to stimulate “increased industrial investments from China into South Africa”, with a focus on sectors including EV manufacturing.
But companies themselves have remained tight-lipped about such possibilities. When asked about potential EV engagement with the South African government, Ben Fouché, deputy director at BAIC South Africa, told Dialogue Earth that shareholders “do not want to share the company’s plans at this time”. BAIC opened a car plant in Gqeberha in 2016, as a joint venture between the company and the South African government, with a model of petrol vehicle being assembled as of early 2024, although reportedly in small numbers.
Despite the multiple challenges, some South African experts remain optimistic about the country making a pure EV, citing the country’s existing car-building infrastructure and skilled workforce.
South Africa is “well-positioned to become a significant player in the electric vehicle manufacturing industry”, says Marteen Kamper, a professor from Stellenbosch University’s electrical engineering department. “By investing in research and development, forming strategic global partnerships, and receiving robust government support, we can not only boost our economy but also contribute to global sustainability efforts.”
This article is republished from Dialogue Earth with permission granted through a Creative Commons license. Read the original article published August 1, 2024.
