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JIMMY MOYAHA: Some weeks ago, around early July, I penned an article for Moneyweb around the EV space and what electric vehicles could potentially mean for South Africa. A couple of EV producers locally, but also companies like BMW and BYD are looking to move their production lines into South Africa. I made a business case to say that that could potentially be an area of investment and opportunity for South Africa to take advantage of, especially in the global context. I’m joined on the line by Thesele Mampane, an investment analyst at Futuregrowth, to take a look at the EV market.
Good morning, Thesele. Thank you so much for the early morning. Where do we stand on EVs? In 2021 we were confident, we were told by the government this is what’s going to happen, this is what we’re putting down on paper. We’re going to go EVs as part of a Just Energy transition. Where are we at the moment?
THESELE MAMPANE: Good morning to you, Jimmy, and to the listener. Yes, you’re right. In 2021 the government put together a green paper sort of outlining a strategy aimed at positioning South Africa at the forefront of production of EVs and components. Since then there hasn’t been much movement from the government’s side. There have been utterances from the minister of Trade and Industry that they aim to finalise an EV policy sometime this year.
So that’s where we are at the moment. We’re sort of waiting to get that directive in terms of policy framework from the government. But, like you’ve mentioned with the likes of BMW wanting to make an investment into South Africa, I think from the manufacturer’s side the ball has been set. The manufacturers, the companies, all the various stakeholders within the industry are ready to go ahead, but they just need this direction from the government to know [its] stance in terms of putting in place this policy framework.
JIMMY MOYAHA: But why is our government so bad with implementation? Thesele, let’s look at this EV space. How big is the space? We know that the automotive space in South Africa already is such a significant contributor towards the overall manufacturing that happens in South Africa. But what is the potential if we are to get this right from an EV space?
THESELE MAMPANE: The potential is quite big because at the moment the industry contributes about 4% to our GDP. And if you look at the data that’s being put out by the National Association of Automobile Manufacturers of South Africa, about 40% of vehicles that are manufactured in South Africa are exported to overseas markets – and 40% is quite a significant number.
Our largest export market is Europe. But then if you look at where they are in terms of legislation around internal combustion engines, they are actually targeting phasing them out by 2035. So if we are to be able to service that market, then we need to make sure that our local industry is positioned to take on these new changes that are happening around us.
JIMMY MOYAHA: So what do we need to do in the interim? You alluded to the fact that industry in South Africa and companies are already on their side, but what needs to be done? Do we need finality on certain policies? What are the steps that, one, government needs to take? But, two, in the event that government delays, what is industry going to be doing in the meantime?
THESELE MAMPANE: I think from an industry point of view it’s a bit difficult because the local companies, the local manufacturers are dependent on investments from their parent companies to be able to take on changes in their manufacturing focused around EVs. So on their part, that policy directive is quite important.
But then, in order for us to be able to sort of take advantage of this new shift, we have to look at it from both the demand side and the supply side.
I guess from a demand side there needs to be a focus around incentivising domestic demand for EVs as well. One of the key stumbling blocks as well for domestic EVs is the price disparity between EVs and internal combustion vehicles.
At the moment EVs are out of reach for many people, so we need to deal with that price discrepancy between EVs and internal combustion engines. At the same time measures need to be put in place in terms of developing widespread charging infrastructure across the country, so that people can get over some of the issues around range anxiety associated with driving EVs.
So the demand side is one side of it, but also on the supply side as well we need to support the shift towards South Africa manufacturing EVs. This can be done by protecting and strengthening the manufacturing industry and just looking at EV subsidies and alignment in terms of import tariffs. There are a number of levers that can be pulled on both the demand and supply side to help support this shift.
JIMMY MOYAHA: A lot of what you’re saying [is] around the regulation and all the things that need to happen there. It sounds like a lot of it sits with the government, especially if you look at things you mentioned around the difference in pricing. If I remember correctly, the internal-combustion engine import duties and the tariffs on those were significantly lower than those of EVs. That’s what a couple of the EV manufacturers were also complaining about, saying that that’s part of the reason it becomes so difficult to have EVs come into the market.
Let’s look at this infrastructure point before you leave, Thesele. We’ve looked at the fear around ‘Hey, are there going to be enough charging stations?’ and that sort of thing. But what areas should we be taking into consideration when it comes to infrastructure, because obviously it’s not just about the charging stations, it’s also about the manufacturing line or whatever it is locally. There’s infrastructure we need to have in South Africa to facilitate the smooth running of these vehicles – even for South Africans.
THESELE MAMPANE: Yes, you’re correct. I think in terms of right-fitting the production facilities that are in place, that is largely dependent on the companies or the manufacturers having confidence that putting their money and investment into right-fitting their facilities will be met by sufficient demand to justify those investments. So it’s twofold. We need to look at it from that side, in terms of making sure that the manufacturing facilities are more than capable of dealing with this shift. But also, once the manufacturing side of it is fixed, people need to know that there is a stable electricity supply [so that] they’ll be able to charge their cars as and when they need to, and that there are sufficient charging points for them to be able to do that, and to take care of the issues around EVs and their limitations on range.
JIMMY MOYAHA: You mentioned a stable electricity supply, and I instantly had an anxiety attack. We know that Eskom is such a critical component of this, and they’ve now announced that they wanted to look at the distribution side, and possibly privatising that. Is there a world in which we achieve EVs without a stable electricity supply, because we’ve been dealing with load shedding for 16 years? Realistically we know what we’re in for. Is this one of the big hindrances from the companies’ side in terms of investments, and they’re saying, ‘Look, until we are confident that Eskom is under control or there is alternative energy sufficient for EVs, this market might not take off’?
THESELE MAMPANE: It’s hard for me to say on that point whether or not it’s hesitancy from the company side of things. But what I can say, though, is that a key consideration with EVs as well is the whole point of EVs is to move away towards renewable, more sustainable energy sources.
When you’re looking at South Africa and its reliance on coal at the moment, sure, on one side you’re driving a car that is supposed to be environmentally friendly, but is effectively relying on electricity that is not necessarily coming from environmentally sustainable sources.
So I think one of the key considerations is also making sure that you’re aligning how you’re generating that electricity to charge that component. That ultimately brings together this whole ethos around what the world is trying to achieve with EVs.
JIMMY MOYAHA: Well, we’ll have to wait and see how that all unfolds. Industry is ready, consumers are ready. The ball’s in your court, government.
Thanks so much, Thesele. Thesele Mampane, an investment analyst at Futuregrowth, has been giving us a sense of the EV market in South Africa at the moment.
