Industrialisation: Tesla chief Elon Musk switched on to SA
JOHANNESBURG – The question goes begging: where is Africa, with its rich endowment in mineral resources? Perhaps the answer lies with Tesla.
Tesla recently became the world's most valuable carmaker, overtaking Japan’s Toyota, after its stock hit a record high. It is a global electric vehicle (EV) and clean energy company that specialises in EV manufacturing, battery energy storage for home to grid-scale, solar panel and solar roof tile manufacturing. The company has the world’s largest market for EVs, with an anchor factory in Shanghai, China, and additional plants in Russia and Germany.
During a virtual meeting held with African Quartz, one of Tesla’s representatives said Elon Musk asked him, “When do we make Tesla products in my home country, South Africa?”
At this explorative virtual meeting, a large degree of synergy was found in the solar photovoltaic value chain and overall sustainable renewable energy. Former minister of labour Shepherd Mdladlana joined me in this meeting.
We briefed the Tesla representatives that, according to South Africa’s National Development Plan 2030, over the next 20 years South Africa will see greater use of EVs, making it vital that the country starts decarbonising electricity generation.
A shift to EVs will increase electricity demand with positive implications for network design, smart metering and tariff structures, which encourage off-peak use. The introduction of EVs could greatly benefit the revenue streams of Eskom, if the state-owned company embraces new innovation and technology.
Tesla shared that its mission is to accelerate the global transition to sustainable energy through manufacturing affordable EVs and energy products.
To ramp production to 500 000 vehicles a year, Tesla alone would require today's entire worldwide supply of lithium-ion batteries.
How would EVs help South African society?
African Quartz emphasised that previously oppressed people in South Africa continue to suffer from intractable inequality, poverty and unemployment, which is exacerbated by apartheid geo-spatial laws that created sleeper towns for the black population.
It is estimated that black people spend one-third of their earnings commuting to and from work. The minibus taxi industry, as the main carrier of this category of workers, annually transporting several millions, is exposed to volatile oil prices and currency exchanges. These inflation drivers are all passed on to the poor/disadvantaged commuters, further eroding opportunities to a better life for all.
The minibus taxi industry carries roughly 15 million commuter trips every day, with most vehicles operating within a radius of 200 to 300km a day. Fuel is the biggest cost driver. Traditional travel energy consumption of 26.7 billion litres of liquid fuels a year can be broken down as follow: 11 billion litres of petrol, 13 billion litres of diesel, 2.2 billion litres of jet fuel, and 500 million litres of fuel oil. Most of this is imported.
It is against this background of high commuter volumes, distances travelled and high fuel costs that a switch to battery-electric vehicles (BEVs) is attractive for investment in manufacturing in South Africa.
Changing the business model
These are some peculiar features about South Africa’s urban landscape that could stimulate BEV adoption and penetration.
I could see through my 4iR eyes that the Tesla representatives liked our novel and unique massive market opportunity in Africa.
The transition from internal combustion engine (ICE) vehicles to BEV could radically transform the business models for taxi owners, corporate companies and households in Africa, saving these institutions millions of rand.
Maintenance of the BEVs would also be lower, since BEVs have fewer moving parts. A BEV has no clutch, no gearbox, no high-maintenance combustion engine, and the brake discs and brake pads are barely used, because, under normal deceleration, the EV is slowed down by recuperating energy back into the batteries.
The running cost for an ICE is R5.10 per km, excluding instalments, while the estimated costs for a BEV are R3.5 per km, according to the Automobile Association of South Africa.
Tesla in Africa
Tesla intends to begin as a small importer commensurate with the size of the market. Its presence grows over time in line with the success of the market, eventually leading to local production when the size of the market demands it. Tesla does not doubt that this will be the case for Africa in the fullness of time.
Former minister Rob Davis also reached out to Tesla when he attended the US 15th Africa Growth and Opportunity Act Forum held on September 26, 2016. Davis stressed that Tesla, which designs and manufactures electric car components as well as batteries, would be welcome in South Africa. Tesla would be more than welcome to establish a Gigafactory in South Africa, linked to the rich minerals available on the continent for battery manufacturing.
President Cyril Ramaphosa offered his congratulations to Musk in May for his SpaceX company’s historic first commercial flight into space.
Research and development are critical and investment by the government and the Department of Trade and Industry is necessary to kickstart emerging high technology industries.
This can be seen in the US’s funding support to innovation.
The Obama Administration provided Tesla with a $465 million (R7.9 billion) loan to build an electric vehicle and the battery packs needed to propel it. It was one of three loans totalling almost $8bn that the Department of Energy awarded to spur the development of fuel-efficient vehicles.
On May 22, 2013, Tesla announced that it has paid off the entire loan with interest awarded to the company in 2010.
Tesla’s net worth, as of Friday, was $224.05bn.
Industrialisation requires a social compact of trust and collaboration or a public-private agreement to stimulate investment in innovation and technology, beneficiation and localisation. It does not come free.
Dr Dennis George is the executive chairperson of African Quartz.