SA’s Electric Vehicle White Paper released, and they don’t want you to buy one just yet

Published Dec 4, 2023


Accounting for around six percent of GDP, the importance of South Africa’s motor vehicle manufacturing industry cannot be understated.

Yet it is currently facing a significant existential crisis, with two of the country’s most prolific manufacturers, Volkswagen and Ford, having recently expressed deep concerns about the future viability of their local operations.

Infrastructural concerns, such as load shedding and the ports crisis, have been extensively highlighted in recent weeks. However South Africa’s lack of a policy direction for New Energy Vehicles is another major area of concern, given that the European Union and the UK - which collectively account for around half of the SA’s vehicle exports - have legislated the banning of new internal combustion vehicle sales from 2035.

South Africa’s Electric Vehicles White Paper, released on Monday by the Minister of Trade, Industry and Competition (DTIC), Ebrahim Patel, aims to create a comprehensive electric vehicle (EV) roadmap for the country.

At this stage, the White Paper does not clarify the exact incentive structures that will be put in place for the country’s EV transition. The Minister said further details on the fiscal aspects would be announced by the Minister of Finance in his Budget Speech in February 2024. Further elements of the White Paper will also be released in the coming months.

Patel said he anticipates that the first incentives will be put in place from the next tax year onwards, although the overall transition will take somewhat longer.

What seems clear following the DTIC’s press conference held in Pretoria on Monday, is that the EV roadmap will initially focus on securing manufacturing and export contracts for the local OEMs. Among other incentives, this will entail the temporary lowering of import tariffs for batteries used in EV production.

Now is not the time to buy an EV, apparently

Incentivising the purchase of electric vehicles in South Africa is something that will only take place further down the line as “phase two” of the EV Roadmap kicks in. The minister could not give an exact timeline for this second phase to kick in, but during the Q&A session he said it could theoretically take as long as seven or eight years.

The bottom line is that government doesn’t want South Africans to buy electric vehicles in large numbers just yet, not only because of the current grid constraints that are causing load shedding, but also because the grid is predominantly coal-powered at present, which would erode the environmental benefits of EV ownership.

Of course, the loss of lucrative fuel levies is another factor that the government seems to be skirting around at present.

South Africa’s current tax structure for EVs, which is higher than that for internal combustion models, has been another point of contention limiting their local uptake, however Patel says any premature change to customs duties could be detrimental given the current pressure on Eskom’s grid.

“At an appropriate point in time we will look at that as a measure,” Patel said. “Doing that right now and bringing a lot of electric vehicles onto the market in 2024 is probably not smart given the grid challenges that we face.”

However, Patel assured that government would continue to engage with the OEMs on this matter. It has also set up an Executive Oversight Committee that will help determine the optimal timing to adjust import duties.

The White Paper states that South Africa will pursue a “managed transition” of the domestic market and no bans of internal combustion engined (ICE) vehicles are planned in the short or medium term.

This, it says will buy time to develop a broader EV ecosystem, including charging infrastructure, electricity upgrades and skills development, as well as the development of an appropriate framework in which public transport and government-owned fleets can cost-effectively transition to EVs.

However, the country will actively support the development of an EV production ecosystem with a package of measures designed to maintain and potentially grow production capacity and all the related jobs.

“A successful EV transition requires the coordination of several elements of the ecosystem, such as auto assembly, component and tooling manufacturing, facilitating the development of the battery value chain and a competitive EV production environment,” the White Paper mentioned.

Although it is now named the “Electric Vehicle” White Paper (the term “New Energy Vehicles” was previously used) the Roadmap supports battery electric vehicles as well as hydrogen powered fuel cell vehicles and even internal combustion vehicles using synthetic fuels. It will also complement the country’s Green Hydrogen Strategy, which was outlined at Monday’s event.

However, there is no mention of hybrid vehicles in the EV Roadmap. When asked about this, the Minister acknowledged that hybrids are an important part of the transition to EVs, however they will only be supported through the existing APDP2 vehicle manufacturing incentive framework that is in place for ICE vehicles. These APDP rules will also be updated to include EVs.

As mentioned, South Africa’s infrastructure remains a significant hindrance to investment. However, the DTIC has promised various policy actions in the coming years, which include the implementation of freight logistics reforms, accelerated measures to improve the supply of electricity as well as the refurbishing of the railway lines, such as the link between Gauteng and Koega in the Eastern Cape.

Regardless of which EV policies are put in place, addressing South Africa’s infrastructural failings is critical. In the coming decade it will determine whether the country's vehicle manufacturing industry survives, or not. And the latter is a thought too scary to comprehend, considering that the sector supports over half a million local jobs, according to Naamsa.

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