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‘Crunch time’ for SA’s auto ecosystem

Home Manufacturing & Processing Automotive ‘Crunch time’ for SA’s auto ecosystem

THE Eastern Cape automotive industry, led by the Automotive Industry Development Centre Eastern Cape (AIDC-EC) is identifying opportunities to develop the industry in a new era of New Energy Vehicle (NEV) production. NEVs are powered by ‘green’ energy sources like electricity, hydrogen, or a hybrid combination of sources.

Representatives from the region’s thriving automotive industry shared ideas at a roundtable discussion on opportunities presented by the industry’s inevitable transition to NEV production. The AIDC-EC campaigns for the country’s interests at regional and national levels and hosted the event in response to the release of the Department of Trade, Industry and Competition’s (DTIC) release of the Cabinet-approved electric vehicle (EV) white paper.

“The speed and quantum of change that is on our doorstep has the potential to reshape the industry,” said AIDC-EC CEO, Thabo Shenxane. “The industry’s commitment to moving with the times and seizing new opportunities is apparent by the depth of thought and energy at the engagement. From our partners at the universities, to OEMs and a broad range of suppliers, everyone understands that we’re going to have to adapt to a new era. I am proud to stand behind the ideas presented to the provincial government. We are all full of expectation for what will be presented by national government in February,” Shenxane said.

Released in early December, the timing of the DTIC’s white paper on EVs was not particularly conducive to considered reaction from an industry which has been calling for policy certainty.

In November last year, naamsa CEO, Mikel Mabasa expressed the Automotive Business Council’s disappointment at the speed at which the government is adopting New Energy Vehicle (NEV) policies. Mabasa said that the minister had effectively bought time for NEV policy “with considerations to domestic market demand stimulus measures, establishment of renewable energy-based charging infrastructure, and production support.”

“South Africa has procrastinated far too long, and we believe that the NEV policy pronouncement should be made by President Cyril Ramaphosa during his State of the Nation Address and supported by fiscal measures the Minister of Finance promised to announce in the 2024 National Budget Review. This is crunch time for the South African automotive industry, and we can no longer afford to be silent on policy choices the country should make about the future of this important sector in the economic life of South Africa and her people”, Mabasa said.

Mabasa is not being alarmist, the shifts in demand for conventional internal combustion (ICE) vehicles from South Africa’s major trading partners could jeopardise the industry’s future exports. The value of this sector to the country and the Eastern Cape region is immense.

The automotive industry

In the Automotive Export Manual (2023), naamsa estimates that the broader contribution of the industry including retail to South Africa’s gross domestic product was 4,9%. The industry supports an ecosystem of ancillary industries and indirect jobs in mainly three provinces, namely: the Eastern Cape, KwaZulu-Natal, and Gauteng, helping to diversify and stimulate local economies. This translates to 41% of manufacturing employment in Nelson Mandela Bay, 27% in Buffalo City, 13% in Tshwane; and 9% in eThekwini.

Industry ideas and discussion

In a thought leadership discussion document published in February 2023, naamsa said: “Essentially, OEMs will be required to replace their existing South African internal combusion engine (ICE) platforms with NEV replacements or risk the chance of having their operations made redundant”

“Given that there will be a maximum of only two model replacements between now [2023] and 2035, OEMs will either introduce a NEV replacement at their next model change, to 2029, or, at the latest, the next, from 2030,” the document suggests.

The document clarifies that investing in the assembly of Hybrid Energy Vehicles (HEVs) will not necessarily result in major additional investment costs for South African OEMs, as the assembly of batteries can be easily assimilated into existing plant assembly operations.
However, this does not apply to Plug-in Hybrid Electric Vehicle (PHEV) assembly, which requires more significant assembly changes. Assembling Battery Electric Vehicles (BEVs)would require major additional investment – potentially similar to a greenfield operation. Beyond assembly changes, the shift to NEV technologies will also fundamentally challenge existing manufacturing operations within the domestic component value chain, naamsa says.

Current production

There are currently seven operating multinational OEMs with CKD automotive assembly plants in South Africa, with two more on the horizon.

Mercedes-Benz South Africa (MBSA) is a wholly-owned subsidiary of the global company, Mercedes-Benz AG. At the company’s East London Plant, C-Class cars are produced in both left- and right-hand drive for the local and export markets. At Mercedes-Benz the strategy is to go all electric by the end of the decade, wherever market conditions allow. The global company anticipates that by 2026 EVs will contribute 50% of total sales.

Volkswagen South Africa does not produce any hybrid models locally. Only the Polo and Polo Vivo are built at the company’s Kariega plant. The company says it has no plans to manufacture Battery Electric Vehicles in South Africa.

Lebogang Makoloi, corporate & public affairs executive at Isuzu Motors South Africa says: “At Isuzu, we recognise the evolving landscape of the automotive industry, with a growing emphasis on sustainable and eco-friendly solutions. As we closely monitor the increasing demand for electric vehicles (EVs), Isuzu remains committed to exploring and innovating in this space. We understand the importance of embracing cleaner technologies and are actively engaged in the development and assessment of electric vehicles.”

Ford Motor Company announced in November last year that it was investing R5.2 billion in its Silverton Assembly Plant for production of the first-ever Ranger Plug-in Hybrid, commencing in late 2024.

Toyota South Africa Motors currently manufactures one hybrid vehicle in South Africa, the Corolla Cross Hybrid, and these are assembled on the same assembly line as ICE vehicles. “Currently we do not manufacture plug-in electric vehicles (EVs) in South Africa,” a spokesperson said.

It was reported in June last year that the company will be launching its first hybrid powertrains for the Hilux bakkie and Fortuner SUV in South Africa in March 2024. The powertrain will feature a 48V mild hybrid system coupled with the regular 2.8-litre turbo diesel engine, which is very different to the Corolla Cross hybrid system.
Stellantis’s R3 billion greenfield manufacturing project at Coega is planned to be completed by the end of 2025. There are no details of fuel type, but the first launch is planned for early 2026 and will be a 1T pick-up truck with volumes expected to reach up to 50,000 CKD units annually.

The white paper

According to the white paper, the ball is in the DTIC’s court to publish the architecture of the incentive package and complete an initial draft of amendments to the APDP Regulations and Guidelines and start stakeholder engagements. These were scheduled to take place in January. The DTIC said that the architecture of the incentive will only be available after the Budget Speech in February.

The department said: “Whilst internal work has commenced regarding amendments to regulations and guidelines it will only be in due course that drafts are shared with stakeholders.”

While the white paper explains the principles and context of the DTIC’s approach to the NEV revolution, it is in the National Treasury’s package that details will be found.

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