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Home Uncategorized

Losing the Lead? South Africa risks falling behind in NEV manufacturing

...auto industry faces crisis as R2.7-trillion exports decline

David Ijaseun by David Ijaseun
November 19, 2024
in Uncategorized
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NEVs (New Energy Vehicles) in South Africa

NEVs (New Energy Vehicles) in South Africa

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South Africa’s automotive industry faces an existential crisis as the global shift toward new-energy vehicles (NEVs) accelerates. With exports dropping by 42.6% in the past year, the country risks jeopardizing its R2.7-trillion vehicle export industry—a sector that contributes nearly R220 billion annually to the fiscus and accounts for 5% of GDP.

The stakes are high, as approximately 80% of locally manufactured cars are exported, primarily to Europe and the Middle East. However, these markets are phasing out internal combustion engine (ICE) vehicles in favor of hybrids, battery-electric, and hydrogen-powered alternatives. South Africa’s inability to produce NEVs at scale has placed it at a competitive disadvantage, threatening thousands of jobs and its standing as Africa’s leading car exporter.

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Industry on the Brink

The automotive sector, home to giants like Toyota, BMW, and VW, has thrived for decades, with cumulative exports since 1995 valued at R1.75 trillion for vehicles and R959 billion for components. Yet, despite these achievements, the industry’s master plan to produce one million vehicles annually by 2035—up from 633,000 in 2023—looks increasingly unattainable. South Africa now ranks 22nd globally in vehicle production, contributing just 0.67% of global output, while competitors like Morocco assembled 535,000 units in 2023 and are rapidly closing the gap.

A Missed Opportunity?

Global NEV demand has surged, with sales growing 53% in 2021, 54% in 2022, and 35% in 2023 to reach 14.2 million units. Despite these trends, South Africa’s government has yet to implement incentives to foster NEV manufacturing, leaving carmakers struggling to compete. Companies like BMW and Ford have initiated NEV assembly lines for popular models like the X3 SUV and Ranger bakkie, but without robust support, they lag behind sister plants in Thailand and China.

Andrew Kirby, CEO of Toyota South Africa, advocates for targeted support, such as prioritizing NEV components like e-axles, to regain competitiveness. “There is no reason why we can’t localize key components and secure market share,” he said, cautioning that delays could cost the nation valuable opportunities.

South Africa’s reliance on legacy ICE models is unsustainable as nations worldwide adopt aggressive environmental policies. While the continent’s car ownership rate is a mere 4%, compared to 83% in the U.S., competitors like Kenya, Ethiopia, and Egypt are investing in automotive production. Morocco’s rapid rise as a manufacturing hub underscores the urgency for South Africa to act.

Industry leaders warn that without decisive government intervention, South Africa risks losing its status as Africa’s automotive powerhouse. Time is running out for the country to embrace NEVs and safeguard its R2.7-trillion industry, jobs, and economic future.

Read more on Electric cars in South Africa: Efficiency wins fans, but cost and charging hold back buyers

Tags: electric vehiclesHeadlineNEVSouth Africa

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