The South African automobile manufacturing industry will plummet into a massive decline if it does not adapt and start making electric vehicles (EVs) in the next few years.
This is according to the National Association of Automobile Manufacturers of South Africa (NAAMSA) CEO Mike Mabasa.
Seven major vehicle manufacturers have production plants in the country, namely BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and Volkswagen.
Together, these companies make thousands of cars and components every year, many of which are exported.
The value of these exports amounted to R201.7 billion in 2019 – making up 15.5% of all South Africa’s exported products.
However, NAAMSA’s forecasts showed this could drop to around R40.3 billion by 2040 if the plants are not adapted to the growing demand for electric vehicles.
Mabasa said the “grand vision” of the global automotive industry was electromobility, connected cars, and autonomous driving.
“Global vehicle manufacturers and major vehicle producing countries are consequently all focusing on electric vehicles and advanced technologies,” Mabasa stated.
“The domestic automotive industry needs to accelerate its electromobility advancement and transformation activities if it does not want to lose a significant portion of its export market over the next 10 to 20 years,” he warned.
Driven by exports
The fact that South African consumers and the vehicle retail market have not yet embraced electric vehicles themselves will matter little in the grander scheme.
The automotive industry exports around 64% of its vehicle production every year, meaning its business relies heavily on foreign demand.
“The global forecast is for electric vehicle (EV) sales to exceed those of internal combustion engine (ICE) vehicle sales by 2038,” Mabasa stated.
Automobile manufacturers will have particular problems with exports to Europe, where the forecast is that EVs will comprise 40% of total sales by 2030 and 80% of total sales by 2040.
That continent typically accounts for three out of every four vehicles exported, Mabasa said.
A further point of concern is that the UK, which is the local automotive industry’s top vehicle export country, recently announced aggressive plans to move the ban of ICE vehicles five years earlier – from 2035 to 2030.
Adverse economic consequences
If the manufacturers in South Africa do not adapt to the new demand, the consequences for the economy and jobs could be severe.
According to NAAMSA, the industry employed more than 112,000 people as of 2020.
“Manufacturing is the engine of the economy and the automotive sector is the largest manufacturing sector in the country’s economy, accounting for 2.6% of total manufacturing output in 2019,” Mabasa said.
“The sector’s contribution to the economy stood at 6.4%, with 4% for vehicle and component manufacturing, and 2.4% for retail,” he added.
“Considering the automotive sector’s significant value chain including finance, insurance, logistics and inputs from several other sectors, the broader automotive industry’s contribution is much higher,” Mabasa said.
Local demand must be stimulated
Mabasa added that ICE vehicles will not disappear globally, but that EV sales will be the next major technology and sales driver.
In order to address the looming threat to the manufacturing industry, NAAMSA and the Department of Trade, Industry and Competition (DTIC) commissioned a study by the name of “Harnessing Electric vehicles for industrial development in South Africa”, which was conducted by TIPS.
NAAMSA said it prioritised the research recommendations which focused on market development for electric vehicles and industrialisation of electric vehicles and electric vehicle components.
It then created an Electromobility Road Map of which the recommendations will be implemented in 2021 and beyond, Mabasa stated.
The idea behind the plan is that the demand for EVs first be stimulated locally before moving to the manufacturing of EVs.
“The recommendations include a tariff reduction in electric vehicle imports to zero and potential additional support to stimulate electric vehicle manufacturing in South Africa, amongst others,” Mabasa said.
Toyota previously announced an investment to start manufacturing petrol-electric hybrid vehicle models towards the end of 2021 in South Africa.
It has not revealed which vehicle this would be, however.
MyBroadband asked other vehicle manufacturers with local factories about their plans for EV production in the next few years.
Volkswagen South Africa said it had no plans to produce electric or hybrid vehicles in South Africa at this time.
It added that it was continuously investigating the possibility of introducing electric vehicles in the country, but that this would be dependent on the introduction of government policies which will make the market conducive for the local introduction of electric vehicles.
Nissan Africa Director of Marketing Stefan Haasbroek said that the company was always evaluating the right vehicles to bring to market.
“As demand for electric vehicles and the infrastructure to support them in markets increases, Nissan will continue to explore opportunities for EV product entries,” Haasbroek said.
“Nissan was a first mover with Africa’s first fully electric vehicle, the Nissan Leaf introduced in 2013.”
“Electric vehicles continue to be a core pillar of Nissan’s global strategy and we will keep media and stakeholders informed of market entry plans,” Haasbroek added.
Ford told MyBroadband electric vehicles and hybrids were not on the cards at the moment, although Ford International Markets Group operations director Andrea Cavallaro has said manufacturing EVs at the company’s Silverton plant is definitely part of the company’s future strategy.
BMW said it typically only builds one model in the current technical set up at its South African plan, and the far majority of its cars are for export to Europe and a few other countries.
“Our (production) strategy is based on a multi flexible platform,meaning we can produce for instance from X3: petrol/ diesel /hybrid and fully electric on same platform,” the company said.
In order to start making electric vehicles it needs technical amendments to production layout, as well as different suppliers.
“Based on demand, and projected demand, we (BMW Group) have started production of iX3 (the fully electric X3) only last year, and it is produced in China,” BMW said.
“Based on future demand and normal production lifecycles (normally around 7 years), the company will decide to add other production facilities to produce BEV or PHEV,” it added.
Mercedes-Benz and Isuzu did not respond by the time of publication.