For the opening remarks at naamsa’s thought-leadership discussions, which were held on 19 April, Ford CEO, Neale Hill, donned his naamsa presidential cap to give a short overview of the local and global auto industry with an emphasis on the transition to new-energy vehicles (NEVs).
Hill said a myriad challenges faced the industry. These included ongoing load-shedding, two further interest rate hikes in the first quarter of 2023, supply chain bottlenecks, a global economic slowdown, a worsening energy crisis and contracted geopolitical turmoil. He also pointed out that all three major economic areas – the USA, China and Europe – were currently in crisis mode albeit for different reasons.
The new-vehicle market’s key performance indicators were also concerning. In the first quarter of 2023 the market increased only marginally by 1.8 per cent compared to 2022. Vehicle imports increased by only 0.2 per cent and a decline of 4 per cent was recorded for vehicle export and a 1 per cent decline for vehicle production.
Of the 66.9 per cent of locally manufactured vehicles, which were exported, 72.7 per cent were destined for the UK and EU. And this is where trouble looms large on the horizon. Since 2014 the UK has already accelerated the cut-off date for internal combustion engine (ICE) vehicles three times, and currently 2030 is D-Day. The EU has also approved the banning of ICE vehicles by 2035.
Norway currently has the most ambitious laws yet that will see all petrol and diesel vehicles banned by 2025. The country also currently has the highest percentage of electric vehicles in Europe at 86 per cent.
Although the SA auto industry has a free trade agreement with the European Free Trade Association, exports to the region have dropped from a value of R870 million in 2021 to R421 million in 2022. “The relevance of this is that the impact of the ban on the sale of ICE vehicles was evident long before the due dates,” said Hill.
“The concern is that this also applies to our number one vehicle export destination, the UK, as well as Germany our number two, Belgium our number seven and the Netherlands, our number 10. This is why it is so important for domestic vehicle production to be aligned with the technological shifts that safeguard our exports,” explained Hill.
He went on to say that a concern is the fact that African countries such Morocco, Egypt and Kenya are progressing very quickly and are already ahead of SA in the EV space.
“SA’s still the dominant vehicle producer in Africa but Morocco is now ahead of SA in the passenger car segment,” warned Hill. “Vehicle production in SA cannot be sustained without the 60 odd per cent exports but at the same time it can’t be sustained without the 40 per cent domestic market sales. On both the demand and supply side support is required,” he said.
“The SA auto industry understands the important role it plays very well in decarbonising road transport as a way of achieving net zero emissions by 2050. The Presidential Climate Committee indicated that the auto industry could support the country’s just energy transition, particularly in the short term, by having 750 000 battery electric vehicles (BEVs) on the road by 2030. The question remains how we get models in the affordable end of the spectrum,” said Hill. He reckoned the 750 000 BEV target was not unrealistic but remained subject to the approval of transitional requirements, both on the supply and demand side.
“What is essential at present is the urgent pronouncement on government’s intentions as soon as possible. This is imperative when considering the importance of timing interventions so that they are aligned with investment decisions and lead times of the OEM head offices when they consider allocation of next generation NEV production cycles. SA has already missed the upcoming round of NEV model investments for which the decision date is three years before the start of production. SA will realistically only be considered for the next round of investments around 2030.
“Timing is absolutely crucial,” concluded Hill.
Hill’s observations around the pivotal role government will play in this make-or-break current transitional period, were ironic in the light of the fact that the Minister of Trade and Industry, Ibrahim Patel, cancelled his scheduled participation in the discussions.
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