The automotive industry has given a cautious welcome to incentives for electric vehicle (EV) manufacture announced in last Wednesday’s Budget 2024 speech in Parliament – but meanwhile must forge ahead with its own efforts to create and meet demand for EVs in South Africa.
Minister of Finance Enoch Godongwana announced that, “to encourage the production of electric vehicles in South Africa, government will introduce an investment allowance for new investments, beginning 1 March 2026”.
While the incentive is attractive – it will allow producers to claim 150% of investment spending on electric and hydrogen-powered vehicles in the first year – the failure to reduce a 25% tariff on imported EVs is regarded as symbolic of foot-dragging on a transition from the internal combustion engine (ICE).
Lebo Gaoaketse, head of marketing and communication at WesBank, said there had been “intensive industry lobbying”, leading to “hope for a government pronouncement that would result in a reduction in the import duties imposed on electric vehicles.”
This, he said, would result in a drop in the retail price of EVs.
“However, South African’s policy on EVs, as previously communicated by Minister of Trade, Industry and Competition Ebrahim Patel and more recently by Finance Minister Enoch Godongwane in his budget speech, remains focused on advancing the country’s aspirations to become a manufacturing hub for EVs and EV batteries, while demand stimulation through reduced import duties and incentives for end-users would not be considered in the near term.”
The failure to support stimulation of EV demand has meant the automotive industry is on its own in rolling out what are broadly referred to as New Energy Vehicles (NEV).
This was underlined by the launch, just hours after the budget speech, of the new Volvo EX30, the lowest cost premium EV yet to come to South Africa. While a number of low-cost brands have released EVs priced at around R500,000, the R775,000 price tag on the EX30 is regarded as a new benchmark in the premium segment.
Greg Maruszewski, Volvo Car SA managing director, unveils the Volvo EX30
For the first time, said Greg Maruszewski, Volvo Cars South Africa managing director, it has brought the price of EVs in this segment to well under one million rand.
He said before the launch event on Thursday: “For us, it’s a very important launch, because this car will put us into a new segment, and it’s a segment with a lot more people than we’ve spoken to before. And that means volume.
“So far the market is very small, but with this offer, because of the price plus the offering, I feel we can grow the segment a lot quicker.”
As a result, the vehicle is expected to make waves beyond only Volvo sales, in effect acting as a rising tide that lifts all boats.
“It will grow the segment, it will grow awareness, and you will have new customers. So it will compete against a lot of the current ICE cars as well. It is going to have a positive impact on the whole automotive industry when it comes to EVs, for sure.”
The EX30 has an estimated range of 480km, but several other firsts will raise eyebrows. With much of anti-EV sentiment based on perceived lack of power, the most significant feature is its ability to accelerate from 0-100 km/h in 3.6 seconds. According to Volvo, it is officially its fastest-accelerating car ever.
With a standard battery capacity of 134kW, it can be charged from 10 to 80% in a little over 25 minutes. It is also the first car to have a premium soundbar installed in the vehicle instead of an array of speakers. A high-end Harman Kardon soundbar is fitted inside the dashboard across the front of the car.
Maruszewski agreed that the launch was a watershed moment for EVs in South Africa, particularly in the light of this week’s Budget speech. Janico Dannhauser, product and pricing manager at Jaguar Land Rover Africa, said it was commendable that South Africa sought to play a key role as a manufacturing hub and not just as an end-user of EVs.
However, he said, “there remains an opportunity for quick wins to stimulate demand for EVs among car buyers”.
“Key among these is a reduction in the import duties imposed on EVs. A reduction in this regard would have an immediate impact on the affordability of EVs. A consumer-focused incentive scheme has also proven effective in global markets in encouraging the uptake of EV among consumers.
“Growing the EV charging infrastructure is also an important imperative that is currently being spearheaded by the private sector. More public sector participation is required to fast-track the broadening of South Africa’s public charging network, particularly in areas that lie outside the established urban centres.
“There is, therefore, scope for greater improvement in policy reforms aimed at ensuring South Africa’s continued relevance in the evolving automotive world.”
Figures released this week by the Automotive Business Council (naamsa), showed that, while EV sales were low, they marked the only area of growth for the industry as a whole in the last quarter of 2023.
Sales of NEVs by 19 industry brands increased by 59,9%, from 1,582 units in the fourth quarter of 2022 to 2,529 units in the fourth quarter of 2023.
The year-on-year increase was even more significant: up 421,7%, from 896 units in 2021 to 4,674 units in 2022, with a further 64,6% increase to 7,693 units in 2023.
NEV sales breached the 1% share of the new vehicle market for the first time in 2023 comprising 1,45% of total new vehicle sales, compared to 0,88% in 2022.
Total new vehicle sales during the fourth quarter 2023 recorded a decline of 5,4% compared to the corresponding quarter 2022 and a decline of 3,5% compared to the third quarter 2023.
naamsa gave a cautious welcome to Godongwana’s speech.
The financial incentive, said naamsa CEO Mikel Mabasa, was “a crucial step in attracting investments, fostering innovation, and driving the growth of the EV sector within South Africa”.
“We welcome government’s decision to reallocate funds to specifically support the transition towards our broader evolution towards new energy vehicles because this demonstrates a commitment to provide the necessary fiscal support for the development and adoption of EVs.”
* A version of this story, by Arthur Goldstuck, first appeared in The Sunday Times.
* Arthur Goldstuck is founder of World Wide Worx, editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee.