Mikel Mabasa, CEO of automotive industry body naamsa, says that government has bought itself more time to announce a policy on New Energy Vehicles (NEVs).
He expressed disappointment at last week’s mid-term budget speech by Enoch Godongwana, Minister of Finance, which was expected to include clear direction on electric vehicle policy.
“We expected more from the Minister… after numerous engagements we had with Government on this topic leading to the budget announcement,” said Mabasa. “Government understands our challenges as a vehicle producing country with bigger ambitions to grow our global influence as we move to NEVs.
“Effectively, the Minister has bought himself more time to announce details for NEV policy which will now be during the 2024 Budget Review with considerations to domestic market demand stimulus measures, establishment of renewable energy-based charging infrastructure, and production support.”
He effectively demanded that President Cyril Ramaphosa include a policy statement in his next State of the Nation Address.
“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.
The Automotive Business Council said in a statement that the Medium-Term Budget Policy Statement [MTBPS] followed a myriad of economic challenges affecting all industries and the economy, such as intermittent electricity supply, constrained production, and investment, and rising inflation rates affecting food and petrol prices straining household income.
It said: “Several global externalities remain persistent, including the sluggish global growth, bullish inflationary environment and increased geo-political tensions. Reflecting on the domestic market, the growth projections in the short-to-medium term are inadequate to drive developmental imperatives for the country. South Africa’s GDP growth forecast has been revised down by 0,1% to 0,8% for 2023 and projected to average just 1,4% from 2024 to 2026.
“The MTBPS announcement aptly illustrates how the negative economic considerations, outweigh the positive. South Africa’s budget shortfall projection for 2023 has deteriorated, reaching 4,9% of the Gross Domestic Product [GDP], in contrast to the 4% approximation indicated in the budget of February 2023. The finance minister announced that government spending has exceeded revenue since the 2008 global financial crisis and will require an average of R553-billion per annum over the medium-term in borrowings to cover expenditure.
“On the expenditure side, the government will make available the allocation of funds for heavy personnel industries such as health, education, and police services and a further R34-billion allocations to the COVID-19 social relief distress grant.”
Mabasa did, however, see a positive: “While we are disappointed that the Minister has decided to kick the NEV policy announcement ‘can’ down to February next year, naamsa is pleased to hear that the National Treasury plans to implement tax and expenditure measures to support the industry’s transition to NEVs.,
He said the economic muscle of the SA auto sector cannot be underestimated nor underplayed.
“From 1995 to 2022, vehicle exported from South Africa into 152 different markets around the world totalled 5,641,644 units with an export value of R1,55-trillion. Additionally, automotive component exports amounted to R892,6-billion. Last year alone, the automotive export value amounted to R227,3 billion which consisted of a record R157,0-billion for vehicle exports and a record R70,3-billion in component exports. As one of the most visible sectors attracting foreign direct investments, vehicle and component sector investment in 2022 amounted to R11,6-billion.”
He said consumer interest in NEV products was gaining welcome traction.
” In 2022, total NEV sales reflected a significant year-on-year increase of 421,7% at 4,764 units from 896 units in 2021. Sales of battery electric vehicles breached the 500 units per year mark in South Africa for the first time, with sales of 502 units last year. It is our considered view that a clearly articulated Government support intervention would undoubtedly go a long way in stimulating more demand and it will also accelerate investment and much greater interest in NEV technology and solutions.”
Based on the new vehicle sales records released by naamsa last week, the year-to-date [YTD] September total NEVs increased by 67% year-on-year, at 5,165 units. The September 2023 YTD total NEV production increased by 112,4% at 5,670 units, and NEV Imports increased by 179,7%, recorded at 3,393, compared to the same period last year. Passenger and extra heavy commercial NEV production increased by 382,3%, and passenger traditional hybrid production increased by 10,2%.
While the total NEV sales remain negligible as a percentage of total new vehicle sales, the NEV policy finalisation will give the industry a much-needed injection of confidence as an export-oriented industry whose 60% of production is for the global market.