The Automotive Business Council, which represents many of the key players in South Africa’s motoring industry, has recommended that government subsidise South Africans wanting to buy full electric vehicles to the tune of R80 000 – and wants this subsidy in place until 2035.

The council, also known as Naamsa, has also called for subsidies for mild hybrid and plug-in hybrids to the tune of R20 000 and R40 000, respectively. The subsidies should be reviewed periodically based on EV cost competitiveness changes over time relative to petrol- and diesel-powered vehicles, it said. And it wants parity on import duties between EVs and traditional vehicles, too. Currently, EVs attract a 25% import tax, versus 18% for other vehicles.

If the South African market were forced to transition to EVs (and hybrids) without any form of incentivisation, the domestic vehicle market would contract substantially, damaging the local industry.

Given the price sensitivity of the South African market, the most appropriate incentive model to support the transition to EVs is likely the provision of a direct, fixed EV purchase subsidy, the Naamsa report said.

The value of the subsidy should be determined by the type of vehicle being subsidised, it added. An incentive of this kind would optimise support for entry-level electric vehicles, with less benefit for more expensive ones.

The recommendations are contained in a 78-page thought leadership white paper Naamsa published this week about what needs to happen for South Africa to accelerate the shift to EVs, support local manufacturers with the industry shift and help reduce carbon emissions from road transport.

South African consumers have been slow to adopt EVs and hybrid vehicles for various reasons. However, there has been an uptick over the past year. Sales showed a significant year-on-year increase of 432%, from 896 units in 2021 to 4 764 units in 2022. But this is still negligible as a percentage of total new vehicle sales.

Critical step

The global transition towards electrically powered vehicles is a critical step to securing the future of the automotive industry in South Africa, the white paper said.

In addition to EV subsidies, which have been introduced in many developed markets around the world to foster quicker adoption of EVs, a key recommendation in the report is aligning European Union and UK environment protection tariffs with those in South Africa.

Read: South Africa needs to stop taxing EVs unfairly: Mercedes-Benz CEO

“Regrettably, South Africa has been painfully slow in finalising its governance and policy transformation priorities,” said Naamsa CEO Mikel Mabasa in a statement outlining the details of the white paper.

The country needs to enhance existing policies to help the industry, including developing an attractive fiscal and regulatory framework that makes South Africa a highly competitive and compelling location for EV and hybrid vehicle production.

The fundamental challenge to EV market growth in South Africa is the uncompetitive pricing of the vehicles compared to their internal combustion engine (ICE) counterparts. The average international pricing gap for new energy vehicles relative to their ICE equivalents is 12% for hybrids, 43% for plug-in hybrids and 52% for full-electric vehicles, according to Naamsa.

And when it comes to exports, the local industry must be overhauled. This is because the EU and other countries have set timeframes to end the sale of ICE vehicles entirely, some by as early as 2035. – © 2023 NewsCentral Media