Transitioning SA's Petrochemical Value Chain

Many significant global markets for South African-produced vehicles are planning to phase out the sale of Internal Combustion Engines (ICEs), in favour of electric vehicles (EVs), which include hybrid and battery electric vehicles (HEVs and BEVs) for passenger and light commercial transport, and fuel cell electric vehicles (FCEVs) for heavier commercial transport. No clear policy direction has, however, yet been articulated in South Africa.

Over the past decade, the EV offering for passenger vehicles in the country has been increasing slowly, with two BEV models, 23 HEV models and 10 plug-in hybrid models being available from various importers and distributers in 2020. A number of brands, namely Audi, BMW, Mercedes-Benz, Toyota and Volkswagen brought in a range of new models to the local market in 2022, indicating positive signs of increased penetration. However, availability of options is limited compared to elsewhere in the world.

The uptake of EVs in South Africa has also been slow – in the period between 2010 and 2019 there were only 6 043 EVs units sold in the country, constituting less than 0.1% of new car sales in the period. Comparatively, EV sales have grown significantly in major global markets, where EVs made up 33% of new vehicle sales in Germany and UK, and 25% of China’s sales by December 2022. Before 2020, these BEV sales were below 5% in these markets, signifying the exponential global demand growth. The Business Engagement commented that the pace of transition is fast internationally, but slow in South Africa. This is significantly out of sync with what the models show as being required from EVs by 2050.

A lack of local EV supply for entry and mid-level market segments is of particular concern, as most options target high-end niche customers. The Civil Society Engagement suggested that the focus of EVs should be on the mini-bus and taxi sectors. There is hope that this gap will be addressed in the coming years as more importers and local manufacturers increase their offerings, and as the policy environment moves to being supportive of EVs. However, affordability remains a challenge, and even if the taxation structure changes to make EVs more competitive, they are still likely to be more expensive than ICEs in the short term (Business Engagement).

Interventions that could improve affordability include:

• Introduction of innovative and cost-effective financing mechanisms and access to capital for consumers to meet the high upfront costs associated with EVs, including establishing more beneficial interest rates for EV financing;

• Dropping of the ad valorem excise duties or VAT on imported EVs and its components, particularly on battery / fuel cells;

• Making customs duties on EVs more competitive with ICE vehicles, particularly with vehicles imported from the European Union;

• Congestion charging in cities, associated with emissions levels of vehicles; and

• Support for ICE phase out

Looking beyond private vehicles, there are some initiatives to introduces EVs into the public transport system. For example, Golden Arrow Bus Service is currently operating two electric buses with the aim of full recapitalisation of its fleet with electric buses.  Other segments such as mini-bus taxis and light commercial vehicles have also increased efforts to deploy EVs in the coming decades. These initiatives are particularly important to provide mobility services to the majority of South Africans, and contribute towards reducing inequality, progressing just transition aspects, and supporting economic growth and social stability.

Although EV uptake remains low in South Africa, EV charging infrastructure and coverage is high relative to the number of EVs on the road. Charging ports are already available within ~300km of each other along major national highways, and at much smaller ranges of ~20km in the large metros such as Johannesburg, Cape Town and Durban. However, the long distances between populated areas presents a range challenge, at least in the short term (Business Engagement).

Security of electricity supply is crucial for enabling EV deployment, as demonstrated by the exponential increase of electricity for transport demonstrated in the modelling, and of great concern in current South Africa. This is not a one-way issue though: increased EV adoption could stimulate growth in distributed generation demand in homes and commercial spaces, potentially smoothing the electricity demand curve with implications for security of supply. Conversely, charging patterns could have adverse effects on network systems.