South Africa wants to build electric cars – amidst an electricity crisis

The National Association of Automotive Component and Allied Manufacturers CEO Renai Moothilal said the country’s energy and logistics crises put South Africa at a competitive disadvantage for electric vehicle (EV) manufacturing.

Moothilal’s comments come after Trade Minister Ebrahim Patel presented a government policy paper on electric vehicles that outlines the government’s framework for the shift away from gasoline-powered cars on Monday, 4 December. 

According to this policy, South Africa intends to build electric vehicles using some of the $8.8 billion of climate funding provided by some of the world’s richest nations.

Moothilal told Kaya Biz that this policy is a step in the right direction and could help South Africa’s automotive sector compete on the global EV playing field.

However, the country’s ongoing electricity crisis, which has seen the country face almost 7,000 hours of load-shedding in 2023, and its logistics crisis are dampening the sector’s ability to compete globally.

“Just in the last six months, issues around energy supply and logistics have dampened the ability of the sector to both produce domestically and get that product to market, whether it’s here in South Africa or, as you know, in the auto sector, we are an export dominant country,” Moothilal said.

“If you don’t have the strength in ongoing production – the auto sector is a highly globally integrated sector – and without those network industries functioning at an optimal level, we’re always gonna be at a competitiveness disadvantage.”

Patel acknowledged this issue in his presentation of the policy on Monday.

“We do need to solve the energy and transport logistic issues absolutely urgently,” Patel said.

“The producing side requires transport logistics. When components are stuck in a port, they undermine the ability to cost-effectively produce vehicles. And then, of course, the finished cars should not be sitting in factory warehouses. They’ve got to get to the market.”

Car-making giant Volkswagen recently highlighted the cost of load-shedding in the country’s automotive sector.

Volkswagen Passenger Cars CEO Thomas Schafer said load-shedding, rising labour costs, and Transnet’s problems make South Africa unattractive to continue building its cars.

Schafer’s warning came amidst Volkswagen’s drive to save costs, improve profitability, and remain competitive in its move to electric cars.

Reuters reported that South Africa used to be highly competitive in the global car manufacturing market because of its labour costs.

However, electricity challenges related to Eskom, railway and port problems associated with Transnet, and higher salaries have changed the country’s attractiveness.

Schaefer said that Volkswagen will eventually have to ask why it is building cars in South Africa, especially as it is far from where the vehicles are sold.

“I’m very worried about it. We’re not in the business of charity,” he said. He urged the government to take action to resolve the problems.

A particular concern is that Volkswagen has no plans to start building electric vehicles in South Africa, cutting it out of this lucrative future sector.

The German carmaker plans to launch ten new electric vehicles by 2026 and is investing nearly $200 billion over the next five years to ramp production.

However, because most South African consumers cannot afford an electric vehicle, it is not an attractive location to build these cars.