Electric vehicles in South Africa: how to avoid making them the privilege of the few

In the early 1900s, automobiles took to the streets of industrialized cities, quickly supplanting horse-drawn vehicles. Fiercely contested at the start, the internal combustion engine won the technological battle against electric vehicles which represented up to a third of the vehicles in circulation before declining.

After more than a century of dominance, the era of internal combustion engines is soon over. The tide is turning towards electric vehicles. Driven by environmental regulations, support programs and improving economy, electric vehicles are set to become mainstream in the coming decades. As the Intergovernmental Panel on Climate Change has reminded us, we need to move aggressively to electric vehicles – as part of a broader movement towards sustainable mobility – to achieve our climate goals.

Yet the rollout of electric vehicles risks leaving many behind. Achieving a socially progressive development of e-mobility requires proactive government interventions. This is particularly true in South Africa, a country characterized by high inequality and unequal access to transport.

Unless ambitious public policies are taken, electric vehicles will remain the privilege of the few for the foreseeable future. A dual strategy is needed. The aim is to promote the purchase of entry-level electric vehicles on the private car market while promoting the introduction of electric vehicles in public transport.

I worked, with partners, to understand the implications of the global transition to e-mobility for South Africa. Our work also included the most appropriate interventions for the country to mitigate risks and maximize benefits.

An exclusive and elitist transition to electric mobility is one such risk. Yet, as explored in a recent policy brief on trade and industrial policy strategies, there is an opportunity to shape deployment more inclusively across private and public transport.

First, the dual strategy would be to promote the purchase of entry-level passenger electric vehicles.

Many, from politicians and government officials to civil society activists and trade unionists, will oppose this very idea. After all, why should the country support the sale of private vehicles? Only a third of South African households own a car, and only upper-middle and upper-income households would be able to afford even an entry-level electric vehicle.

The same argument would also be expressed as follows: can’t we just let the market evolve on its own?

The answer to this might be if South Africa did not have a car industry or if the vehicles produced in the country were all exported. But this is not the case.

South Africa has a well-developed automotive value chain, often touted as the crown jewel of the country’s industrial policy. And local industry is closely linked to national and European dynamics.

The local market matters. It accounts for 2 out of 5 passenger vehicles made in South Africa. Moreover, about half of the new car market is made up of entry-level vehicles below R260,000. But sales of electric vehicles are insignificant. There were only 6,367 electric vehicles on South African roads at the end of 2020. All electric vehicles, including hybrid models, accounted for less than 0.2% of new car sales in 2020.

Still, a transition to producing more electric vehicles is vital if South Africa is to keep up with developments in Europe. About 3 out of 5 passenger vehicles manufactured in South Africa are exported, mainly to Europe (three quarters of exports). Europe accounted (by value) for 60% of South Africa’s exports of vehicles and automotive components in 2020.

And the European trajectory is clear: no sales of thermal or hybrid engines by 2035 in most countries.

The cost of doing nothing would be disastrous for the sector – and South Africa’s environment.

Some Solutions

Electric vehicles are cheaper to own. But they are more expensive to buy than their internal combustion engine counterparts. This is a problem given that the domestic market is very price sensitive, especially in the entry-level segment.

Temporary support for the full range of electric vehicles is recommended to entice potential buyers. The support is expected to bridge the gap between electric vehicles and their internal combustion engine equivalents in the entry-level segment.

The promotion of electric vehicle sales at the national level could be achieved through a direct and fixed subsidy for the purchase and loans with extremely low interest rates, supported by development financing institutions for electric vehicles of entry level.

To minimize financial implications and keep up with global trends, strict conditions would be required. More importantly, support is set to expire in 2030 for mild hybrids and 2035 for all other electric vehicles.

The availability of entry-level electric vehicles in the local market is a fundamental condition for the incentive to be effective. For this, the tariff anomaly, which sees battery electric vehicles from the EU receiving a tariff of 25% (compared to 18% for all other vehicles) should be resolved.

Secondly, we must promote the introduction of electric vehicles in public transport. Almost three-quarters of South Africans used public transport as their primary mode of transport in 2019. Among commuters who use public transport for mobility, 66% used minibus taxis and 12% used buses.

So far, knowledge on the deployment of electric public transport vehicles is limited. Cape Town is the only municipality to have experimented with e-buses, with little success. The buses proved unsuitable for the city’s geography, and the bidding process was marred by allegations of irregularities.

Electric minibus taxis are another route worth taking. No experience exists for these, although a pilot is planned for Stellenbosch.

The roll-out of electric minibus taxis is expected to be supported by a temporary and enhanced scrapping allowance from the taxi recapitalization program for the purchase of electric vehicles.

In addition, reducing the cost of financing e-minibus taxis would further support the transition. Minibus taxis are considered high risk and face high interest rates when financed. Preferential financing terms for electric vehicles could be obtained through state-guaranteed loans or the granting of concessional debt. This is also offered for passenger vehicles.

For bus fleets, the deployment of electric vehicles would mainly go through public procurement programs, such as bus rapid transit systems.

Here, the public character of the bus systems would allow for great experimentation with innovative mechanisms and models. This could involve subsidies as well as innovative financial arrangements and business models, such as pay-as-you-go, battery leasing or bus sharing.

Additional measures could also be introduced. These include adequate charging infrastructure, differentiated electricity tariffs (to encourage off-peak charging), preferential access/parking or discounted licenses. As well as being critical to South Africa’s industrial development, boosting local manufacturing of all types of electric vehicles could also translate to lower cost vehicles in the long run.

More generally, the “electric revolution” can make transport more environmentally sustainable. It also offers a unique opportunity to make it more socially inclusive.

Gaylor Montmasson-Clair, Senior Economist, Trade & Industrial Policy Strategies (TIPS), University of Johannesburg.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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