Green Economy Journal Issue 59

MOBILITY
of EVs in SA
Towards an
INCLUSIVE ROLLOUT
Unless ambitious public policy action is taken, EVs will remain the privilege of the few for the
foreseeable future. A dual strategy is necessary. It involves promoting the purchase of entrylevel
EVs in the passenger car market while simultaneously fostering their introduction in
public transport.
BY GAYLOR MONTMASSON-CLAIR*
To minimise financial implications and keep up with global trends,
strict conditions would be required. Most importantly, support should
lapse in 2030 for soft hybrids and 2035 for all other EVs.
The availability of entry-level EVs on the local market is a fundamental
precondition for the incentive to be effective. To this end, the tariff
anomaly, which sees battery electric vehicles originating from the
EU fetching a 25% tariff (against 18% for all other vehicles) should
be resolved.
Second, it requires fostering the introduction of EVs in public transport.
Close to three-quarter of South Africans relied on public transport as
their main means of commuting in 2019. Of commuters that use public
transport for their mobility, 66% used minibus taxis and 12% buses.
So far, knowledge in deploying 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 tender process was marred by allegations
of irregularities.
Electric minibus taxis is another route worth taking. No experience
for these exists, though a pilot is planned for Stellenbosch. The
rollout of electric minibus taxis should be supported through a
temporary, enhanced Taxi Recapitalisation Programme scrapping
allowance for the purchase of EVs.
In addition, reducing the cost of finance for e-minibus taxis would
further support the transition. Minibus taxis are considered high risk
and face high interest rates when financed. Preferential financing
terms of EVs could be achieved through government-guaranteed
loans or the provision of concessional debt. This is also proposed for
passenger vehicles.
For bus fleets, the rollout of EVs would essentially flow through
public procurement programmes, such as bus rapid transport
systems. Here, the public nature of the bus systems would allow
TAXI RECAPITALISATION PROGRAMME
The Taxi Recapitalisation Programme is an intervention by
government to bring about safe, effective, reliable, affordable
and accessible taxi operations by introducing new taxi
vehicles designed to undertake public transport functions
in the taxi industry.
MOBILITY
PAY AS YOU SAVE®
Pay As You Save® or PAYS is a proven financing approach that
has been used in multiple countries to facilitate investment
into a range of climate smart solutions. PAYS is now being
used to reduce the upfront capital costs of transitioning from
internal combustion engines to electric vehicles, starting with
public transport.
for a great degree of experimentation with innovative mechanisms
and models. This could involve grants as well as innovative financial
arrangements and business models, like Pay As You Save®, battery
leasing or bus sharing.
Complementary measures could also be introduced. These include
adequate charging infrastructure, differentiated electricity tariffs
(to encourage off-peak charging), preferential access/parking
or discounted licenses. Besides being critical for South Africa’s
industrial development, stimulating the local manufacturing of all
types of EVs could also result in lower-cost vehicles in the long run.
More broadly, the “electric revolution” can make transportation
more environmentally sustainable. It also provides a unique
opportunity to make it more socially inclusive.
The cost of doing nothing would
be disastrous for the sector.
I
have been working 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 maximise benefits. An exclusionary, elitist
transition to e-mobility is one such risk. Yet, as explored in a recent
Trade & Industrial Policy Strategies policy brief, an opportunity
exists to shape the rollout more comprehensively in both private
and public transport.
First, the dual strategy would involve promoting the purchase of
entry-level passenger electric vehicles (EVs).
Many, from politicians and government officials to civil society
activists and unionists, will object to this very idea. After all, why
should the country support the sale of private vehicles? Merely a
third of South African households own a car and only upper middleand
high-income households would be able to afford an EV, even
an entry-level model.
The same argument would also be expressed as: can’t we just let the
market transition on its own?
The answer to this would be maybe, if South Africa did not have
an automotive manufacturing industry or if vehicles produced
domestically were all exported. But that’s not the case. South Africa
has a well-developed automotive value chain, often heralded as the
crown jewels of the country’s industrial policy. And the local industry
is closely tied to both domestic and European dynamics.
The local market matters. It accounts for two out of five passenger
vehicles manufactured in South Africa. Moreover, about half the market
for new vehicles consists of entry-level vehicles below R260 000. But
EV sales are insignificant. There were only 6 367 of them on South
African roads by the end of 2020. All EVs, including hybrid models,
accounted for less than 0.2% of new car sales in 2020.
Yet, a transition to producing more EVs is vital if South Africa
wants to keep up with developments in Europe. About three out of
five passenger vehicles manufactured in South Africa are exported,
primarily to Europe (three-quarters of exports). Europe accounted (in
value) for 60% of South African exports of automotive vehicles and
components in 2020.
And the European trajectory is clear: no internal combustion engine
or hybrid sales 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’re more expensive to
buy than their internal combustion engine counterparts. This is
a problem given that the domestic market is very price sensitive,
particularly in the entry-level segment. Temporary support for the full
range of EVs is recommended to incentivise prospective buyers. The
support would need to bridge the gap between them and internal
combustion engine equivalents in the entry-level segment.
Fostering EV sales domestically could be achieved through a direct,
fixed-purchase subsidy and extremely low-interest loans, underpinned
by development finance institutions for entry-level electric vehicles.
* Article written Gaylor Montmasson-Clair, Senior Economist,
Trade & Industrial Policy Strategies (TIPS), University of
Johannesburg. This article is an excerpt from POLICY BRIEF |
TOWARDS AN INCLUSIVE ROLLOUT OF ELECTRIC
VEHICLES IN SOUTH AFRICA | TIPS | [February 2022]
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