It’s ‘adapt or die’ for SA carmakers

The South African automotive industry plays a significant role in our country’s economy, with a GDP contribution comparable to that of mining and agriculture. However, the sector faces a massive challenge that threatens our nation’s fragile economic renaissance: policy development.

Worldwide, the automotive sector is already going through the most rapid and far-reaching changes of its entire existence. If South Africa is to remain globally competitive, we urgently need to be able to develop new state policies that enable us to do so.

As the era of the internal combustion engine (ICE) comes to an end, and new energy vehicles (NEVs) become the road-transport mode of choice, automakers across the globe are retooling their factories, and working with their Governments to develop policy and legislation to support this new industry. These vehicle manufacturing markets are moving at an aircraft speed to develop and introduce agile public policy positions to enable the industry to adapt and embrace this imminent change.

South Africa, on the other hand, is moving at a snail pace and will be forced to play a catch-up game if it wants to remain relevant and a competitive vehicle manufacturing base of the future.

One of the reasons for this is that, despite the massive foreign-exchange earnings that our sector generates, the capacity of the State is currently not geared to adequately look after the interests of our industry. This is not to even mention the enormous resources that will be required to develop policies to build a new industry based on renewable energy, and the manufacture of electric vehicles.

Mining and agriculture are served by large government departments – the Department of Mineral Resources & Energy, and the Department of Agriculture, Forestry & Fisheries. Meanwhile South Africa’s automotive sector, which generates  around 18,7% of domestic manufacturing output, is managed by an automotive desk of about six people at the Department of Trade, Industry and Competition.

There have been plans developed to move South African auto manufacturing into the future and to stimulate our industry. However, even these do not keep pace with the rapid, ongoing revolutions in the global sector.

The Automotive Production Development Program (APDP) aims to stimulate local production of automotive components while maintaining the incentives for OEMs to manufacture for export and the local market.

But this is not a plan that reimagines our industry for the renewable-energy and electric-vehicle era.

At the same time, the international markets on which we depend to sell our petrol and diesel vehicles, are all legislating to phase out ICE vehicles. The European Union has brought forward the initial timeline to ban internal combustion engines to 2035, while the UK will ban ICE vehicles from 2030.

South Africa is in danger of becoming stuck making a legacy product that no one wants.

All the while, our rivals in the manufacturing sector are refitting their factories to transition to electric, passing new laws to support this and embracing the low-carbon future. New countries are posed to enter the industry – Ghana , Morocco and Egypt, for instance. We are falling behind.

We risk the same fate as the Australian automotive industry, which failed to adapt to industry changes, and has now shrunk to the point where its car making sector has essentially ceased to exist.

As an emerging economy, South Africa, cannot afford the collapse of an industry that creates thousands of jobs and significant amounts of foreign exchange for our economy.

I therefore appeal to our country’s decisionmakers to act to develop policies that will support a transition for our industry.

In order to survive, we have no option but to transform to the manufacture of new-energy vehicles as soon as possible.

If we accept that our major markets will cease to exist within 10-15 years and refitting factories and developing new models takes around a decade, then the time to make this crucial change has almost run out!

Already manufacturers have left South Africa because it now longer made sense for them to continue manufacturing vehicles in the country. So, there are no guarantees. The very future of our industry hinges on our ability to adapt to the new reality, change our manufacturing policies and to move in step with the rest of the world.

Mikel Mabasa will be keynote speaker on the opening day of the Southern African Transport Conference, from July 4-7