SA Auto Week the place to get some answers to burning questions surrounding the shift to NEVs

SA Auto Week – a first for South Africa – will gather industry experts in Midrand from October 25 to 28 to deliberate on the challenges, changes, and opportunities within the industry.

As an integral partner within the local automotive ecosystem, WesBank is one of the headline partners of SA Auto Week. Naamsa’s overall vision for the event, and the theme for the three-day thought leadership conference, is “Reimagining the Future Together”. This aligns closely with the way WesBank views the future of mobility and the vital role this sector must play in the South African economy.

Ahead of the conference, the conversation has shifted to new-energy vehicles (NEVs), including electric vehicles (EVs) and hybrid models, and what a successful and attractive automotive sector in South Africa would look like. Being a relatively small component of the much larger total global production, the local automotive industry tends to follow global trends very closely, according to Alan da Silva, sales and marketing executive of WesBank. Local original equipment manufacturers (OEMs) will need to respond to global demand dictated by international regulations, particularly those of our export markets.

“They will need to gear their manufacturing plants for NEV production and remain competitive, as trading partners will likely no longer require internal combustion engines (ICE) vehicles. Government support to the SA auto industry is essential to assist the manufacturing sector to adjust to these NEV changes. Without this, it is unlikely that we could be a competitive global player, and the risk is that the manufacturing of these vehicles will take place elsewhere in the world.”

In the shift to NEVs, we need to consider the economic pressures driven by OEM parent companies and global demand, and the social impact of the world moving towards cleaner energy production. Da Silva is of the opinion that the shift to clean energy production will have a profound impact on South Africa. “Traditional forms of energy production such as coal are deeply entrenched in our economy with many people employed in those sectors, and then there is the large investment by Government, which is still to be realised.”

Consideration also needs to be given to other economic and social challenges unique to South Africa, such as the impact on revenue collections through fuel taxes, the impact on fuel forecourt employees, powering NEVs on an already constrained grid, how rising electricity costs will impact the charging of NEVs, the evolution of the taxi and public transport systems to NEVs and the availability of suitable vehicles to power commercial fleets.

The latest figures released by motor industry body Naamsa reflect that 2 689 new NEVs were sold between January and August this year, a rise of 1 000% over the same period last year. However, the current vehicle purchase prices and the high import duties remain deterrents for potential adopters.

As such, Declan Jones, WesBank’s chief financial officer, expects the global migration towards NEV adoption to be more accelerated than locally. “Many laws have been passed and specific targets set in Europe and the USA to actively drive the migration to NEVs. Here in South Africa, we lag way behind these trends, primarily due to a lack of investment in infrastructure, both at the national energy network level and at the microlocal government level for infrastructure to charge NEVs

“SA’s current critical energy crisis is the major limiting factor to our evolution in this space. The reality is that, at least initially, these vehicles will be restricted to a niche population with the ability to afford NEVs. While vehicle prices are reducing, the access to charging ports and cleaner energy options will burden the consumer more than just the cost of the vehicle.”

The impact will also be felt at the dealer level, particularly those dealerships that also service vehicles because there will be less demand for servicing of NEVs. Dealers will need to adjust their business models to cater for this loss of revenue. “From an automotive value chain perspective, there will be a reduction in revenue for parts and services within the overall supply chain ecosystem, given the simpler construct of NEVs. While replacing batteries could supplement the reduction in revenue, it will be less regular, thus placing pressure on dealerships’ margins where workshops are present. Another challenge is the safe disposal of batteries and the additional infrastructure required to do so,” commented Jones.

Barry Axe, who heads up innovation and integration at WesBank, believes that broad policies that will provide a framework for the transition from ICE to NEV cars for all industry players within the value chain – Government, OEMs, energy companies, financial institutions, dealers and industry bodies – need to be in place to support this transition.

“The distribution models for NEVs seem to be driven by the OEMs. It will be interesting to see if this evolves to a more direct-to-consumer model, which, if implemented, could significantly change the role and financial model of the dealer within the mobility ecosystem. The need to invest in specialised equipment may also inhibit non-franchise service and maintenance providers to participate in the value chain initially. There is also the question of the rollout of a sufficient infrastructure for charging NEVs – will this be driven by energy companies, the car manufacturers or independent providers?” asked Axe.

Source: MotorPress