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PRICE
The current price of electric vehicles is such that only a small minority of middle and
upper class citizens can afford them. This situation is worsened by the fact that the
vehicles are imported and carry a 25% import duty on top of the weak exchange
rate. There is also a perception that these vehicles are more expensive to run on the
back of increasing electricity prices in South Africa, however officials from the National
Association of Automobile Manufacturers in South Africa (NAAMSA), have found that
the current running cost of petrol versus electric is 5 : 1 in favour of electric.

LOCAL PRODUCTION

Local production has the potential to reduce the costs of electric vehicles and increase
domestic demand. It also allows us to grab a slice of the global market whilst the industry
is still in its infancy. Participating in the global value chain in EV production would have
enormous development benefits for the country in terms of job creation and increasing
the trade balance. Investing in an industry that promotes sustainable energy use is
also wise in the face of eminent global carbon taxes and as finite resources become
scarcer.

This opportunity was noticed by the Cape Town-based company, Optimal Energy,
which developed its own electric vehicle – the Joule – in 2008. The car was successfully
launched in Paris and attracted the interest of over 130 distributers worldwide. It was
marketed as an ‘electric vehicle for the masses’ retailing at a relatively affordable
R250 000. However, the company was closed in June 2012 before the car went into
mass production because of its inability to secure sufficient funding. This is likely as a
result of the company launching prematurely, as the risk and uncertainty surrounding
EVs was much higher then than it is today. PROVINCIAL OUTLOOK NATIONAL OUTLOOK GLOBAL OUTLOOK GAP HOUSING INVESTOR NARRATIVE SPOT THE OPPORTUNITY PORTFOLIO INSIGHTS KHULISA NEWSLETTER ELECTRIC VEHICLES ENERGY SECURITY LOOKING AT GDP

For local EV production to attract sufficient initial investment, it is necessary that
there is a healthy domestic demand for EVs. This will be aided by the infrastructure
investments currently underway and the increased incidence of imported EVs. It will
also be essential for government policy and incentives to support the industry in making
EVs more affordable and attractive, as was done in the US as well as the other major
international players mentioned earlier. Whilst it may seem to be counter-intuitive,
encouraging international manufacturers to set up in South Africa can have many spill-
over effects to supporting the local industry in the long run.

POLICY

Government support and incentives play a large role in increasing the viability of driving
as well as producing EVs in a country. In the majority of infant industries, government
assistance is needed to solve coordination failures and support R&D in areas that are
not already commercially viable.

Luckily, encouraging investment in automobile manufacturing is something that the
South African government does best. 65% of all incentives between 2010 and 2011
went to vehicles, parts and accessories. The continued support through the Motor
Industry Development Programme (MIDP) from 1995 and the Automotive Production
and Development Programme (APDP) from 2013 has resulted in the automotive industry
becoming the largest manufacturing sector in the country. It contributes a non-
negligible 6% to national GDP and 12% of South African manufacturing exports, and
accounts for around 300 000 jobs – before multipliers are even taken into account. As
can be seen in Figure 13 below, the majority of locally produced vehicles are exported.

QUARTERLY ECONOMIC BULLETIN 2016 35