Khanyiselo Kumalo, GreenCape
How do you think the electric vehicle and smarter mobility industry in Africa will perform in the next 1 - 5 years?
The EV mix is continuously changing, the number of available models is increasing and this is on the back of more automakers making commitments to manufacture EVs from 2019 onwards. Growth is expected to also increase and this is largely enabled by battery technology improvements and extensive infrastructure network rollouts.
We also foresee electrification of public transport gaining traction, this is especially true to buses and government transit fleets as they demonstrate the best business case for electrification. EV growth in SA is currently driven by climate conscious consumers that are able and willing to prioritise the cost to the environment when purchasing a vehicle.
We expect that EVs will become attractive to the emerging middle and new middle income group when cost comparable EVs with increased range are made available to the SA market. And because majority of public transport users are the poor and disenfranchised, the electrification of public transport is where we foresee majority of commuters in the low income bracket will gain access this technology. We are projecting a medium to long term timeline for any significant growth without enabling government support and policy certainty.
Taking the rest of Africa into account, there is a big opportunity for uptake in the 2/3 wheeled EV segments. The extensive roll out of RE through microgrids presents an opportunity for solar powered charging infrastructure.
What are the top burning electric vehicle and smarter mobility challenges faced in Africa right now?
In South Africa, there are a number of challenges which I believe other emerging economies in the rest of Africa are also likely to experience. These include products that aren’t fit for market, high import duties, and lack of policy certainty, skills and finance.
In terms of products that aren’t fit for the market, cost is one constraint. EVs are also not yet comparable to ICE vehicles within a similar price range. In addition, even if someone can get an EV in their price range, they might not find one that fits their lifestyle due to limited product choice.
High import duties are a constraint, especially in SA. Currently, electric vehicles are subjected to 25% import duties while buses and trucks carry a 20% duty. In comparison, ICE vehicles incur import duties of 18%. Electric vehicles are further subjected to 17% ad valorem (luxury tax duty) because of the battery price pushing the overall cost of the vehicle into a luxury threshold. Total taxes on electric vehicles and hybrids is 42%, which is significant.
Policy uncertainty and a lack of policy directives on local EVs manufacturing presents an investment risk. Until enabling policies are put in place that provide investors with peace of mind and inspire investor confidence, we will continue to see a lack of investment and risk-taking in this space.
As we transition to an EV-led vehicle industry, we will need appropriate skills to facilitate market growth. There are currently not enough skills in the automotive market and ancillary services sectors to adapt to the growth of the EV manufacturing section. We need to up-skill practising technicians to ensure the transition towards electric mobility is possible. This training is also important for first level emergency responders, dealership and aftermarket services as these sector also play an important role in a functioning transport sector.
Finally, a major obstacle – favourable finance terms for EV investments and project development. In the context of all the other barriers, the risk for lenders is still high, which results in short tenors of debt and high interest rates. This means that investors just don’t have enough equity to secure the debt they need. We really need innovative finance tools and government assistance that are able to absorb some of the risks associated with financing this nascent market
What are the key opportunities and challenges?
There are three emerging investment opportunities in the EV market.
Local manufacturing of EVs for the export and domestic market. This opportunity is particularly attractive to greenfield investors.
The opportunity to manufacture and/or assemble electric bus components.
Local production of lithium-ion batteries (LIBs) especially considering Africa’s rich mineral endowment. At present, the know-how is vested almost entirely in Asian countries, which make it difficult to penetrate the Li-ion battery market. Be that as it may, the need for affordable and abundant mineral alternatives to Ni & Co are crucial to the long term viability of the battery market. As such, Mn- rich cathodes are emerging as the next exploitable opportunity and Southern Africa is well placed to participate in that value chain.
The top 3 themes you will share/have shared at the seminar/conference?
Investment opportunities, the case for public transport and the balance of trade benefits for increased EV uptake in the country. Al three themes are further unpacked in the recently published 2019 EV Market Intelligence Report
What are the burning issues that keep you awake at night?
If global growth trends are anything to go by, then the reality is that we will need government’s involvement if we are to make any real and accelerated development in the SA’s EV market. Part of me is concerned that we have not effectively communicated the macro economic opportunities & balance of trade benefits of this market to the decision makers in government.
Can things go any slower!!! The snail pace of the transition is frustrating.
Li-ion batteries… and how it will be a missed opportunity for the continent if we are unable to capitalise on it in time
Forecasts and predictions for the year ahead?
My more optimistic but realistic side of the brain says slow but steady growth. I think people will be more enlightened and knowledgeable about EVs. Whether that will translate into more sales is debatable. I also think we will see more infrastructure roll outs as peoples understanding improves.
What is one piece of advice you'd give to a company in the electric vehicle and smarter mobility industry?
Make the time to understand how things work in the SA market. Speak to those who have done it and failed. The learnings will surprise you. Many a time, you meet companies that are excited to initiate projects in SA that are doing well in other countries and often get disappointed when those same initiatives are not met with the same reception. Understand the limits of your country. The transition to a clean economy cannot be insensitive to competing social needs. Whatever innovative solutions you bring in need to be able to address that.
What do you see as the most significant threat to the electric vehicle and smarter mobility industry and why?
Lack of funding & restrictive finance term