While sales of electric vehicles have increased, the automotive industry’s commitment to manufacturing EVs in South Africa (ZA) is still uncertain. Stellantis, already building an automotive manufacturing plant in the country to build the Peugeot Landtrek pick-up trucks by the end of 2025, has hinted that it may consider building EVs at the plant in the future but has made no firm commitment. Other manufacturers like Volkswagen and Isuzu Motors do not have plans to make electric or hybrid vehicles in South Africa despite generous tax breaks introduced earlier this year.

It makes no sense that a country rich in rare earth minerals used to make electric vehicles and currently exported mainly to China does not manufacture them. At the very least, it would benefit many of Africa’s economies to manufacture components for new energy vehicles rather than just the raw materials for export.

Mike Whitfield, managing director of the South African unit of Stellantis, which (among others) produces Alfa Romeo and Jeep, expressed this view in an interview with Bloomberg this week.

He said the decision to manufacture EVs in South Africa depends on whether a local market emerges. “In five years, it’s a high probability, but there’s no final decision,” he told Bloomberg.

South Africa’s failure to take control of its potential

South Africa is one of the Continent’s most industrialised nations. Its biggest car export market is the European Union, which is transitioning fast to electric vehicles, while the market for fossil-fuelled vehicles is shrinking. The car industry in ZA accounts for more than 5% of gross domestic product and employs over 116,000 people. That industry will suffer if it doesn’t move quickly to manufacturing EVs.

The government has been slow to establish a framework for investment in local production of new-energy vehicles, and the local network of charging stations has barely been developed. If EVs were to be manufactured locally, they could be sold locally if an adequate charging network was in place.

Mercedes-Benz, Volkswagen, Isuzu Motors, and Ford also operate manufacturing plants in South Africa’s Eastern Cape, but they have no plans to manufacture new-energy vehicles there.

In February 2024, the South African government tried incentivising EV manufacturing by offering generous tax breaks. Beginning in 2026, companies that invest in the production of electric vehicles can claim a 150% tax deduction on their investments.

Nigeria’s expensive efforts to stabilize the transport economy

Meanwhile, Nigeria plans to spend nearly $4 billion this year subsidising fuel. An article on Oilprice.com stated that Nigeria is projected to allocate 5.4 trillion nairas ($3.7 billion) in 2024—50% more than the previous year—to maintain stable petrol prices to boost its floundering refinery industry. A previous plan to abolish subsidies resulted in a threefold increase in petrol prices, higher transport costs, a rise in inflation, and public outcry.

Of course, this will have an economic impact, helping to stabilize transport costs, control inflation, and increase political stability. Affordable petrol is crucial for citizens’ mobility, especially in areas lacking public transport infrastructure. It ensures people can travel for work, education, and other essential activities without prohibitive costs. However, it also poses significant long-term financial challenges and necessitates careful planning to ensure sustainable economic growth and stability.

The contrasting situations of South Africa and Nigeria highlight the complexities of transitioning to sustainable energy. While Nigeria’s fuel subsidies stabilize current economic conditions, South Africa’s hesitant (or non-existent) shift to EV manufacturing risks future economic and industrial stagnation. South Africa should accelerate its EV infrastructure and production incentives to leverage its rare earth minerals. The successful adoption of EVs could ensure long-term economic resilience and alignment with global market trends.

Image: Shutterstock-25-1729009561 Wesley Poon

error: Content is protected !!