Automotive products and services that assist environmental improvement
Electric and hybrid vehicles
In markets beyond Africa, there is increasing demand for EVs1 and hybrid vehicles2. A strategic initiative for the Retail and Rental business segments, is the sale of EVs and hybrid vehicles in the UK where there are government subsidies and better charging infrastructure; although it is still unclear how an increasing number of these vehicles will be charged. In the UK, around 10% of new vehicle purchases are now EVs and hybrid vehicles, which by 2040 is expected to grow to around 50% of the vehicle parc. In the UK, we estimate that around 5% of our vehicle sales are electric and hybrid vehicles.
In the UK, we sell electric vans and a number of hybrids. The number of pure hybrid EV and hybrid passenger vehicle models from OEMs represented by Motus in the UK is limited; however, the transition is expected to be rapid once it starts. As an example, Kia already has plans to distribute the Kia Sorento EV. The tax perks in the UK, together with the savings gained from less petrol purchases, balance the higher price of an EV and hybrid vehicle, making it economically viable for consumers. When new EVs and hybrid vehicles are launched, technicians working on these vehicles receive the relevant training from OEMs. EVs and hybrid vehicles have differing servicing needs. EVs require less servicing than combustion engines, and hybrid engines require both traditional and EV technicians. This means that our business in the UK will, in time, have to develop strategies to counter the variable workshop volumes and skills requirements.
In Australia, EV and hybrid vehicle sales are marginal; however sales are expected to pick up from 1 September 2021 if the Electric Vehicles Bill is passed (delayed due to COVID-19). The Bill will support the New South Wales (NSW) Government's $490 million Electric Vehicle Strategy, which comes into effect in September and which introduces rebates of AUS$3 000 on purchases of new EVs and hybrid vehicles (the first 25 000 eligible vehicle purchases) and refunds on stamp duty for past purchases. The government aims to increase EV and hybrid vehicle sales to more than 50% of new cars sold in NSW by 2030.
In South Africa, almost all vehicles in parc and in the current sales landscape have either petrol or diesel internal combustion engines. Apart from affordability, there is no formal government policy position or adoption target for the production or sale of EVs and hybrid vehicles. Additional challenges faced include an unstable electricity supply and no infrastructure to support charging ports.
Car Rental has tested EVs and hybrid vehicles; however, cannot support these offerings until the challenges reported above are addressed.
naamsa | The Automotive Business Council (naamsa) indicates that while 23% of consumers would be prepared to consider an EV or hybrid vehicle for their next vehicle purchase, only 60% of this group of consumers were prepared to pay up to R500 000. Today, the average cost of a premium brand EV or hybrid vehicle is between 40% to 60% higher than a traditional internal combustion engine counterpart, making affordability the biggest challenge for financially strapped South Africans. The price gap is driven by the current cost of the batteries. While the cost of ownership remains high together with the uncertainty of the residual values on batteries and the vehicles themselves, no meaningful uptake is expected in the short term, with these vehicles likely to comprise less than 1% of our total sales in South Africa in the near future. We estimate that to generate a robust domestic market for alternative vehicles will require a 15 to 20-year implementation plan, with all stakeholders working together.
Future EV market in the UK and Europe
In 2030, around 40% of all new vehicle sales in Europe are forecast to be EVs and hybrid vehicles.
By 2040, this is expected to increase to around 80%.
The impetus to accelerate EV and hybrid vehicle adoption comes from the South African Automotive Masterplan (2021 to 2035) implemented on 1 July 2021 – government policy to stimulate and protect the local auto manufacturing base for export. In 2020, three out of every four vehicles manufactured in South Africa were exported to Europe and the UK, and as of the first half of 2021, four out of five are being exported. These territories are setting aggressive EV and hybrid vehicle adoption targets and the discontinuance of internal combustion engines. In nine to 15 years, the vehicles currently produced in South Africa will not be viable for this market. A change in policy is inevitable and needed for South Africa to maintain its export sales volumes. In addition, as a signatory to the Paris Climate Agreement, South Africa has set a 45% green energy target by 2030. The introduction of EVs and hybrid vehicles would significantly contribute to meeting this target.
naamsa is engaging with the Department of Trade, Industry and Competition (dtic) on an early review of the Automotive Masterplan. The aim will be to incorporate the latest global EV and hybrid vehicle developments, which have been accelerated by COVID-19, so that the automotive industry can achieve the masterplan's targets. The Minister of the dtic confirmed in April 2021 that, as a start, work has commenced to accelerate the development of capabilities to manufacture hybrid vehicles.
naamsa members have agreed (based on global experience) that to develop a manufacturing base oriented towards EV and hybrid vehicles, South Africa must first create domestic demand through imports. However, there are conflicting opinions on this approach; with some fearing that an unintended consequence of stimulating EV and hybrid vehicle demand will drive up demand for imported product rather than fostering local manufacturing. In addition, employee representatives want evidence that switching to manufacturing these types of vehicles will preserve or create jobs, which at this stage is unclear.
In May 2021, the South African Government issued a draft New Energy Vehicle Green Paper. The paper is the first step towards establishing a clear policy foundation to co-ordinate a long-term strategy to enhance South Africa's competitiveness in the global transition from the internal combustion engine into electromobility solutions and technologies. naamsa was an active participant in the drafting of the paper.
Going forward, through naamsa and our participation in the industry body's fuel committee, we will provide feedback to the dtic on the paper. One of the policy's goals is to support a positive environmental impact by:
- Continuing the transition towards cleaner fuel technologies.
- Adopting new and sustainable manufacturing processes to reduce GHG emissions.
The challenge for South Africa in its tough economic position, is the political will and the affordability of investing in the infrastructure needed to supply cleaner fuels required by modern engines that are more fuel efficient and have lower carbon emissions. Pleasingly, government has requested bilateral meetings with each local OEM to better understand their individual EV strategies and investment plans.
What consumers are concerned about in terms of EVs and hybrid vehicles
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■ Top concern
While the change to EVs and hybrid vehicles in South Africa will largely depend on government's will to support the affordability of these vehicles and stimulate consumer demand, our transition will also in part be dictated by our partner OEMs. OEMs are making headway in the production of battery, hydrogen fuel cell, liquefied petroleum gas (LPG) and hybrid vehicles. It is certain that traditional EV and hybrid technology will be preferred for passenger and light commercial vehicles, and fuel cell technology for heavy commercial vehicles that travel longer distances. We monitor global trends and OEM developments so that when policy changes are implemented in a country where we operate, we will be able to quickly adopt EVs and hybrid vehicles into our portfolio. Some OEM initiatives are briefly discussed below.
Toyota, the world leader in EVs and hybrid vehicles, is already bringing this technology to South Africa, investing almost R3 billion in the production of the new Corolla Cross – a hybrid sport utility vehicle (SUV) – at its manufacturing plant in Prospecton in Durban. Toyota has also partnered with Sasol to pilot a local 'hydrogen' freight corridor for hydrogen powered heavy-duty long-haul trucks.
BMW introduced two models in its i brand to the South African market in 2015, with growing numbers. From 2021 into early 2022, the brand plans to launch the BMW iX, BMW iX3 and BMW i4.
Mitsubishi Motor Corporation has a target to have 50% of its vehicle production being EVs by 2030, and to reduce the average CO2 emissions from new vehicles by 40% against its 2010 average. Plans are underway to launch the new Eclipse Cross and all-New Outlander – plug-in hybrid EVs – to export markets in 2022.
Kia's 'Plan S' to 2030, includes new targets for EV sales, both passenger and purpose-built vehicles. Kia estimates that by 2030, EVs will account for 40% of its total sales, with an annual sales target of 1,6 million units. More than half of these, 880 000 units, are to be purely electric. Seven models are offered on the standalone electric platform and four on combustion platforms. All 11 models will come to market by 20261.
From a base of 100 000 vehicles sold in global markets in 2020 (four models), Hyundai aims to grow its EVs to five times this base by 2025 (560 000 sales across 12 models). This will likely be a combination of fully electric and plug-in hybrid. In 2023, Hyundai will release its fourth generation of battery systems, and is preparing for the mass production of solid-state battery technology around 2027. It is aiming to lead in high-speed ultra-rapid charging, and plans to roll out its E-Pit charging stations across South Korea2.
The Renault Group plans to have EVs comprising 65% of European sales by 2025 and 90% in 2030.
In addition to manufacturing alternative drive systems, some OEMs have made a commitment to greening their supply chains. For example, Ford Motor Company has set a target to use 100% locally sourced renewable energy for all its manufacturing plants globally by 2035 and to achieve carbon neutrality by 2060. The Renault Group has a clear action plan to achieve carbon neutrality in Europe by 2040 and worldwide by 2050. Toyota Motor has moved up its target year for attaining net zero carbon emissions among group factories to 2035 from the previous deadline of 2050.
Once started, and if driven by policy, the growth in EV sales could be relatively quick in South Africa. To remain competitive, we must ensure that we have the agility required to take advantage of opportunities as they arise.
This will require that we:
- Continue to engage with our OEMs on EV products and assess their relevance for the markets we operate in.
- Maintain EV and hybrid vehicle brand positioning.
- Continue to contribute to developing automotive policy through our representation on industry bodies.
Other products and services
As part of our aim to design products that support lower carbon vehicles and to make meaningful contributions to 'mobility as a service', Financial Services piloted a ride-sharing initiative prior to the advent of COVID-19. Unfortunately, public interest in ride-sharing has reduced given the increased need for social distancing. We have gained valuable insight, which we will use to continue our exploration of new and innovative ways to support 'mobility as a service'.
Nexus is the largest automotive global parts buying group with annual buying power of €27 billion. It is represented in 137 countries and has buying agreements with 76 global component manufacturers and 12 emerging suppliers. Aftermarket Parts joined Nexus in 1 January 2021 and the business segment's Chief Executive Officer is a member of the Nexus ESG committee, which aims to benchmark the collective's ESG activities to worldwide standards, and transform the industry starting with 'clean, green' workshops. Right now, data is being mined across the industry to facilitate and guide these goals.