South African electric mobility market
There are several emerging opportunities in the South African electric vehicle (EV) market for foreign companies and investors looking to enter the South African electric mobility market. South Africa has a well-developed automotive assembly industry that will need to transition towards the manufacturing of EVs in the years to come.
The four key market opportunities that have been identified as attractive sectors for investment in the EV industry in South Africa are:
a) local manufacturing and electrification of public transport
b) electric micro-mobility for last-mile delivery
c) local manufacturing of electric private passenger vehicles
d) local lithium-ion cell manufacturing.
According to the Climate Transparency Report (2021) South Africa’s transport sector contributed to 12% of South Africa’s greenhouse gas (GHG) emissions from fuel combustion. South Africa aims to reduce transportation related GHG emissions by 5% by 2050 by implementing the South African Green Transport Strategy, 2018. Electric Vehicles (EVs) are an important mechanism for the decarbonization of the transport industry through the reduction of direct tail-pipe emissions. A transition to zero-emission vehicles could contribute significantly towards achieving South Africa’s GHG emissions reduction targets.
The vehicle market segments which have been identified as market opportunities for investment with regards to EV uptake include public transport, micro-mobility, and private passenger vehicles. The electric minibus taxi industry has a total addressable market size of 356,485 vehicles that is valued at approximately $27 billion. The unit cost of an electric minibus taxi has been estimated at $75,000 including import taxes. The electric bus industry has a total addressable market size of 65,329 vehicles that is valued at $23 billion. A unit cost of $350,000 per bus has been estimated to calculate this market size. The South African electric private passenger vehicle market size is approximately 7.8 million vehicles with an estimated value of $390 billion (assuming $50,000/vehicle)
The market shift towards fleet electrification in each of the vehicle segments is driven by different factors ranging from rising fuel costs, government procurement practices favorable to EV uptake (particularly in the Western Cape) and a greater focus on environmental, social, and corporate governance (ESG) aspects of business. In niche markets, such as safari game viewing vehicles, a key driver for electrification has been the relative quietness of EVs which prevents wildlife from being scared away during game drives. In the mining industry, the case for the electrification of underground mining vehicles is driven by decreased requirements for cooling and ventilation when using EVs.
Other industrial vehicle fleets are expected to become electrified in the medium to long term as battery range technology advances. The barriers to EV uptake in the identified market segments include: limited public charging infrastructure, high capital costs associated with procuring EVs and limited market availability with regard to affordable and fit-for-purpose EVs. One of the identified contributors to the high cost of EVs in South Africa is the customs duty of 25% that is applied to imported EVs, as well as the additional ad valorem (luxury goods) tax that is applied to imported vehicles.
There is an investment opportunity for the local manufacturing of lithium-ion cells in South Africa to supply both the EV manufacturing and stationary energy storage industries. This is driven by the availability and relative ease of access to lithium, cobalt, nickel, manganese and other critical raw materials in South Africa and the sub-Saharan Africa region.
The four key market opportunities mentioned above hold potential for U.S. investors, original equipment, manufacturers (OEMs), technical advisors, component and manufacturing equipment suppliers in the electric vehicle market in South Africa.
For further information, please contact:
Jaisvir Sewpaul
U.S. Commercial Service, South Africa
Jaisvir.Sewpaul@trade.gov
Sources: Green Cape (2023) – Electric Vehicles Market; Automotive Export Manual; Auto Green Paper on the Advancement of New Energy Vehicles in South Africa; National Association of Automobile Manufacturers of South Africa (2020).