Africa Automotive: Budget for electric vehicles and free trade

The 2024 Budget Review: Consolidated Spending Plans document, which was released in conjunction with Finance Minister Enoch Godongwana’s National Budget Speech, revealed the Department of Trade, Industry and Competition (DTIC) has reprioritised R964-million for the transition to electric vehicles. This move aligns with the New Energy Vehicles White Paper, which was approved by the Cabinet in 2023.

Finance Minister Godongwana detailed South Africa’s financial standing during his budget speech at the Cape Town City Hall. He explained the reprioritised funds complement the funding secured for the Just Energy Transition Investment Plan and the implementation plan for electric vehicles.

Mampho Modise, Deputy-Director General: Public Finance at National Treasury, clarified the reprioritisation would not impact the DTIC’s incentive programmes. Instead, most of the reprioritised funds would come from a Special Economic Zone (SEZ) fund. The decision to stop establishing new SEZs and focus on improving existing ones was made some time ago.

Christopher Axelson, National Treasury’s Deputy-Director General for Tax and Financial Sector Policy, further elaborated on the potential impact of the incentive. He predicted it would lead to large investments and a revenue forgone of R500-million in 2026/27 as those investments start to take place.

South Africa’s focus on new energy vehicles (NEVs) comes as automotive manufacturers worldwide are accelerating the push towards electric vehicles, moving away from combustion-based ones. NEVs utilise alternative energy sources instead of traditional fossil fuels. They are designed to be more environmentally-friendly and energy-efficient, aiming to reduce greenhouse gas emissions and dependence on non-renewable resources.

By the end of 2022, South Africa had 4 764 NEVs on local roads, according to the National Association of Automobile Manufacturers of SA.

Last year, during the medium-term budget, Godongwana stated the country’s transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans. He noted that the government plans to implement tax and expenditure measures to support the automotive sector during this transition.

In his budget speech, the finance minister said: “The Electric Vehicles White Paper outlines our strategy to transition towards a broader new energy vehicle production and consumption in South Africa, starting with electric vehicles.”

The African Continental Free Trade Area (AfCFTA) agreement, ratified by the majority of African countries, aims to consolidate 55 economies into a single, competitive mega-market of more than a billion people. This would make it one of the largest free trade areas globally.

The AU projects that the agreement will stimulate revenue growth and lift 30-million of Africa’s extremely poor out of poverty. However, despite the excitement surrounding the treaty, the implementation has been delayed, pushing back potential benefits and raising questions about the AU’s ability to execute the plan effectively.

The AfCFTA, first agreed upon in July 2019, is a cornerstone of the AU’s 50-year strategy to bolster Africa’s economic growth. It seeks to deepen economic integration in Africa by facilitating the flow of goods and services between countries, promoting cross-country investments, eliminating trade barriers, and advancing open visa policies.

The AU also hopes to use the plan to boost local manufacturing and secure a larger share in global trade, where Africa currently contributes only 3%.

All AU member states, except Eritrea, have signed the agreement. They will be represented through the eight recognized regional economic blocs, including the South African Development Community (SADC) and the Economic Community of West African States (ECOWAS). The treaty became operational in January 2021.

Collectively, the agreement represents a united African market of 1,3-billion people, worth approximately $3-trillion, roughly equivalent to India’s gross domestic product. The AU aims to reduce or eliminate tariffs on 90% of products and generate an additional $450-billion in revenues for Africa by 2035. If the agreement proceeds as planned, the AU estimates Africa’s economy will expand to $29-trillion by 2050.

The AfCFTA agreement presents significant opportunities for the Moroccan automotive sector, one of the best-developed on the continent, particularly for its affordable inputs, finished exports, advantageous labor, and reduced customs tariffs. This is according to the 9th edition of the CFC Africa Insights report.

The report, titled “AfCFTA: Unlocking the Potential of Intra-African Trade,” suggests increased trade integration with African partners, especially in North and West Africa, could lead to economies of scale. Morocco is well-positioned to benefit from the establishment of cross-border value chains, and the sector also holds promise for economies across the region.

In 2022, international automotive trade reached $1,6-trillion, surpassing that of crude oil and natural gas. The report underscores how automotive supply chains, spanning across borders, enable numerous countries to contribute to vehicle production.

Under the AfCFTA, the Moroccan automotive sector stands to gain two key opportunities: access to low-cost inputs and an outlet for finished goods exports. By integrating Morocco’s automotive sector with neighboring economies, Moroccan producers can capitalize on lower labor and material costs in Africa.

The report highlights Nigeria’s current tariff on unassembled cars stands at 5%, but is anticipated to decrease to 0% by 2030. This shift could generate employment opportunities and stimulate economic growth.

In his Budget speech, South Africa’s Finance Minister emphasised: “It aims to transition the automotive industry from primarily producing internal combustion engine vehicles to a dual platform that includes electric vehicles, by 2035.

“To encourage the production of EVs in South Africa, government will introduce an investment allowance for new investments, beginning March 1, 2026.

“This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.

“The incentive will be implemented in addition to the existing support under the Automotive Production Development Programme.”

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Tata Ultrathon swings into action

The two locally assembled Tata Ultra FE+ trucks launched in Johannesburg recently mark the start of a planned Ultrathon rollout of new models covering the full range in a series the Indian truckmaker has purpose-designed to suit African conditions.

The product move has started with the Ultra T.9 and Ultra T.14, both of which house Euro IV specification engines specifically engineered to run on local Euro II grade fuel but still provide significantly improved fuel efficiency.

The T.9 has a GVM of 8 990 kg and is powered by a Common Rail diesel 3,3-litre engine with 114 kW at 2 600 r/min and 450 Nm from 1 500 r/min on offer, driving through a six-speed manual transmission, while the T.14 (GVM 14 700) has a 5,05-litre engine with 132 kW at 2 400 r/min and 590 Nm of torque from 1 000 r/min available, also using a six-speed gearbox.

Anurag Mehrotra, vice president of International Business for Tata Motors says the company vision is not so much about product or services but is dedicated to ‘connecting aspirations’.

Entire Spectrum

“Connecting Aspirations is not a tagline but is a way of life for us at Tata Motors and this means looking at the entire spectrum of trucking and transport holistically. For example, the Ultra trucks are configured to create a good and comfortable workspace for the driver, rather than simply creating spec-driven vehicles.

“Also, we look closely at our fleet customers and how we can make it possible for them to do more trips a day and with fuel efficiency good enough for them to make more money per trip – and also making sure the vehicle does not go off road or have lengthy downtimes.”

In line with the comments made made by Mehrotra, the newcomers are kitted as standard with anti-lock braking, feature a walk-through cabin and the front end has parabolic suspension for improved ride quality, while the vehicles come with a 5-year/500 00 km factory warranty and are fitted with the Fleet Edge telematics solution.

Comfort and Productivity

“Over the last three decades, Tata commercial vehicles has earned a rich reputation with its exceptional functionality, high productivity, unmatched comfort, advanced connectivity and unparalleled performance.

“We have consistently set new benchmarks by introducing smarter and future-ready products across various vehicle segments. The launch of the latest Ultra range in South Africa marks a new landmark in freight transportation in the country.

"Built on the internationally recognised Ultra platform, these trucks are engineered to cater to a diverse set of applications, deliver higher performance, vehicle utilisation, uptime and more revenue. We are committed to enabling our customers in South Africa succeed and the launch of this Ultra range is a significant step forward in fulfilling this commitment,” says Mehrotra.

Discerning Operators

“Our products and services have been designed keeping the specific requirements of the discerning South African fleet operators who seek both, power and fuel efficiency. It also addresses the need for higher safety and comfort for the drivers. The new range has been extensively tested in South Africa to ensure it delivers to the expectations of our customers.”

Len Brand

Len Brand, managing director, Tata Africa Holdings Limited, added, "We are thrilled to announce the launch of two new trucks to the Tata commercial vehicle lineup. This introduction aligns seamlessly with our commitment as a partner to Tata Motors and their vision for South Africa. The addition of these innovative products to the South African transport sector serves as a catalyst in our ongoing efforts to secure a more significant market share in South Africa. We are excited about the potential these new offerings bring and the positive impact they will have on our presence in the region.”

Uptime Promise

"With a robust network of 90 touchpoints, we are focused on providing convenient and comprehensive support to our customers. Our dedication to delivering on our uptime promise remains strong. We assure our customers of complete satisfaction as we work to keep their businesses moving forward. In partnership with Tata Motors, we're contributing to innovation and reliability in the South African commercial vehicle landscape.”

Tata Motors offers an umbrella of vehicle lifecycle management solutions that include Annual Maintenance Contracts, Extended Warranty, Fleet Management Services and host of value-added services. These are coupled with vehicle financing and curated repayment options.

Looking to the future, Mehrotra said Tata was fully committed to greener transport and would ‘likely’ consider the introduction of fully electric trucks for last-mile delivery in South Africa.

“We do have to consider all options – many of our suppliers have simply stopped making any componenents for Euro II engines, which is why we had to configure the Ultra series specifically for South Africa. In India, Tata is testing all alternatives including hydrogen to ICE.”

“We are currently able to provide customers with CNG conversions if they want them,” says Brand.

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New tech for Volvo trucks

New technology is being added to the full range of Volvo extra heavy trucks along with a bit of a front end refresh with a large and more prominent ‘Iron Mark’ – these, however only destined for local release in the fourth quarter.

“The extra heavy Volvo trucks are icons in the industry and with the latest upgrades I am confident we will further strengthen our position in this segment”, comments Roger Alm, President Volvo Trucks. “Our skilled engineers have done a tremendous job in fine-tuning our heavy-duty trucks for reduced CO2 emissions, improved safety and even better productivity and customer satisfaction.”

Waldemar Christensen, MD of Volvo Trucks South Africa, says: “Regardless of which powertrain a customer chooses – electric, gas or diesel – all variants of Volvo's extra heavy trucks will benefit from a high level of efficiency, safety and driving experience.”

An advanced new Camera Monitor System contributes to both better aerodynamics and improved safety. This new solution, which will be available locally, as an option, will replace traditional exterior mirrors and in the process give the driver a wider visual field and thus improve safety for both the driver and surrounding road users.

“The camera system has a positive impact on the driver’s visibility in rainy and dark conditions, as well as in direct sunlight and when driving in tunnels. When pulling a trailer, the camera system also has an auto-panning function that zooms in on the turning trailer,” explains Christensen. “This feature will be particularly relevant in local driving conditions where trucks often travel on unlit roads and challenging weather conditions.”

Other updates on Volvo FH, FM and FMX models:

- Volvo’s I-See technology has been refined to save energy and carbon emissions, using a cloud based topographic map to optimise the driving and enabling more driving time in cruise control mode that can both save energy and give more relaxed driving.

- Updated brakes with Volvo patented drag-free brake discs, pads and hubs, improving the braking capacity, reducing energy consumption and emissions.

- Upgraded user-friendly infotainment system that can be personalised depending on individual needs.

- Improved sound system, available with six premium high-quality speakers, a new power amplifier and a subwoofer adding massive power to the sound experience.

- A new built-in navigation system will be offered with improved maps adapted to truck-specific needs, with automatic map updates enabling efficient delivery of goods.

- Interior updates also include an integrated microwave oven and USB-C power outlets.

- Volvo Trucks’ My Business Apps offering has been introduced to more markets. This is a subscription-based service that enables customers to download business-related apps from different providers, and use them in the trucks’ side display, bringing real benefits to the uptime and everyday use of the truck.

- The new Tire Monitoring Service gives fleet operators a complete view of the truck and trailer through Volvo Connect, reducing the risk of costs and disturbances related to tire issues.
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