Significant auto sector jobs at risk without NEV policy support

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JIMMY MOYAHA: With the growing popularity of new energy vehicles [NEVs] and South Africa’s own transition objectives to new electrified vehicles – and potentially as part of our Just Energy Transition ambitions – one would think this would be the great area of opportunities for South African jobs.

However, the team at the National Association of Automotive Component and Allied Manufacturers [Naacam] is concerned that the introduction of new energy vehicles could pose a risk to existing jobs that are already in the market. We’re going to be taking a look at this in more detail with the CEO at Naacam, Renai Moothilal, who joins me on the line now to see what we make of these developments.

Renai, lovely having you on the show. Thanks so much for taking the time. Where does the area of concern come in here from a jobs perspective, particularly in the automotive space? I thought the introduction of new energy vehicles was going to be a good thing for the job market.

RENAI MOOTHILAL: Thanks for having me, Jimmy. And I think you actually contextualised it fair enough.

There are opportunities. Having said that, the reality is that South Africa does not have a demonstrated history of production in the NEV space, and many countries are already in that market in terms of producing those vehicles.

It is important that at some point our domestic production environment transitions into scale production of these NEVs.

They are starting to emerge in pockets, but not at any level of significant volume.

So the opportunity exists if we are able to transition the domestic manufacturing value chain, particularly in the component space, to produce a range of new energy vehicle components to replace what are slowing modes of production in our traditional strength, which is internal combustion-wise – ICE [internal combustion engine] production.

So let me just summarise the initial comment in that the potential for significant job loss exists if we do not proactively put in place the policy and other business support measures that will assist the South African industry to transition into a multi-pathway or technology approach, including the new energy vehicles.

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JIMMY MOYAHA: Renai, that sounds like that leaves an area of opportunity still available in this particular market, and you touched on some of the factors that need to be looked at if we are to make the most of this opportunity. I want to get your thoughts around where policy sits on this, because that forms part of how it is that automotive manufacturers choose to invest in South Africa.

We know that in the past things like policy uncertainty have been a dampener to the automotive sector. If we are to have a blended life where internal combustion engines and new energy vehicles coexist, particularly in the South Africa’s context, what needs to happen from a policy perspective?

RENAI MOOTHILAL: I think it’s really key. South Africa, just like other destinations where there’s significant auto manufacturing, relies on industrial policy and a range of incentives.

I mean, if you compare us to countries like Thailand or Mexico, Morocco, all of them have some level of state support.

So we should not shy away from the fact that South Africa has a long history of producing automotive products – both vehicles and components – but also a long history of government support necessary to continue to ensure that we maintain the levels of production that that we have.

Having said that, I do think there are a few key areas where policy needs to be looked at and recalibrated in some way. We as a sector are right now going through a review of what are known as the SA Automotive Masterplan and the Automotive Production and Development Programme [APDP] policies.

What we have noticed is, despite significant investment from a policy side into the sector, we’ve almost had a local components production, or localisation environment, that’s effectively stuck in the mud.

It’s been at about 40% for the longest time, and that really needs to be unlocked, particularly when you talk about these moves to new energy vehicles.

We really need to ramp up to get closer to the 60% target, which is the global benchmark for competitive value-chain propositions.

So what does that mean? The APDP needs to be recalibrated to almost be a little more overweight on supporting production in the component-sourcing by OEMs [original equipment manufacturers] and less towards what we know as assembly or just kind of pure assembly of vehicles.

That’s a really key policy update that we think is needed.

We also need to find a way of unlocking the domestic market. I do think there is some space for policymakers to get creative in how greater levels of South African-produced vehicles find themselves being driven by South Africans.

Right now we’ve got a heavily penetrated vehicle market where somewhere between 67% and 68% of vehicles sold in the domestic market are imported.

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So what we really need to do is to start seeing a shift back towards a more balanced supply of South African produced vehicles on the domestic market.

I do think we then need to start looking at issues around preparation of skills and technology.

One of the encouraging findings out of our research was that many of the existing manufacturing skills can easily transition into new frameworks of production, whether that’s something like NEV production or other new emerging technologies – I think of something like automated or advanced driver systems.

If we are able to build the skills base and technology base to ensure that South Africa is participating meaningfully in those parts of the value chain, I think we would have made significant progress.

And then, ultimately – investment in any new technology follows certainty.

You made the point about policy certainty. Manufacturers of both vehicles and components make investment decisions today for products that get onto the market in five, seven, 10 years’ time.

So the stability of an industrial policy is really important. But long term security of that policy framework is equally key.

So announcements around what happens post 2035 start becoming important right now.

JIMMY MOYAHA: There is definitely opportunity to make the most of new energy vehicles in South Africa, and it does not necessarily mean we have to do away with internal combustion engine vehicles either. It just means we have to find a policy that works for both. We have to find a market.

We certainly have the employees and the labour force to be able to accommodate new jobs in the automotive space.

We’ll leave the conversation on that note. National Association of Automotive Component and Allied Manufacturers chief executive, Renai Moothilal, joined us to take a look at the transition to new energy vehicles in the South African automotive space, and how that could potentially be a catalyst to creating more jobs.

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