I recently came across an article that mentioned that Ford Global would be more than doubling its investment in electric and autonomous vehicles to $29 billion (R422bn) by 2025. That’s a BIG number! And only OEMs that lead the electric vehicle future will WIN! After reading the article I had a few questions, like:
- What does this mean for the automotive industry?
- Where does that leave South Africa?
- Are we ready for an EV future?
So I decided to speak to the Managing Director: Ford Southern and Sub-Saharan Africa, Neale Hill, to give a bit more context into this massive investment and to gauge where OEMs are towards fast tracking us to an Electric Vehicle future.
Ford South Africa is ready for an electric vehicle future
According to Neale, Ford South Africa is ready to be part of the electric vehicle future in South Africa. Whilst Ford SA may be ready, the reality is that all of the 7 OEMs represented in South Africa, still operate as part of a global automotive industry. This means that with the rate of change happening in the world, South Africa would naturally follow suit or risk being left behind.
Whilst the real questions that most people battle with are:
- How will South Africa cope given the current situation at Eskom?
- How do electric vehicles fit into South Africa?
Neale believes we will continue to see the acceleration too electric vehicles amongst OEMs within the next two to three years with the second half of this decade becoming even more aggressive.
OEMs need to adapt to an EV future
When I look at the context of where we find ourselves as South Africa, I realise that:
- South Africa is not a designer or manufacturer but an assembler of cars
- 60% – 65% of the vehicles we manufacture are exported to Europe or China,
- Domestic demand is not nearly enough to sustain local assembly and investment by OEMs.
Which very well means that we need to get to a point where we retool our plants very quickly in order for us not to lose out on the +/- 65% export revenue. Which needs to be done by 2030 – given the deadlines where European countries will stop accepting Internal Combustion Engines (ICE).
Neale further reminds us that car manufacturers or assemblers have to ensure that as these deadline dates loom, they need to produce cars suitable for the export market as export customers will become more of a priority. I’m excited to learn that the entire automotive industry is coming together to discuss what the future holds for the automotive industry of South Africa.
Will OEMs transform or build EV’s from scratch?
I recently had the pleasure of driving a Volvo XC 90 Hybrid, which led me to wonder whether OEMs would steam roll ahead to full on electric or would they consider the progressive approach from ICE to Hybrid to Electric. Ford on the other hand has decided to develop all technologies to simultaneously appeal to all markets.
However, when one looks at where some of the trends and the vehicles being released, it’s evident that more and more full battery electric vehicles are starting to feature prominently, not only for Ford but across other manufacturers as well. A case in point is the Ford Mach-E; also electric, has received a positive reaction from customers in North America.
Ford seems to be ready for a fully electric future by investing in technology that designs the car from scratch instead of retrofitting an existing car to help them compete aggressively in the different segments. Currently Ford have designed a vehicle from the ground up and may be ready to launch a purpose-built full electric vehicle with all the capabilities in terms of battery storage, a range of over 550 kilometers on the vehicle and performance to boost as well. If you’re to ask me that’s pure brilliance!
Now that we’ve got the specs right for the consumer, let’s address the elephant in the room i.e. price. We need to make sure every South African out there can afford these cars because right now the main challenge for the average consumer is price. We know electric vehicles attract +/- north of 25% import duty, excluding the ad valorem tax, making the purchase price for the vehicle almost impossible for the average car shopper to own an electric vehicle.
OEM franchise model under threat
Whilst all these changes are rapidly accelerating, it’s evident that our current franchise model could also be under threat as new entrants such as Tesla and BMW are already using the agency/direct model to sell to the consumer.
Neale acknowledges that Tesla has in fact presented more opportunities for change but also admits that within this new model the concept of the middle men/car dealerships could be negatively impacted.
Neale highlights that the pandemic has taught us that consumers are ready to buy cars online, it’s also a space OEMs would need to embrace quickly as consumers will soon be placing orders for vehicles online and dealing directly with the manufacturer. As OEMs, the dealer network will require its full support even through the transition.
My hope is that whatever changes come our way, they are all for the good of the South African automotive industry, after all we contribute a major part to the country’s GDP.