Toyota plans to manufacture electric vehicles in South Africa.
By Roy Cokayne.
Toyota South Africa Motors (TSAM) intends to manufacture electric vehicles (EVs) in South Africa and export them to global markets, with its CEO Andrew Kirby saying on Thursday that it is crucial to the company’s sustainability that the government finalise its new energy vehicle (NEV) policy.
A huge chunk – 44% – of TSAM's manufacturing volume is exported to Europe and this is not a market the company can afford to lose, he said.
It would "have dire consequences on our business structure, on our employment, on our suppliers".
"So we really do need to get some quick response from government in terms of what aspects they are able to support us to improve the viability of investing to manufacture NE vehicles in South Africa."
Expanding on what he means by a "quick" response, Kirby said TSAM is going into an investment decision phase in 2023 for the Hilux "so within the next 12 months".
He said it is definitely TSAM's intention to start producing EVs in South Africa and referred to the latest Euro 7 emission standard announcement.
"We know the transition [to electric mobility] in Europe is going to be quite quick and speedy and that if we want to retain those exports, we are going to have to adapt to manufacturing either a low or zero emission Hilux. That is the pressure point for us.
"It has an enormous impact on our business, on the supply chain and on the economy if we lose that market and that is obviously occupying our mind."
All cars and vans sold in the EU must have zero CO2 emissions by 2035.
However, in November the European Commission published stricter exhaust emission standards that it proposes should be effective from 1 July 2025 on all cars and vans sold in the EU and by 1 July 2027 on all new heavy duty vehicles.
Minister of Trade, Industry and Competition Ebrahim Patel published a Green Paper in May 2021 on the advancement of new energy vehicles in South Africa.
The stated aim was to finalise the strategy within 90 days to allow the policy proposals to be submitted to cabinet for consideration by October 2021.
That target was missed and the government has still not finalised its policy.
Kirby said Patel announced that SA's automotive industry should expect an announcement in the Budget speech in February.
What to expect?
"We are really looking forward to seeing what that includes and if that can help us find a way to accelerate our transition [to electric mobility] as a country, and obviously as a company as well."
He added that what the automotive industry is hoping for and what it thinks will be announced in the budget "are two different things".
The hope is that there will be support for the industry to accelerate the localisation of NEVs, including by trying to make NEVs – particularly plug-ins, batteries and fuel cell vehicles – more affordable and accessible in SA.
Kirby said this is important to enable the industry to create the market for NEVs "so we can justify investing in these vehicles".
"We don't think that is going to happen. The indication that has been given is that we are likely to see, as the first phase of support, support on the supply side.
"This means there will most probably be mechanisms put in place to try and reduce the capital expenditure requirements for NEVs and we can localise those.
"The reason for that is that those lead times are much longer and the indication we have been given is that that will be addressed first – but we haven't been given clarity on exactly how those mechanisms are going to work or the extent of the mechanisms.
Kirby said Toyota does not have a specified cut-off date for when it will stop producing internal combustion engine (ICE) and hybrid vehicles and exclusively produce NEVs.
He said Toyota feels strongly that battery electric vehicles are not the only way to go and that it needs to be careful about meeting the real-life needs of its customers.
This means Toyota has a diverse approach and multi-pronged strategy to mobility solutions and is adopting an approach for hybrids, plug-in hybrids, battery electric vehicles, fuel cell electric vehicles but also zero emission synthetic fuel or hydrogen fuel ICE engines vehicles.
Kirby said battery electric vehicles may be the answer for some customers in some markets but another technology might be the preferred solution in other markets.
He added that TSAM has adopted a phased approach to the rollout of energy-efficient vehicles in SA and is gearing up to sell as many NEVs as it can – but that with limited charging stations in the country and an energy crisis, it has to do this pragmatically.
But we are committed to increasing the sale of NEVs to at least 20% of our sales mix by 2025," he said.
We don’t have all the answers yet and of course don’t have the supply yet – and one of the challenges for us as a sector is that we don’t as of yet have a committed direction or support programme from national government.”
TSAM senior VP of sales and marketing Leon Theron said that despite the floods that damaged its plant at Prospecton in Durban and stopped production for more than 100 days, Toyota retained its market leadership position for the 43rd consecutive year.
Toyota forecast total industry new vehicle sales of 540 000 units for 2022.
Automotive business council Naamsa reported earlier this month that total industry sales in 2022 grew by 14% to 529 000 units.
However, Kirby said Toyota's crisis caused by the flooding and the cessation of production meant it lost 32 000 units in the South African market.
Despite a number of challenges, Kirby forecast that the new vehicle market in SA will grow by 7.8% this year to 570 000 units and that the supply of vehicles will improve.