DTI opposed to temporary scrapping of EV duties, but open to EU tariff re-set

20 Apr 2018

Engineering News, 20 April 2018
By Terence Creamer

The Department of Trade and Industry (DTI) has confirmed that it is opposed to reducing protection on the import of electric vehicles (EVs) as a way of increasing domestic demand, arguing that automotive firms should, instead, use the duty offsets available to them through production rebate credit certificates to increase EV imports.

The department estimates that the original equipment manufacturers (OEMs) have accumulated R6-billion-worth of production rebate credit certificates.

Industrial development division automotive unit director Tinyiko Mafuwane tells Engineering News Online that government views EVs as a future industrialisation opportunity and that a level of protection will be necessary to ensure the viability of any move to manufacture EVs locally.

The department is, thus, not supportive of a proposed temporary scrapping of EV tariffs, describing such a move as contrary to the local-production objectives of the Automotive Production and Development Programme (APDP), which will remain policy until 2020.

The policy position thereafter, which is expected to include support for new technologies, including the local manufacture of EVs, will be released only once Cabinet approves the APDP successor programme. Mafuwane tells Engineering News Online that such approval is “imminent”.

Currently, a tariff of 25% is in place for electric passenger vehicles, while electric busses and trucks carry a duty of 20%.

BMW South Africa, with the support of Nissan South Africa, have submitted an official request to the International Trade and Administration Commission of South Africa (Itac) for a scrapping of duties on pure EVs for a period of three years. Thereafter, a 10% import duty is proposed.

Itac is yet to make a determination, but the DTI has confirmed that it has outlined its opposition to the proposal during Itac consultations.

Mafuwane noted that government policy, as articulated in the APDP, seeks to promote the production and export of domestically produced vehicles.

“The net effect of the proposed tariff reduction could lead to a surge in completely built-up (CBU) imports of EVs to the detriment of the local vehicle assembly and component supply industries and ultimately employment in the sector.”

However, BMW SA has described the main aim of the application as being to stimulate the growth and uptake of EVs in South Africa by making them more affordable to a wider customer audience.

“A reduction in the import duty will further create a more competitive market, with a wider offering for customers. A secondary benefit will be the attraction of potential long-term investment in electro-mobility in South Africa,” the company has argued previously.

The DTI counters that, in applying for temporary relief, the OEMs have failed to provide clarity on how the scrapping of protection will affect demand and what the associated socioeconomic benefits could be. In addition, in the absence of a firm OEM commitment to produce EVs domestically, government believes lowering protection could limit the space for future industrial policy interventions.

Nevertheless, some relief may emerge as a result of ongoing trade discussion between South Africa and the European Union (EU).

South Africa is concerned about the current surge in the import of 1 000 cc internal combustion engine vehicles, which currently attract no duty. To mitigate the threat, the DTI is considering opening negotiations with the EU to re-set the tariff rate at 18%, the preference level that applies larger ICE CBUs imported from the EU.

“It may therefore be attractive for the EU to secure a 7% advantage for battery electric vehicle (BEVs) into the South African market, especially given the EU’s own rapid transition to BEV market consumption, and the potential threat of US and Chinese competitors in this rapidly evolving vehicle technology,” Mafuwane suggests.

This process, she stresses, is still at an investigation stage within the South African government. “Once an inclusive position has been formulated, the relevant EU authorities would be informed.”