Load-Shedding In South Africa Is Slowing Down The Auto Industry

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South Africa is going trough its worst ever period of load-shedding, and it seems to be getting worse. We are only in the first week of February 2023 and already 2023 has seen more load-shedding than the whole of 2019. There has been more load-shedding in one month (January 2023 — 29 days of load-shedding) than in 12 months in 2019 where there were 22 days of load-shedding. According to data from the popular South African load-shedding tracking and monitoring App, ESP.info, there were 35 days of load-shedding in 2020. I am pretty sure that by the time you read this article, we will have passed 35 days of load-shedding 2023. And by the time February ends, we would have surpassed the 48 days of load-shedding experienced in 2021.

naamsa, South Africa’s industry representative that actively represents, promotes, advances, and protects the interests of local manufacturers and assemblers of passenger, light, and heavy commercial vehicles as well as major importers and distributors of new vehicles in South Africa, has lamented the distressing effects of load-shedding. naamsa represents 41 companies and recently expressed serious concern about the current load-shedding schedule. Undoubtedly, the destructive higher stages of load-shedding have an amplified the negative impact on vehicle production and component manufacturing in South Africa. “Load shedding is the biggest inhibitor to drive the industry’s localisation ambitions, create sustainable jobs within the auto sector and to further attract investment opportunities into the country to grow the South African economy,” said Mikel Mabasa, naamsa CEO.

“We welcome government’s intent announced recently to declare load shedding a national state of disaster so that urgent resources and solutions can be mobilised to assist the country to recover from the current energy crisis,” Mabasa said. Reflecting on the new vehicle sales statistics for the month of January 2023, naamsa said that the new vehicle market had started the year on a positive but weak note. Aggregate domestic new vehicle sales in January 2023, at 43,509 units, reflected an increase of 2,006 units, or 4.8%, from the 41,503 vehicles sold in January 2022. Export sales recorded a decline of 367 units, or 1.8%, to 20,536 units in January 2023 compared to the 20,903 vehicles exported in January 2022. Overall, out of the total reported industry sales of 43,509 vehicles, an estimated 36,353 units, or 83.6%, represented dealer sales, an estimated 12.1% represented sales to the vehicle rental industry, 2.2% sales to government, and 2.1% to industry corporate fleets.

The January 2023 new passenger car market saw 31,072 units being registered, an increase of 873 cars, or a gain of 2.9%, compared to the 30,199 new cars sold in January 2022. The car rental industry supported the new passenger car market during the month and accounted for a sound 16.2% of sales in January 2023. With  the rental car industry contributing close to a 5th of total new vehicle sales, it could actually be a key growth driver for EV adoption in South Africa, especially now that some more affordable EVs such as the ORA Good Cat will be coming to South Africa.

naamsa adds:

Domestic sales of new light commercial vehicles, bakkies (pickup trucks) and mini-buses at 10,622 units during January 2023 recorded an increase of 998 units, or a gain of 10,4%, from the 9,624 light commercial vehicles sold during January 2022.

Sales for medium and heavy truck segments of the industry reflected a positive performance during the month and at 461 units and 1,354 units, respectively, showed an increase of 13 units, or 2,9% in the case of medium commercial vehicles, and, in the case of heavy trucks and buses an increase of 122 vehicles, or a gain of 9,9%, compared to the corresponding month last year.

The January 2023 exports sales number at 20,536 units reflected a decline of 367 vehicles, or 1,8%, compared to the 20,903 vehicles exported in January 2022. The weak performance of the new vehicle market during the first month of the year is in line with expectations of a depressed economy along with ongoing structural problems and cost of living increases. The same challenges that confronted the economy and the automotive industry in 2022, such as persistent load shedding, high inflation and interest rates, and currency depreciation have been carried over into 2023.

During the month, the South African Reserve Bank has raised interest rates for the eighth consecutive time since November 2021 and adjusted the country’s GDP growth rate for 2023 down to only 0,3% due to extensive load-shedding and other logistical constraints. The Bank estimated that load shedding would deduct as much as 2 percentage points from growth in 2023. A close correlation exists between new vehicle sales and the country’s GDP growth rate. It is expected that unpredictability in the new vehicle market will prevail but that sales would exceed the pre-COVID-19 level in 2023. Vehicle exports performed weaker in January 2023 compared to the corresponding month 2022 but the export momentum remains upward.

Unfortunately, it looks like load-shedding will be with us for the next few years. South Africa urgently needs new generation capacity to plug the gap ASAP. South Africa’s auto sector is huge and is a key contributor to the south African economy. Companies and organizations involved in the design, development, manufacturing, marketing, importation, exportation, and selling of motor vehicles help employ over 100,000 people in South Africa. It is one of the country’s largest economic sectors by revenue and contributes 4.3% to the country’s GDP (2.4% manufacturing and 1.9% retail). The industry accounts for 17.3% of the country’s manufacturing output and is the country’s 5th largest exporting sector out of all 104 sectors and accounts for 18.1% of total exports.

South Africa’s automotive industry’s products are exported to 152 countries around the world. Stabilizing the power sector will help stakeholders in the auto industry plan better for expansion programs. It would be a sad loss if stakeholders were to put on hold some new investments in such a critical sector of the economy. In the meantime, there is also an opportunity for players in the auto sector to partner with companies in the distributed solar and battery storage industry, for example, to alleviate the pressure from the incessant load-shedding. South Africa’s C&I solar sector has been growing tremendously in recent years as consumers move to cushion themselves from the ever increasing electricity tariffs. Now is perhaps the right time for them to accelerate solar and battery storage installations to cushion themselves from all this load-shedding.

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Remeredzai Joseph Kuhudzai

Remeredzai Joseph Kuhudzai has been fascinated with batteries since he was in primary school. As part of his High School Physics class he had to choose an elective course. He picked the renewable energy course and he has been hooked ever since.

Remeredzai Joseph Kuhudzai has 734 posts and counting. See all posts by Remeredzai Joseph Kuhudzai