South Africa proposes rules to entice local EV battery-making

South Africa plans to change its auto-industry incentive program to channel more support to electric-vehicle battery manufacturers, boosting the nation’s prospects of becoming a manufacturing hub for the fast-growing technology.

Trade, Industry and Competition Minister Parks Tau on Friday published draft amendments to the flagship blueprint supporting the car industry that would introduce higher production credits and customs rebates for battery makers. If enacted, the policy could help the country move from being a vehicle exporter to a shipper of processed battery minerals needed to power EVs.

The proposed changes to the Automotive Production and Development Program that he opened for public comment include adding critical minerals used in battery production to a list of standard materials eligible for incentives if they are processed in South Africa or neighboring countries.

It would double the proportion of materials that could be eligible for support to 50%, unlocking more credits for manufacturers.

The auto sector makes up the biggest share of South Africa’s manufacturing and its contribution to the country’s economic output rivals that of the mining sector, but it is buckling under the pressure of rising costs and a flood of cheaper imports from India and China. About two-thirds of vehicles produced in South Africa are exported, but shipments have declined because of trade wars.

Companies with local operations, including giant manufacturers Toyota Motor Corp and Volkswagen AG, have sought urgent policy interventions to help them compete, with unions and investors joining forces to make the call.

China currently dominates the processing and refining of rare-earth elements such as lithium, manganese and nickel that are used in everything from smartphones, drones, EV-motors and wind turbines. South Africa is the world’s top supplier of manganese ore, a key steelmaking ingredient, holding about 70% of global identified resources.

The draft explicitly expands eligible products to include battery-electric, hybrid and fuel-cell vehicles in an attempt to make sure the local industry remains competitive as global markets tighten emission standards.

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