ELECTRIC VEHICLE INDUSTRY ROAD MAP

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1 ELECTRIC VEHICLE INDUSTRY ROAD MAP July 2013 KEY ACTION PLANS ANNEXURE 1

2 KEY ACTION PLAN 1 : GOVERNMENT VEHICLE FLEET PROCUREMENT POLICY TO INCLUDE ELECTRIC VEHICLES FROM 2015 Nature of the intervention: Develop policies to ensure that 5 percent of total annual fleet requirements by both the State and State Owned Enterprises comprise of Electric Vehicles, increasing by 5 percent thereafter until 2020 Economic rationale: Stimulate support measures for the establishment of an EV Industry in South Africa as well as stimulate demand for locally produced EVs. Increase viability of local manufacture of EVs and investment in the automotive industry by OEMs Outcomes:. Local production and operation of EV by Increased usage of EVs by Demand stimulation by government Attract FDI and technology advancements Key milestones 2013/14 Q2: Conclude engagements with NT on proposals for state procurement of EVs Issue letter from dti minister to NT minister Hold meetings between dti / NT Draft proposal identified and agreed 2014/15 Q1: Draft amendment to procurement policy completed EV procurement policy drafted EV procurment policy approved by NT SCM committee 2014/15 Q3: Approval of cabinet memo for amendment of SCM policy Stakeholder engagements and request for public comment Consideration of inputs from engagements Finalise draft for submission to cabinet Submission to cabinet and approval 2014/15 Q2: Procurement guidelines amended NT issue practice notes to government departments engagements with major procuring entities Lead departments: the dti / NT Page 2

3 Supporting departments : DoT, NT, provincial and local governments and targeted Metros Details of the Intervention: The South African Government through NT, procured approximately R8,0bn worth of vehicles during the period 2007 to During 2010/11 year further substantial vehicle procurements were made (figures to be aggregated).approximately 80% of the value procured has been from the major OEMs: VWSA, Toyota, GMSA, Nissan and Ford and the vast majority purchased fall into the 1,3l to 2,0l four door sedan category, the vehicle class which could be substituted by the entry level EV category intended for introduction and those already in production. Global players such as China and the US have already implemented initiatives by setting targets for EV procurement for their state fleets. In South Africa, Government s purchasing power can be used effectively to stimulate the uptake and demand of EVs in the market. Government vehicle fleet to constitute 5% EVs with minimum local content criteria prescribed starting form 2015 The intervention will include key activities such as: Stakeholder engagement at high level ( NT/dti) Drafting of appropriate supply chain management policy ( SCM) amendments Consultation with all stakeholders regarding the amendments to SCM policy Processing the amendments until cabinet approval Ensuring relevant spheres of government are well informed on the EV procurement policy Risk Factors to be taken into account: Risk factors to be considered that may delay the intervention or result in an ineffective deployment include: Resistance by state user departments to procure EVs due to the nature of the vehicle application EVs have a limited driving range and top speed. Concerns over the cost of EVs the battery cost is a major concern in the EV production resulting in the delay of SCM guideline amendment approval. Other alternate fuels options which also result in lower emissions may be promoted resulting in the support and uptake of EVs declining. Page 3

4 Risk Mitigation Options: The environmental and economic impact of introducing EVs should be clearly demonstrated ( qualitative / quantitative ) i.e total CO 2 reductions per annum and percentage contribution towards 2020 emissions reduction target, job creation potential and development of R& D skills in SA. The total cost of ownership ( EV vs ICE) should be illustrated to show the long term saving on fuel, maintenance etc. Lead environmental advocates should make a strong case for EVs in view of SA s pledges to global CO 2 reduction Page 4

5 KEY ACTION PLAN 2: PROVISION OF INVESTMENT SUPPORT FOR THE MANUFACTURE OF ELECTRIC VEHICLES AND COMPONENTS Nature of the intervention: Amendment of the Automotive Investment Scheme (AIS) of the Automotive Production and Development Program (APDP) to enable Electric Vehicles and related components to participate in the scheme through the reduction of qualifying annual units per plant quota to units annually per plant. Economic rationale: Direct and Indirect employment generation; Promotion of new technologies as well as innovation; Promotion of R& D skills; Improvement in the trade balance; Development of local automotive design capacity and capability; Higher levels of local content if battery manufactured locally; Increase viability of local manufacture of EV Outcomes: Viable local manufacture of electric vehicles. Key milestones 2013/14 Q1: Submit Amendment Memorandum to The Enterprise Organisation (TEO) to amend the annual quota of the AIS for EVs. 2013/14 Q4: AIS Guidelines amended reflecting the new qualify criteria for EV Original Equipment Manufacturers. 2013/14 Q4: Amended guidelines submitted to the AIS Committee for implementation. Lead departments: the dti The AIS is administered by the dti only. Supporting departments: NT Page 5

6 Details of the Intervention: The industry is relatively still very small compared with Internal Combustion Engines vehicles market with global production of 77.9 million cars in Economies of scale do not motivate for local manufacture of EVs in South Africa without appropriate investment support from government. The AIS is an incentive designed to grow and develop the automotives sector through investment in new and/ or replacement models and components that will increase plant production volumes and/ or strengthen the automotive value chain. It provides for a taxable cash grant of 20 percent of the value of qualifying investment in productive assets approved by the dti as well as an additional taxable cash grant of 5 or 10 percent for so-called strategic projects. In order to qualify under the Automotive Investment Scheme, Original Equipment manufacturers should be able to manufactured units annually per plant. The industry is at its infancy stage and limited number of electric vehicles to be manufactured locally is anticipated. Reduction of the to units per plant annually for the manufacturing of Electric Vehicles is recommended to allow viable local manufacture of EVs. It is further recommended that EV manufacturers qualify for the additional 10% for strategic project if they achieve more than one economic benefit requirement (employment creation, tooling, Research and Development in SA related to the project and the strengthening the automotive supply chain ) as well as increase in unit production per plant for OEM s in the second year of production. It is further recommended that Components Manufacturers should achieve an increase in turnover for related EV component in addition to achieving more than one economic benefit requirements to qualify for the addition 10% for strategic projects. Risk Factors to be taken into account: Lack of general agreement on what constitutes local manufacture and not local assembling of EVs. Unavailability of OEMs manufacturing EVs locally. Risk Mitigation Options: Consensus on the level of local content deem appropriate. Promotion of local EV manufacturing. Page 6

7 KEY ACTION PLAN 3: DEVELOPMENT OF REGULATORY FRAMEWORK AND TESTING INFRASTRUCTURE FOR THE INTRODUCTION OF EVS Nature of the intervention: Develop the legislative framework required for the introduction, safe manufacturing and operation of EVs in South Africa. Economic rationale: The development of an electric vehicle industry will have a number of positive spin- offs for South Africa in the area of employment creation, value addition, technological advancement, foreign currency earnings and general business confidence. Outcomes: EVs and components homologated and tested in South Africa Legislative and regulatory environment for electric vehicles established. Relevant testing infrastructure for EVs established Compulsory specifications developed / adopted by SA for EVs Key milestones 2013/14 Q2: Adoption of ECE regulations for EV introduction in South Africa. 2013/14 Q3: Development of compulsory specifications for EVs 2013/14 Q4: Approval of regulations and promulgation. Completion of all testing infrastructure requirements. Lead departments/agencies: the dti / SABS / NRCS Supporting departments/agencies : DoT, CSIR Details of the Intervention: The development and enactment of legislation including regulations is a core function of Government and the regulatory framework for the introduction and testing of EVs will be to a large extent determined by SABS. Page 7

8 SABS publishes national standards which it prepares through a consensus process in technical committees, provides information on national standards of all countries as well as international standards. NRCS is mandated to advise the Minister of Trade and Industries on matters relating to compulsory specifications, and develops compulsory specifications and other relevant regulations on his behalf. The dti, by virtue that it is the controlling body of SABS and NCRS will ensure that the necessary legislative framework is established and the necessary compulsory specifications introduced Activities included in the intervention: Consultation with all identified stakeholders Adoption of UN s ECE R100 ( Electric Vehicle Specifications ) for South African EV regulatory requirement Drafting of proposed regulations Publication of regulations in the Government Gazette for public scrutiny, comments and objections Notification of WTO members Consideration of submissions by a review committee and approval by the Board of the NRCS Ministerial approval and promulgation in the Government Gazette. Establishment / amendment of testing facilities Risk Factors to be taken into account: Time to draft compulsory specifications for EVs - may prove lengthy exercise Current testing facilities may require major adjustments to accommodate EV testing leading to delays for approvals. Compulsory testing requirements emanating from ECE R100 adoption may require additional resources at SABS if tests required are additional to current regulations. Risk Mitigation Options: Testing infrastructure development plan to be developed and discussed with all stakeholders Support for testing infrastructure Page 8

9 KEY ACTION PLAN 4: FOSTER ENERGY STORAGE RESEARCH AND DEVELOPMENT INITIATIVES TO REDUCE COSTS Nature of the intervention: Establishment of a Centre of competence for EV Battery Economic rationale: - R & D Skills development - Promote the introduction of new technologies - Promote battery advancement in South Africa - Creation of local Intellectual Property for battery manufacturing Outcomes: Centre of competence for EV Battery established Cost reduction of EV ownership Key milestones 2013/14 Q3: Formulate EV R & D team and TOR 2013/14 Q4: Develop proposals for R& D support initiatives 2015/16 Q1: Development of R&D fund and training allowances for pilot plant studies in support of commercial EV battery development by University graduates or science councils 2015/16 Q4: DST to establish Centre of Competence for EV battery Lead departments / agencies: the dti / DST / CSIR / IDC Supporting department / agencies : Academic Institutions, Private sector Page 9

10 Details of the Intervention: R&D activities have proved to be critical in EV industry globally especially with regards to EV battery technology Global research indicates that research and development to reduce battery costs is critical for market entry and acceptance of EVs. In order to achieve comparative costs with internal combustion engines (ICEs), battery costs must be reduced by almost half by 2020 or sooner. Government support is required to offset initial costs for battery manufacturing plant start-up efforts by funding R& D at component manufacturing level at attractive rates of the required investment. In addition funding for research and training in support of EV battery development by University graduates or science councils is to be provided. Government support for other innovative energy storage research is also to be considered. Risk Factors to be taken into account: High R& D costs associated with battery technology development Commercialisation of battery not guaranteed due to various issues i.e cost model, financiers, suitable partners, investors Global EV battery manufacturers well ahead of South Africa at this stage resulting in competitive issues Risk Mitigation Options: South Africa to use its Mineral Resources to gain a comparative advantage Create partnerships to reduce costs and solicit skills transfer Utilise Public Private Partnerships where possible Page 10

11 KEY ACTION PLAN 5: INFRASTRUCTURE ( ELECTRICITY ) Nature of the intervention: Introduce preferential tariff schemes and intelligent charging methods to encourage off peak charging of EVs and also optimize electricity usage during charging. Economic rationale: Reduce charging costs and promote usage of EVs over conventional fuel driven vehicles. Outcomes: Preferential electricity tariffs for EV users. Intelligent charging systems introduced. Key milestones 2013/14 Q2: Draft tariff scheme proposals by DoE / Eskom. 2013/14 Q3: Develop Intelligent charging systems 2013/14 Q4: Action plan for charging system roll out developed. Lead departments / Agencies: the dti / DoE / Eskom Supporting departments / Agencies: Provincial Government, Metros Details of the Intervention: DoE is to formulate tariffs that provide incentive for EV use.tariffs to be time of use specific to encourage off peak charging NERSA to require Distributors (Eskom and Municipalities) to roll out tariffs within a set time frame. The above will require smart metering and smart charging to be rolled out in parallel so that EV use/charging/tariffs can be ring-fenced. DST to determine best practice technology in collaboration with industry. Government to produce a plan to install EV charging infrastructure at key points in Page 11

12 metros and high traffic nodes to encourage use of low range EV options. Risk Factors to be taken into account: Insufficient public charging points Tariffs may result in EV uptake deterrent Risk Mitigation Options: Proposed pilot projects to determine optimal charging points Prioritise preferential tariffs Monitoring mechanisms to be put in place Page 12

13 KEY ACTION PLAN 6: TAX INCENTIVES FOR ELECTRIC VEHICLE PURCHASERS Nature of the intervention: Development of a variety of tax benefits to encourage the purchase of Electric Vehicles in South Africa. Tax benefits to include, amongst others: personal income tax rebate, reduction of VAT on Retail Selling Price, vehicle registration costs Economic rationale: Stimulate demand for EVs to support the start up of an EV Industry. Outcomes: Increased demand for EVs. Local EV production viability increased. Key milestones 2013/14 Q2: Tax benefit proposals investigated and discussed with NT. 2013/14 Q2: Draft Tax benefits Proposal 2013/14 Q3: Draft Tax Rebate Proposal with the public s inputs finalised Final Draft sent to NT Lead departments / Agencies: the dti / NT Supporting departments / Agencies: SARS Details of the Intervention: NT has introduced a carbon emissions tax based on a threshold of 120 g CO 2 / Km vehicles emitting CO 2 levels above the threshold will be taxed accordingly ( a sliding scale rate ). This is a once off tax charged during the vehicle purchase transaction. In essence, vehicle owners have been dis-incentivised to buy high CO 2 emitting vehicles as part of the on-going drive to reduce harmful greenhouse gases globally. EVs by nature of their design will emit CO 2 at levels below the tax threshold and therefore will not be subject to carbon taxes. As EVs may prove to be a new concept to the majority of South Page 13

14 Africans, their uptake will require innovative assistance schemes for consumers. Globally, Governments are providing upfront vehicle purchase assistance as well as tax rebates. A basket of tax benefits could prove beneficial to entice consumers to consider purchasing an EV or to switch their next vehicle purchase to an EV. There are sufficient tax incentive models available globally for the South African Government to research and benchmark, as was in the case of the introduction of Carbon Taxes. Risk Factors to be taken into account: Financial implications may outweigh the benefits Short term inducement without providing a sustainable EV Industry Tax incentive model does not reach intended market Risk Mitigation Options: Tax incentive must be thoroughly researched and costed Consumer survey should be conducted to assess EV awareness and appetite, as well as to solicit tax incentive ideas Propose for private sector initiatives to compliment government tax incentives Page 14

15 KEY ACTION PLAN 7: IMPROVE ELECTRIC VEHICLE CONSUMER AWARENESS & PUBLIC EDUCATION Nature of the intervention: Development of EV Consumer Awareness and Public Education Campaigns designed to educate the public on EVs as well create an appetite for EVs in South Africa. Economic rationale: Increase potential market for EVs leading to: - Improved viability for local EV production - Employment generation and investment in the domestic automotive industry Outcomes: Increased public and consumer awareness for EVs. Potential target market for EVs identified. Key milestones 2013/14 Q1: Data collection and collation on markets and consumer driving behavior 2014/15 Q2: Identify and Formulate EV Consumer and Public Education Campaign Task Team and develop a Terms of Reference 2014/15 Q3: Identify all resources required and develop an EV Consumer and Public Education Campaign Strategy 2014/15 Q4: Roll out EV Consumer and Public Education Campaigns in Major Cities in all provinces. Lead departments: the dti / DOT / DoE / Dept of Environment / GCIS Supporting department: DST/ Automotive Industry Details of the Intervention: Anecdotal research indicates that lack of public awareness and education are key limiting factors to the uptake of EVs since prospective buyers require sufficient information when deciding to make a purchase. In addition, prospective customers need an understanding about the type of the EVs Page 15

16 to consider based on the benefits available. Lessons learnt in other countries also point out that even though governments have in place massive customer incentives, without proper understanding of the environmental and personal benefits of using an EV the level of uptake will remain low In considering an EV awareness and advocacy campaign in South Africa to increase the awareness and educate the public about the benefits of using electric vehicles, collaboration between the private and public sector will be highly required. The primary objective of the public sector is to promote aware of reducing harmful gases to the environment whereas the private sector will be also on the benefit of driving an EV. The intervention entails identification of key stakeholders, both private and public, to develop a joint EV Awareness and Public Education Campaign to increase the benefits of EVs as well as their interest in adopting them. The Campaign will be rolled out in various media channels such as print and multi-media. Risk Factors to be taken into account: Lack of relevant data needed to develop the campaign. Target audience not correctly identified. Campaigns ineffective at increasing awareness and creating consumer demand. Resistance to the idea of EVs due to the choice of EV available. Lack of collaboration between key stakeholders. Risk Mitigation Options: Conduct market research prior developing the EV Awareness and Public Education Campaign Identify and include all key stakeholders. Indentify key role of all stakeholders. Page 16

17 KEY ACTION PLAN 8: THE PLANNING AND MANAGEMENT OF URBAN INFRASTRUCTURE Nature of the intervention: Planning and provision of infrastructure in Metropolitans in preparation for the establishment of the electric vehicle industry in South Africa. Economic rationale: Increase the level of integrated planning in the areas of transportation, urbanization and enabling infrastructure that leads to economic activity in new technologies and sustainable city development Outcomes: Well integrated transportation and public transport system which optimizes and encourages flexible transport modes and alternate - fuel vehicle usage resulting in emissions reductions Investment in infrastructure that enables Electric Vehicle charging and operation Creation of public spaces that allow electric vehicle charging including the usage of energy efficient technologies Integration and incorporation of the EV Industry Road Map in Metropolitan Cities. Key milestones 2013/14 Q2: Development of Detailed Projects Plans 2014/15 Q4: Integrated Metropolitan City Plan that include infrastructure planning that enables the uptake of alternate vehicle technologies, flexible transportation and sustainable city developments Page 17

18 Lead departments: the SALGA / Municipality Metropolitans / DoT / DEA / DED Supporting department: the dti / Business Details of the Intervention: SALGA have identified the role of local Government as one of the key success factors in the rollout of an EV industry. On a global scale, sustainable city planning has emerged as one of the factors that unlock the mass roll-out of EVs. The intervention promotes integrated urban planning in the following areas: Public Transport well integrated public transport and supporting infrastructure can improve transport by avoiding congestion, optimising flexible use of various transport modes. Sustainable Development with more people moving to cities, the demand is increasing for sustainable development projects in energy, transportation, water and healthcare. Enabling infrastructure an electric vehicles require a network which is an infrastructure system of publicly accessible charging stations. This requires all stakeholders including local government and OEMs to develop agreements to create the network. Mobility and integrated planning intelligent systems for optimal planning of new infrastructure is required assist the planning process for city growth. Economic Development Providing eco-friendly transportation requires products and solutions for industry to support economic development. Risk Factors to be taken into account: Dissemination/communication of information to relevant authority. Relevant authority mandate conflict. Lag of initiatives in regions. Lack of training in energy and environmental issues. Un-coordinated planning leading to lack of inclusion of green initiatives. Page 18

19 Risk Mitigation Options: Promotion of green initiatives at National level. Stakeholder forum development including private sector. Introduction of regular green initiative promotion campaigns. Promotion of generic recommendations across municipal plans for green transport and urbanization initiatives. Industrial support programmes at the municipal level for green transport and urbanization development. Page 19

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