Gas guzzlers are here to stay
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South Africans are staring down the barrel of another massive fuel price increase next month. But, there’s a long way to go before motorists opt for environmentally-friendly electric vehicles.
Petrol is expected to rise by 87c per litre, next month, meaning that, one could pay as much as R18.26 per litre of 95 Octane in Gauteng and inland provinces and R17.54 in coastal areas in the Western Cape and KwaZulu Natal.
Unleaded Octane 93 may spike to R17.55 a litre on the coast and R18.07 inland. Diesel is expected to rise by 58c. It is forecast to cost R15.66 in Gauteng and inland areas, while on the coast one may pay R15.05 a litre.
With petrol edging towards R20 a litre, the Automobile Association’s Layton Beard, said there are many complicating factors preventing the swift transition from fuel to electric vehicles, thought the cost of fuel was not a factor.
“When people look at fuel prices, they are not looking at whether it’s going up or down as a reason to change to electric vehicles or not, and part of reason for that, is that you can get a cheaper more fuel-efficient new (fuel propelled) vehicle than a second hand electric vehicle,” said Beard.
In a week in which Volkswagen South Africa announced that the iconic Golf 8 GTI arrives in the country on September 1, at a cost of R669 300, he said, the disparity in pricing between electric vehicles and the high cost of electric vehicle ownership probably remains one of the current barriers.
“The cost of fuel, I don't think is a factor, it's not a factor yet, it may in the long term become affected when there is price parity in terms of vehicle ownership,” he said.
Earlier this month the AA, which uses data from the Central Energy Fund (CEF) to compile its forecasts, said the mid-month data indicates that petrol is set to increase by 87 cents/litre, diesel 58 cents and illuminating paraffin 56 cents. This was attributed to the weakening Rand, as a result of the riots which are expected to play a key role as the exchange rate impacts local fuel price.
The Automobile Association (AA) neither regulates or adjust fuel prices in South Africa, nor does it have any input in how the fuel prices are calculated.
Fuel prices are officially calculated and adjusted on the first Wednesday of every month by the Department of Mineral Resources and Energy. The DMRE is the only entity which regulates, sets, and adjusts fuel prices in South Africa.
Elaborating on why fuel powered vehicle will continue to thrive, Beard questioned whether there are sufficient incentives for electric vehicles. “Therein lies another issue which may not be a problem now. Fuel vehicle ensures that government gets a considerable R125 billion a year in taxes, via the general fuel levy and the Road Accident Fund.
“If we have electric vehicles on roads, where does fiscus source revenue, would that mean we would have to pay more for them? It is a complex issue but other things we need to look at are the development of hydrogen and biofuels. The AA is looking at what is good for the environment, it may be electric vehicles, but much needs to be done,” he said.
Norman Lamprecht, Executive for Trade, Exports and Research at NAAMSA The Automotive Business Council, said studies show that the running costs of an electric vehicle is lower than that of an internal combustion engine (ICE) vehicle. But the current price differential between electric vehicles and ICE vehicles remains the major challenge for the foreseeable future.
“Once price parity between electric vehicles and ICE vehicles is reached, it is anticipated that electric vehicle sales will increase if running costs prove to be lower than that of an ICE vehicle, while environmental concerns would also be a factor in consumers’ minds to switch to electric vehicles,” he said.
Lamprecht said, since there was already a carbon tax on ICE vehicles with regular increases, a preferred avenue to stimulate electric vehicle sales would be to reduce taxes on electric vehicles than to increase taxes on fuel injected vehicles.
He added that a jointly funded NAAMSA/Department of Trade and Industry, Competition (DTIC) study which began in July expects to be finalised by December 2021.
Gaylor Montmasson-Clair, Senior Economist: Sustainable Growth at the Trade & Industrial Policy Strategies (TIPS), said many believe that South Africa was behind Norway the global leader in electric vehicle consumption.
“While it’s kind of true, I don’t think we need to compare ourselves to Norway. People tend to forget most of the world are behind those leaders,” he said.
But, he said, since South Africa was already player in the game, the country should take the opportunity to start bringing electric vehicles into the vehicles into the country, getting them on the road and ensuring that people start buying them.
A window of opportunity, according to Montmasson-Clair, is the fact that on the manufacturing side, roughly half of the vehicles produced in South Africa are exported to the UK and the US markets which are rapidly shifting to electric vehicles.
“So those exports in the long term, while in the medium term, even if we don't shift, even so for me the window of opportunity is no, both on the market side and on the industrial and manufacturing side. And you know, we must We must seize it. It's a really crucial opportunity. We've seen a lot more momentum recently around this, certainly both from government and industry, and really looking forward to seeing a lot more on the ground.”
George Mienie, the CEO AutoTrader, said its 2021 Mid-Year Car Industry Report suggests that 22.5% of consumers found electric vehicles easier to drive with better performance.
“We asked respondents what were the disadvantages of an electric vehicle - initial cost of purchase currently ranks in 4th place (Charging time is 1st). However, the positive news is that this concern has reduced from 55.3% (2020) to 47.9% (2021). That said, this continues to remain a major barrier to adoption,” he said.
Mienie said, the survey clearly shows that top two advantages of owning an EV are the positive impact on the environment - namely, reduced carbon emissions and reduced air pollution.
Asked if it is likely that one would be penalised for driving fuel injected vehicles eventually in the future, Mienie said, this is not likely, but a necessary step on the roadmap to mass electric vehicle adoption - as there are carbon taxes on large engine capacity vehicles e.g. SUVs
“In order to change behaviour and drive mass adoption, one has to use the ’carrot and stick’ approach together,” he said.
The rising fuel price is unlikely to have any impact on the sale of electric vehicles.