China, Europe, and the United States represent around two-thirds of total car sales and stocks, meaning that the EV transition in these markets has major repercussions in terms of global trends.

1. Global electric vehicle (EV) sales are projected to remain robust in 2024, reaching around 17 million by the end of the year. In April 2024, global EV sales reached 1.1 million units, with year-to-date sales of 4.3 million, 22% greater than the same period in 20233. The revenue in the Electric Vehicles market is projected to reach US$623.3 billion worldwide in 2024, with an expected annual growth rate of 9.82%

BEVs are battery-electric vehicles. PHEVs are plug-in hybrid electric vehicles. FCEVs are fuel-cell electric vehicles. EVs refer to all electric vehicles. Battery electric vehicle sales are expected to reach 33,000,000 by 2030 and to increase to 55,000,000 by 2035 worldwide.

While sales of electric cars are increasing globally, they remain significantly concentrated in just a few major markets. In 2023, just under 60% of new electric car registrations were in the People’s Republic of China (hereafter ‘China’), just under 25% in Europe,2 and 10% in the United States – corresponding to nearly 95% of global electric car sales combined. In these countries, electric cars account for a large share of local car markets: more than one in three new car registrations in China was electric in 2023, over one in five in Europe, and one in ten in the United States. China exported over 4 million cars in 2023, making it the largest auto exporter in the world.

During 2023 it became the first year in which China’s New Energy Vehicle (NEV)3 industry ran without support from national subsidies for EV purchases, which have facilitated expansion of the market for more than a decade. Tax exemption for EV purchases and non-financial support remain in place, after an extension, as the automotive industry is seen as one of the key drivers of economic growth.

2. Government policies and the tax environment contribute to the development of the EV market just as is the case in South Africa. Whilst the automotive industry has a positive impact on the South African economy, the cost of the fiscus is offset by the revenues earned through taxes collected. During the five years from the 2017/18 tax year to the 2021/22 tax year, corporate income and personal income taxes collected from the automotive industry covered the cost of industrial support provided through the APDP, providing a net neutral position for the fiscus while creating substantial economic gain.

Central to the Department of Trade and Industry is its focus on the domestic production of EVs. “We view this as the cornerstone of the transition, fortified by tailored market development interventions. Our technology-agnostic stance recognises the rapid evolution of the automotive landscape and positions South Africa as a production destination for vehicles and components in emerging technologies. The commitment to public measures including fiscal support, is clear. Successful management of the transition is a pro-growth and pro-investment strategy.”

One of the policy statements of the government revolves around the commercialisation of green hydrogen. This will involve Industry, the Presidency, the Department of Trade and Industry (DTIC) Industrial Development Corporation (IDC), the Development Bank of South Africa (DBSA) National Treasury, (NT), the Department of Minerals and Energy (DMRE), to ensure the production of green synthetic fuel.

The electrification of two- and three-wheelers (2/3Ws) and public or shared mobility will be key to achieving emissions reductions in South Africa. South Africa’s taxi industry consists of over 1,200 associations scattered across the nation comprising almost 150,000 individual owners whose vehicles transport millions of workers each day doing a total of fifteen million trips, in total generating around R90 billion in revenue a year. Taxis also pay more than R36 billion for fuel per annum; with service, maintenance, finance, and insurance costs also stretching into the tens of billions. An operator who wishes to expand his fleet with new vehicles and to apply for finance must have proof of where their income originates from, where they keep it, and that they pay their dues to the country’s revenue service, else they would not be able to continue doing business by the book, something that is often required to be part of an association. Finance for new electric vehicles at the current price of electric vehicles will prove a major headache for the industry, consumers, and the government. Affordability will prevent raising the cost of transport and in turn, finance will not be available at a cost per trip that does not make the business plan viable. This aspect alone will prevent the fast adoption of the EV for taxi transport.

3. The world is increasingly looking towards green hydrogen as an energy solution to reduce CO2 emissions.

The commercialisation of green hydrogen is making steady progress but still faces challenges related to cost, infrastructure, and scalability. Herby a few important issues:

a. Cost Reduction

Electrolysis Efficiency: Green hydrogen is produced by splitting water through electrolysis using renewable energy (e.g., solar or wind power). The cost of electrolysis is gradually declining due to technological advancements and scaling up production. However, it remains more expensive (some estimates indicate a fourfold level compared to hydrogen produced from fossil fuels (grey or blue hydrogen).

b. Infrastructure Development

Production Plants: Several large-scale green hydrogen production projects are underway or planned around the world. Major initiatives are concentrated in Europe, Australia, and the Middle East, where renewable energy resources are plentiful.

4.Transportation & Storage: Infrastructure to transport and store hydrogen is under development but poses challenges. Hydrogen is highly flammable and requires special handling. Pipelines, storage facilities, and transportation methods (e.g., converting hydrogen into ammonia for easier transport) are being designed and tested.

5. Challenges

Economic Viability: At present, green hydrogen remains more expensive than fossil fuel-based hydrogen. Achieving cost parity will require further advancements in technology and scaling up production.

Infrastructure Gaps: The global infrastructure for producing, transporting, and using hydrogen is still in its early stages. South Africa has a large population that is trapped in poverty and any premium to transport costs will not be possible. In essence, it will not be a just transition as is propagated by the world as a requirement.

Conclusion:

Green hydrogen is gaining momentum as a critical component in the global energy transition toward sustainability, particularly for decarbonizing hard-to-electrify sectors. Experts predict that green hydrogen will likely become commercially competitive between 2030 and 2050, depending on technological and market developments.

4. A consortium led by Nelson Mandela University and Ikigai Group has won a UK Government grant under the South Africa-UK PACT programme to deliver an innovative feasibility study to explore the viability of green hydrogen production and export Infrastructure from South Africa’s Eastern Cape region to global markets, including the UK, Europe, and Japan. According to Colin Loubser, CEO of Hive Energy Africa and general manager of Hive Hydrogen South Africa Coega Green Ammonia Project in the Eastern Cape, South Africa has produced many insights into how these projects should be developed within the existing and evolving government frameworks, country legislation and bankability challenges and what is required for success both commercially and for all the communities these projects impact.

A recent Bloomberg analysis has revealed a more surprising finding: smart money is betting heavily against clean energy while going long fossil fuels. The evidence comes about is based on the fact that the $5 trillion hedge fund industry is net long oil, gas, and coal but net short batteries, solar, electric vehicles, and hydrogen. These guys are right most of the time. Oil Price.com reports that “Meanwhile, slowing sales growth has made money managers turn cold on the erstwhile high-flying electric vehicle sector, with 55% of the companies in the Krane Shares Electric Vehicles & Future Mobility Index ETF sold short compared with 35% in early 2021.”

We hope that we do not leap headfirst into a project that will have similar cost overruns such as those experienced with Medupi and Kusile. Karpowership, the global company that owns and operates the world’s largest and only floating power plant was close to a transaction that would have been unaffordable for South Africa was it not for the intervention by civil action groups to prevent the government from locking us into a long-term deal.

* Kruger is an independent analyst.

** The views expressed herein are not necessarily those of Personal Finance or Independent Newspapers.

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