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Electric vehicle incentives – fancy a tax break or cash in your pocket?

Nissan and BMW to bring electric vehicles into SA. See the new BMWs.

GEORGE: In Mission Impossible: Ghost Protocol Ethan Hunt (Tom Cruise) and the rest of his team run around Russia, Dubai and Mumbai – saving the world. Some of which happens in the BMW i8 hybrid-electric sports car.

Now BMW South Africa has announced that the i8 will be coming to the country, following six months after the local launch of the fully electric i3 in July 2014. The cars will be built in Leipsiz, Germany, in a carbon-neutral plant.

BMW won’t be the first to bring a zero emissions-electric vehicle to South African shores. Nissan, who already mass-produces the electric LEAF, will start to sell the LEAF locally after September this year.

The technology in these cars is expensive, putting a premium on the price you’ll pay to embrace your greener self.

South Africa is, however, still a developing economy and the market is therefore different from developed economies where environmental considerations rank high on priority lists. In developing economies a big driver is still status, Guy Kilfoil, General Manager: Group Communications and Public Affairs at BMW South Africa says.


So what will make you pay a 50% premium for a BMW i3 (at around R450 000), when the equivalent 1 Series cost R300 000?

The price for the LEAF in South Africa is not yet known and the above price for the i3 is still approximate, as it is unclear what incentives government might offer and exchange rates for imports fluctuate. Nissan has recently announced price cuts for the 2013 LEAF in the markets where it is already sold and incentives bring this price down further. In the US, for example, all LEAF models are eligible for a $7 500 federal tax credit. The new LEAF S base model will be around $28 800 (R259 000 with current exchange rate, before the tax credit).

In Japan, government incentives total as much as 780 000 yen, according to Bloomberg, bringing the price of the S LEAF to 2.2m yen (R214 000 with current exchange rate).

A direct tax benefit from government will likely be Nissan’s goal locally as well, but in his 2013 Budget Speech, Finance Minister Pravin Gordhan made no mention of such a possibility. He only announced an increase in the stick approach of carbon tax on higher carbon emitters. This will increase from R75 to R90 for every gram of emission per kilometre above 120g of C02 per kilometre and in the case of double cabs from R100 to R125 for every gram per kilometre in excess of 175g per CO2 per kilometre.

At an E-Mobility Summit hosted by BMW in George, Department of Trade and Industry officials indicated that Treasury has given an indication that direct cash-back incentives were not on the table. What incentives types are on the table is not yet clear as the industry has been waiting for the draft strategy on Electric Vehicles (EV) for some time. This is apparently due for release in the next couple of weeks.

What is clear, however, is that manufacturers differ on what they would prefer.

Kilfoil made it clear that BMW is not for direct cash-back incentives and would prefer incentives that reduces the cost of ownership over time. Kilfoil suggested mechanisms such as making EVs exempt from e-tolling or an income tax rebate on an annual basis.

Endless opportunites

What could also help is the possibility of a lower electricity tariff to charge your vehicle at night after 10pm, when the country has a surplus of generated electricity that is not being used. Another acceptance hurdle is the availability of charging infrastructure even though most people in the EV target market won’t need these as the range is sufficient for their use.

Earlier this week the Department of Environmental Affairs announced that there would be about 50 charging stations in place (mostly in Gauteng) by the end of the year and that it is in discussions with Gautrain stations, shopping malls and petrol stations on the N1 for possible charging stations at these premises. Kilfoil indicated that three-phase electricity for charging would have to be in place at these premises.


He said the uptake of EVs in South Africa could depend on the success of possible car sharing ventures where you rent the vehicle for a short period to get, for example, from a Gautrain station to your appointment. “We have already been approached by at least two rental companies to discuss this… and if this comes off and it is a successful venture, it (uptake of EVs) could be bigger than we think,” he said.

At a cost of around 21c per km (R25 to R30 to charge the battery with a range of 160km), the operating costs against a backdrop of rising fuel prices (with an expected hike to be announced on Friday of around 80c per litre and more on the cards in April with increases in the levies from Treasury) could also be an incentive. Other options could be free and priority parking in busy areas or demarcated lanes on the highway – which have been used with limited success in the past for carpooling.

Still worried?

Kilfoil believes that acceptance is the biggest hurdle as the customer would want to see the financial benefit over the period of use of the vehicle for the premium she or he paid. BMW is considering leasing options for the i3 a “get out of jail free-card” where customers won’t have to worry about the long-term.

The BMW i3

Cellphone users know their smartphone batteries deteriorate over time – what about the battery in your smart EV? Kilfoil says that they have found in trials with the MINI E that over eight years there has been no decrease in battery performance, so that should not be a concern and if you are leasing the car for a shorter period, this problem is eliminated anyway. Power surges won’t damage your car as there is a built-in transformer that protects the battery.

With the announcement of only an 8% increase in electricity tariffs by the National Energy Regulator of South Africa on Thursday and the problems this might hold for Eskom expansion, you will still have a problem if there is load-shedding when you want to charge. However, after 10pm at night, this is unlikely. The grid in your neighbourhood might also need some reinforcement, but only if all of a sudden approximately 120 EVs are being charged all at once in one suburb using three-phase electricity, Kilfoil said.

Will sales take off?

BMW expects electrified vehicles globally for their brand to be 5% to 15% of total sales by 2020. Kilfoil says a number for South Africa for 2020 is more difficult to predict as the vehicles will only start selling here in 2014 and 2015.

BMW South Africa is aiming for 100 to 120 of the i3 models in the first full calendar year and only about 20 of the i8’s. He said the i8 (at around R1.2m) would be due to more of a supply problem as these sports vehicles will be as in demand as other high-performance sports cars. He does not think that sales would exceed 180 before 2020 – a small fraction of local BMW sales when last year’s total of 24 745 BMW units sold are taken into consideration.

The BMW i8

Advancement in technology

Kilfoil states that battery technology is improving so rapidly that by the end of the current i3 model lifetime (7 years) batteries could have a range of five times what it currently has. Your EV would perhaps be able to make the trip from Johannesburg to Durban then, but currently the target market is most likely consumers who can afford the EV as a second or third vehicle for runs to the office, crèche and shopping mall – keeping mileage to less than 160km a day.

BMW provided transport and accommodation for the journalist.

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