Mercedes-Benz SA expects surge in electric vehicle sales

Mercedes-Benz South Africa (MBSA) is anticipating a surge in electric vehicle (EV) sales in 2023.

This is despite the hefty price tag of most EV and new energy vehicle (NEV) models, in addition to the country’s power supply and load shedding challenges.

Read: Mercedes-Benz SA opposes plan for electric vehicle subsidies

Mark Raine, co-CEO of MBSA and executive director of MBSA passenger cars, spoke about the expected surge last week at the launch into the South African market of the luxury automaker’s new EQE electric vehicle, which will cost R1.8 million including a service and maintenance plan.

It has a range of 645km and enhanced charging, which means it takes 15 minutes to recharge it for 250km.

The EQE launch follows MBSA launching an EV offensive in the South African market with the launch of the EQA, EQB, EQC and EQS models in the third quarter of last year.

Raine said between 300 and 500 EVs have until now been delivered to customers in South Africa across all brands, but predicts a strong pick up in EV sales in the country.

He said MBSA only joined the EV “party” in South Africa at the beginning of the third quarter of 2022 and other brands introduced EVs into the SA market later than they had done in other international markets.

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Raine said MBSA did not deliver the anticipated volumes of EQ models into the domestic market because of supply challenges.

He anticipates a strong surge in the uptake of EVs and that post 2026, sales out of its EQ electric vehicle portfolio will account for 50% of its sales in South Africa.

“Why do I believe that? Because it’s going to be rapid transformation and whether we like it or not, the world is going in that direction – and singling out South Africa and [saying] that we are going to be different is not going to work, especially in the luxury market where we are going to be the early adopters,” he said.

Raine denied EVs are being marketed in South Africa as loss leaders, stressing MBSA’s EV pricing strategy is sustainable and also fair to consumers.

Too expensive?

Responding to suggestions that EVs are too expensive in the South African market, particularly with the economy performing poorly and household disposable incomes under pressure, Raine stressed that “especially with EVs, it’s not just about the list price but the cost of ownership”.

Raine was unable to provide an update on the automotive industry’s request to the government for price parity between the import duties charged on internal combustion engine (ICE) and NEV vehicles.

“I don’t actually have one. The government at the moment is probably dealing with bigger issues at hand than looking at this problem. We know it is currently being discussed and evaluated but we don’t have any update as yet.”

Import duties

EVs are subjected to import duties of 25% while import duties of 18% are paid on ICE vehicles.

Minister of Trade, Industry and Competition Ebrahim Patel published a Green Paper in May 2021 on the advancement of new energy vehicles in South Africa.

The stated aim was to finalise the strategy within 90 days following its gazetting to allow the policy proposals to be submitted to cabinet for consideration by October 2021, but the policy has still not been finalised.

Raine said the concept MBSA is attempting to take forward is that the charging of EVs needs to rely much more on renewable and solar energy than conventional electricity supply from Eskom.

He said 99% of its EV customers bought their vehicle on a monthly instalment and thereafter their cost of ownership reduces from previously spending an average of between R5 000 and R7 000 per month on fuel to maximum of R2 000 per month in electricity charging fees.

Raine refuted suggestions that the cost of consumers installing a solar power system at their home should be added to the cost of buying an EV.

“The concept is that you are not adding price to your car, you are substituting expenditure that you would otherwise pay on electricity for your household and an electric vehicle is just complementing that,” he said.

Raine also highlighted the cost benefits of a solar power system if a consumer runs their geyser and pool pump off the system.

“Our strong recommendation as a brand in terms of sustainability and environmental friendliness is that our customers go for an electric vehicle but at the same time should look to go off the grid or go into renewable or solar energy.

“Then it really stacks up as a business case. I am entirely convinced about it,” he said.

Read: Slow progress on EVs is bad omen for SA’s auto market

Raine added that MBSA increased its sales by 37% in 2022 compared to the previous year, with December 2022 the company’s strongest selling month since pre-Covid-19 times.

He forecast MBSA will increase sales by double digits in 2023, “meaning 10% plus”.

This contrasts with a much lower forecast for overall industry new vehicle sales in 2023 by automotive business council Naamsa.

Mikel Mabasa, the CEO of Naamsa, said earlier this month that GDP growth in South Africa continues to be adjusted downwards and is now expected to be at 1.1% for 2023.

“In view of the close correlation between new vehicle sales and the country’s GDP growth rate, single digit growth in new vehicle sales could be expected for 2023 as the market returns to pre-pandemic levels in sales and exports,” he said.

Mabasa also highlighted the growing pressures on household incomes, adding that the consumer trend of buying less expensive and smaller cars, usually sport utility vehicles (SUVs) or crossovers, continued in 2022.