Current estimates put the number of electric or hybrid electric cars on South Africa’s roads at anywhere between 1,000 or 1,500, having doubled in the last year.
The Nissan Leaf was the first electric vehicle (EV) introduced into the local market in 2013, followed by the BMWi3 in 2015. Jaguar Land Rover’s I-Pace is the latest addition to the South African market. The Audi E-tron and the Mercedes Benz EQC are expected to launch locally in the very short term.
There are currently over 90 EV charging stations in Gauteng and by the end of the year, South Africa is expected to have over 200 EV charging stations installed in major hubs and along national routes. The age of electric mobility is certainly here.
While 1,500 cars is a small number compared with the millions of normal internal combustion engine (ICE) vehicles this number is expected to increase significantly in the near future.
“As EVs become increasingly cheaper and battery costs drop below the $150 per kilowatt-hour threshold, Bloomberg predicts that by 2040 one in every three new cars sold globally will be an EV,” says Christelle Colman, insurance expert at Old Mutual Insure.
Mass rollout to lead to a lower insurance premium
In South Africa, as in the United Kingdom and the United States, EVs currently command a marginally higher insurance premium. This is largely because, for the time being, insurers simply do not have enough accident, repair and other claims history on EVs.
“In the absence of data, insurers globally have tended to default to higher premiums. South Africa has proved no exception in his regard,” says Colman.
That said, in the case of EVs the jury is still out on the evidence for higher premiums.
Colman predicts that in a very short time, “the cost of EV cover will align with – and eventually beat – the cost of cover for conventional vehicles.” With their advanced technology demanding specialised maintenance, EVs currently cost more to repair and maintain than conventional vehicles. As the number of EVs increase, however, the fact that EVs don’t have alternators, clutches, radiators or fuel pumps means that, “they have fewer things that can go wrong and, in time, as EV servicing skills also become more readily available, EVs can expect to attract similar or even lower premiums than conventional vehicles,” says Colman.
This prediction is supported by Merrill Lynch who expect the cost of EVs along with their insurance in the United States to be cheaper than their gas counterparts by as early as 2024.
Since EVs in South Africa currently retail at over half a million rand, the profile of the people purchasing these vehicles generally attracts a lower premium. More importantly, “the risk profile of people who have made a conscious choice to support a greener environment also exhibit a responsibility and care profile likely to attract lower premiums over time,” adds Colman.
In South Africa, “we are also not sure about how likely, or unlikely, EVs are to be stolen or whether they will present a different theft or malicious damage risk from other vehicles,” says Colman.
For now, the lack of recharging points in South Africa along with the fact that the bulk of existing recharging points are in secure shopping malls and other high-security public spaces, is likely to see fewer electric vehicles stolen. Since electric vehicles generally take several hours to be recharged, however, when people are travelling long distance, “they will in all likelihood need to leave their vehicles outside, unattended at service stations or in hotel or B&B parking lots, charging overnight,” says Colman. In these contexts, EVs might present a higher likelihood of being damaged or stolen.
While the National Association of Automobile Manufacturers is working with vehicle manufacturers to establish standardisation of EV charging equipment to be used across all electric vehicle brands, the numbers on EV theft are likely, in the long run, to be determined by government policy.
“How efficiently, securely and effectively South Africa’s EV recharging infrastructure is designed, rolled out and supported will be a key determinant of safety and security in the industry,” says Colman.
Given the data that South Africa’s insurance industry is collecting on EVs, the country’s insurance sector is well-positioned to advise the design of any long-term policy on the development and regulation of South Africa’s EV industry.
As with all disruptive technologies, EVs present significant opportunity to grow the efficiency and capability of South Africa’s automotive sector, “with broad implications for local manufacturing, new skills, reduced emissions and noise, expanded infrastructure and more jobs,” predicts Colman.
Manufacturing EVs in South Africa
For now, South Africa’s Department of Transport’s Green Transport Strategy 2018-2050 aims to reduce emissions in the transport sector by 5% by 2050. While no EVs are currently produced or assembled in South Africa, The Department of Trade and Industry’s Automotive Production and Development Programme’s waiver of import duties for local assembly, would also apply to locally assembled EVs. In the meantime, Bloomberg has reported that the South African motor industry is putting together a position on electrification, including a request to reduce the import tariff on EVs to boost domestic sales regardless of whether EVs are assembled locally or not.
In this regard, South African policy makers would do well to follow the legislative and market developments in Europe and America where a far larger portion of domestic vehicles are powered by electricity. In fact, countries like Germany have gone as far as subsidising the production and sale of EVs as an active measure in support of sustainable development goals and a cleaner and quieter living environment.
Either way, Old Mutual Insure which already insures EVs, expects the number of EVs on South Africa’s roads to increase dramatically over the coming years. As the use, maintenance, liability and other data available on EVs increases, along with the skills and infrastructure to manage EVs efficiently, the cost of EVs as well as the cost of their insurance is set to decrease
Given that EVs are also less environmentally damaging in terms of energy use, longevity and noise, “it is also not inconceivable that the insurance industry will eventually attach a premium discount to EVs as well,” concludes Colman.