Energy transition creating waves in local automotive sector

With the global energy transition sparking a need for participants in the South African automotive industry to reconsider business models to ensure sustainability, advisory firm KPMG is assisting clients in the sector to better grasp the impact of the transition.

The company is helping clients draft strategies for holistically tackling the transition, owing to some not having a complete understanding of its impact across the entire automotive ecosystem, says KPMG automotive sector lead Dex Machida.

“We assist with various aspects, spanning ecosystem analysis, strategy formulation through to something as granular as developing of frameworks for power purchase agreements. We do a fair amount of work across the entire ecosystem for our clients when it comes to the energy transition conversation.”

To aid this initatitive, KPMG launched its Mobility 2030 campaign in 2017 to create a better understanding of how the transition will affect the movement of people and goods in the future, especially pertaining to electric vehicles and autonomous driving.

It has also collaborated with the Department of Science and Innovation, in conjunction with North-West University, to shape the Hydrogen Society Roadmap, published in 2021, with Machida noting that hydrogen also poses opportunities for the local automotive industry, particularly in terms of beneficiation of platinum-group metals.

Despite the impact of the energy transition, the automotive industry currently has a limited role to play in the transition.

He adds that local original-equipment manufacturers (OEMs) and component manufacturers are gearing more towards legacy vehicle production while not fully grasping the manufacture of new energy vehicles (NEVs).

Moreover, the lack of market demand in South Africa for NEVs has also hindered growth in this regard.

“We are not seeing a massive demand from the local automotive sector. It is challenging to take that step for the industry, which requires significant investment for us to adopt new forms of mobility. When the scale of demand reaches an inflection point between overall cost and the investments needed, I think that is when we will start seeing the conversation around battery electric vehicles making more sense.”

Hence, Machida expects the transition to create a disruption in the industry, thereby creating additional challenges for the sector.

External pressures have placed the automotive industry in a “tough position”, owing to competition from regions such as South-East Asia, thereby pushing the local sector to continuously innovate to remain competitive.

Local challenges, such as loadshedding, are also impacting on the industry, with power outages halting production and, consequently, affecting the bottom line.

“South Africa needs to get a handle on loadshedding and the energy transition to help maintain the sustainability of the automotive components manufacturing industry. We need to ensure that nobody is going to be disadvantaged as we transition to new forms of mobility and energy,” Machida argues.

NAACAM

As a member of the National Association of Automotive Component and Allied Manufacturers (NAACAM), KPMG works with NAACAM to provide support for the association when there is a need for assistance with projects and initiatives.

As reported in Engineering News earlier this month, NAACAM partnered with the International Finance Corporation (IFC), with assistance from KPMG, to launch the Localisation Optimisation Opportunity Platform (LOOP) as a ‘matchmaking’ platform to meet the procurement needs of OEMs and tier-one component suppliers.

Launched on August 30 during this year’s NAACAM Show, LOOP aims to create an automotive database to match the procurement needs of tier-one component manufacturers and subtier local suppliers to deepen localisation across tier-two and lower spaces.

Hence, LOOP aims to provide a mechanism to match local suppliers with the needs of customers, facilitating greater access for local suppliers.

Meanwhile, KPMG also works with NAACAM to help shape thinking in the automotive industry by engaging with work around knowledge production, thought leadership and product development for the market.

Machida describes NAACAM as a “great forum” to disseminate information between members in terms of sector developments while acting as a platform that allows for conversations between private- and public-sector entities.

“For an industry as large as the automotive industry, it makes sense to work together to try to drive the interests of the sector. I think NAACAM has been doing a great job and they will continue to do so with the support from all the associate members.”

To ensure the sustainability of the local automotive industry, KPMG assures that it aims to continue investing in the sector and supporting clients as they navigate various challenges.

The firm aims to continue fostering relationships and advocating for clients to help drive their agendas and create a positive impact in the sector.

“The sector has been a significant contributor to the South African economy for a long time and through the coming together of sector players, we can ensure the survivability of the industry and shape the future of the automotive sector together,” Machida concludes.