Energy15.01.2025

Truth about Tesla battery factory in South Africa

While a large-scale battery plant for electric vehicles (EVs) holds great potential for South Africa, US EV and energy giant Tesla is unlikely to start any manufacturing activities in the country soon.

Bloomberg recently reported about one of the potential proposals in resolving an impasse over the local approval of SpaceX’s groundbreaking Starlink satellite Internet service.

The report came after South African-born Elon Musk, the world’s richest man, met with President Cyril Ramaphosa on the sidelines of the United Nations General Assembly in New York in September 2024.

Musk is the CEO and biggest shareholder of SpaceX and Tesla.

According to people “familiar with communication” between Ramaphosa and Musk, the government was willing to amend telecoms ownership rules to facilitate Starlink’s local launch.

However, this would be in exchange for Tesla’s local investment in areas like battery production.

MyBroadband spoke to a source with close knowledge of Tesla’s strategy and the company’s perspective on South African business prospects.

They believe that unless there was another major “stupid” incentive unknown to the public at this stage, Tesla would be unlikely to build a battery plant or automotive factory in South Africa.

The upside of getting Starlink approved would not be sufficient leverage to warrant an investment costing billions of rand.

Our source explained it was a “no-brainer” to roll out a large battery plant to make packs for vehicle manufacturers that already had significant production capacity in the market.

However, Tesla is not among these manufacturers and would stand to gain little from a local battery plant without having a vehicle assembly plant in the country.

The source also said that Tesla would be keenly aware of the major challenges with doing business in South Africa.

“South Africa probably has the best infrastructure on the continent, but I think its taxes and the laws that govern investment into the country are a big hurdle,” the source said.

“It’s not a place that I would take my money and want to build something.”

“The risks are too high, it would probably be too expensive, and there are BEE laws and all sort of things that come into play.”

“Even with Elon’s affiliation with South Africa as a brand, I don’t think we are really high on the radar.”

South Africa is a major producer of manganese, one of the key components in EV batteries.

It is also close to countries rich in other required rare-earth minerals, such as lithium, nickel, and cobalt.

However, Tesla’s current focus and strategy was on robotics, automation, and the vehicle itself.

For EV batteries, it has established supply chain agreements with major manufacturers like BYD, CATL, LG, Samsung, and Panasonic.

It also operates its own battery factory in Nevada, but this only makes components for its own vehicles, which are not yet on sale in South Africa.

The source said a factory from a company like CATL, which supplies many vehicle makers with battery cells, would be a more realistic prospect in South Africa.

The government has reportedly courted both CATL and its Chinese counterpart BYD, another major EV and battery maker, to set up local factories.

Ideal location in the Eastern Cape

Rubicon sustainability and e-mobility head Greg Blandford believes any battery cell plant should ideally be located in or near Gqeberha, formerly known as Port Elizabeth.

The city’s port is far less congested than Durban’s, and it is home to or near the factories of Volkswagen, Mercedes-Benz, and Isuzu. These factories produce more than half of the country’s exported vehicles.

Blandford argued that it made a lot of sense for the batteries in locally-produced EVs and hybrids to come from a local source.

He said South Africa and its neighbours had “pretty much everything ready” to establish a full EV battery value chain, rather than relying on imported batteries.

Ironically, these batteries are often made with rare-earth minerals mined on the continent and shipped elsewhere at some point.

“We’ve got the minerals, minerals processing facilities, OEMs, line builders, and manufacturing capabilities,” Blandford said.

A local EV battery plant would not only reduce manufacturing costs but give the industry greater control over the EV value chain.

Blandford said the Automotive Industry Development Centre has already held several workshops to align the industry’s major shareholders to create a fully integrated, locally owned value chain and make South Africa a key exporter of EVs and batteries.

Government, vehicle and component manufacturers, line builders, and battery makers will be the key players getting the effort over the line.

Blandford said the initiative should be a joint venture between the public and private sectors as it would require significant funding.

To be viable and cost-effective in the long run, the plant would need to produce at least 20 gigawatt-hours of battery storage per year after full completion.

South Africa only recently got its first gigawatt factory in Cape Town, capable of producing one gigawatt-hour of energy storage annually.

The capacity could build up over time. However, considering the demand for EVs is still relatively low, the factory would also need to make cells for other applications — like stationary backup storage — which is popular in South Africa and expected to see growing demand across the continent.

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