Analysing South Africa’s automotive energy consumption : application of index decomposition analysis

Abstract

This research focuses on applying the Index Decomposition Analysis (IDA) to South Africa’s automotive industry to decompose energy consumption and further make use of regression analysis to understand how it relates to the economy. South Africa has been going through an energy crisis, which has resulted in ongoing load shedding as a way to manage this crisis. Looking at South Africa’s energy generation, it can be noted that the entire country depends on Eskom as the main supplier and of electricity, but it is unable to keep pace with the demand. The results of the research show that there exists a nexus across all segments between energy consumption and GDP; furthermore, the decomposition results show that energy consumption in some years experienced a reduction. However, it can be seen that an increase in energy consumption year on year is predominant; this then suggests that the reductions experienced were the result of a special event; hence, it can be deduced that overall energy consumption has increased slightly. The increase is as a result of the activity effect which contributed the most towards this whilst the structural effect yielded a negligible contribution. Lastly, the intensity effect contributed to the reduction in energy consumption as a result of sectoral shifts; this reduction contributed towards keeping the overall increase in energy consumption low. This study aimed to outline the differences in energy consumed during the production of different vehicle classes, citing various factors responsible for the changes in energy consumption during vehicle production, raising awareness with manufacturers on the impact industrial energy consumption has on the national energy grid and on advising medium to large manufacturers to become suppliers.