South Africa’s automotive industry has received a major shot in the arm with the announcement today of the biggest greenfield investment in 40 years. The multi-billion rand joint-venture agreement between the Industrial Development Corporation (IDC) and China’s Beijing Automotive Group Co. LTD (BAIC) will see the establishment of a new car manufacturing plant located in the Coega Industrial Development Zone outside Port Elizabeth.
As the majority shareholder with 65% equity in this new venture, BAIC intends using this manufacturing facility as its springboard into the rest of the continent. At full capacity, the plant will produce up to 100 000 units a year consisting of cars, SUVs and pickups.
Speaking today at the unveiling of the new joint venture, IDC CEO, Mr. Geoffrey Qhena, hailed the agreement as further evidence of South Africa’s reputation as the continent’s industrial powerhouse.
“We are extremely excited to announce a deal of this magnitude and economic importance to the country,” he said. “The automotive industry already plays a pivotal role in enhancing our reputation as a leading industrial economy. The industry also makes a significant contribution to the economy through local and export income and creates more than 100 000 jobs.”
Mr. Qhena said the project, which will target both domestic and global markets, will be in two phases.
“The first phase will have the installed capacity to manufacture 50 000 units per annum. This is expected to double in phase two.”
Construction of the plant, which will start in December this year, is expected to be completed in the first quarter of 2018, according to Mr. Qhena.
More than 2 500 jobs will be created during the construction phase that is planned for completion in the first quarter of 2018.
Chairperson of BAIC Group, Mr. Xu Heyi, said the new plant was central to the company’s global expansion plans that service the sub-Saharan and North Africa markets, and eventually the Middle East as well as South America, from South Africa” he said. “Our dealings with our local partner, the IDC, and with government and industry leaders fill us with the confidence that South Africa – and the Coega IDZ in particular – is the right place to be.
“We look forward to a long and fruitful relationship, and to making a strong contribution to the economy of this region and the country.”
BAIC has an enviable reputation in China as the fourth-largest automotive company by sales and revenue in that country, generating more than US$53 billion income in 2015. The group’s brands include BAIC Motor, FOTON, BBAC and BHMC, CHANGHE, and it is the official manufacturer through joint ventures of Mercedes-Benz, Hyundai and Suzuki vehicles in China.
An export target of 60% of local production has been set to support these continental growth aspirations.
Mr. Qhena said this would add considerably to South Africa’s automotive exports, which reached 320 000 units in 2015 from
140 000 a decade ago.
Much of this growth is by virtue of the incentive schemes available to the industry, with the latest iteration – the Automotive Production and Development Programme (APDP) – aiming to grow local production to 1.2 million units by 2020.
This programme has spurred on investment by vehicle manufacturers and component manufacturers to more than R24 billion over the past five years.
“The benefits of this programme are evident for all to see, with the aim to increase exports as well as local content evident in this partnership with BAIC,” Mr. Qhena said.
“OEM purchases from local component manufacturers have increased from R35 billion in 2012 to more than R53 billion last year, which will be increased further with the commitment of 60% of BAIC vehicle components to be supplied by existing and new local manufacturers.
“The location of the plant in Port Elizabeth is therefore no accident as the city and surrounding area have a wealth of component manufacturers that supply the local automotive plants. This will not be to exclusion of other manufacturers located near to the other manufacturing hubs in Gauteng, KwaZulu-Natal and North West.”
Local supply will be prioritised, with plans for the BAIC facility including the future construction of a supplier park in the Coega IDZ to facilitate supply.
Local component manufacturers will supply many of the steel chassis components and assemblies, as well as panel and pressed components, interior and exterior trim, wheels and tyres, automotive glass components and electrical and electronic components.
“The extent of this local participation with a global motor brand demonstrates the quality of the partnership that South African industry can offer,” Mr. Qhena said. “And with the support and involvement of the IDC, we hope to be able to expand these relationships and the participation by local manufacturers.”