Johannesburg - The R11 billion investment by the Beijing Automobile International Corporation (BAIC) and its local partner, the Industrial Development Corporation (IDC), in a new vehicle manufacturing plant in the Coega industrial development zone (IDZ) is BAIC’s leading project for the China-based group’s globalisation.
Xi Heyi, the chairman of the BAIC Group, the fourth largest automotive firm in China by sales and revenue, said this week that the new plant was also BAIC’s first foreign vehicle manufacturing plant.
“We expect the BAIC South Africa project to become BAIC’s gateway to the world. We expect the South African plant to become the messenger for the promotion of China-South Africa friendly co-operation,” he said at a sod-turning ceremony for the commencement of construction of the new plant.
New plant
Haiyang said BAIC had a globalisation strategy and before 2020 would focus on its international business.
He confirmed that BAIC had “other plans” it was considering and other projects were “on the way”.
BAIC is the majority shareholder with 65 percent equity in the new venture, with the IDC holding the remaining 35 percent.
Busi Mabuza, the chairwoman of the IDC, said they were very excited at having secured this investment, which was the biggest investment in a greenfields manufacturing plant in South Africa in the past 40 years.
Mabuza said the plant would have an initial annual capacity to produce 50 000 cars, trucks and special utility vehicles (SUV), but would eventually have an annual capacity of 100 000 units.
About 40 percent of the vehicles produced by the plant were earmarked for the domestic market and the remainder for export markets, initially in Africa but later in Europe and the Middle East.
The first phase of the project involved a total capital outlay of about R4.25bn, with about R1.2bn spent on the construction of the plant and the balance on the land and equipment for the plant.
Mabuza said the IDC had committed more than R1bn to the project, which was estimated to grow the automotive industry’s contribution to gross domestic product (GDP) to about 8 percent. The industry currently contributes about 7 percent to South Africa’s GDP.
Dong Haiyang, the chief executive and president of BAIC International Development Company and chairman of the joint venture project, said commercial production would commence in March 2018 and the plant would reach 50 000 units of production a year by 2022 and 100 000 units by 2027.
More than 2 500 jobs will be created during the construction phase of the plant.
Li Xingxing, the senior vice-president at BAIC International, said BAIC would hire about 1 000 employees for its manufacturing Âoperations before production commenced.
Xingxing said a further 10 000 indirect new jobs would be created among the group’s component suppliers, dealer network and financial services operations because of the investment in the new plant.
Haiyang said the new plant would initially manufacture four models, two cars for the entry and small to medium car segment and two SUVs.
He said a 1 ton pick-up for the South African and African export market would be added later. Haiyang said they also planned to introduce some off-road vehicles into the African market, with the target markets for exports to the continent focused on east, west and north Africa.
He said the intention was that when production reached 50 000 units or more, these models would also be exported to Europe together with some “new energy” vehicles.
Li Xingxing, the senior vice-president at BAIC International, said BAIC would be launching completely built up (CBU) models into the South African market this year.
Xingxing said a hatchback model would be launched this month and several other models were going through the homologation process and would be launched in November.
He said BAIC was recruiting dealerships by itself and would appoint 25 dealers around the country that would cover about 90 percent of the South African market.
Value chain
Mabuza said the project was in line with the IDC’s value chain strategy, which was significant to the corporation because it improved the IDC’s ability to facilitate the export of goods to other countries, bolstered efforts towards localisation and contributed to increasing the productivity of the country while also creating jobs.
Geoffrey Qhena, the chief executive of the IDC, said BAIC had committed to 60 percent of the components for its vehicles to be supplied by existing and new suppliers.
Qhena said this would further increase original equipment manufacturer (OEM) purchases from local component manufacturers, which had increased from R35bn in 2012 to more than R53bn last year.
Local component manufacturers would supply many of the steel chassis components and assemblies, panel and pressed components, interior and exterior trim, wheels and tyres, automotive glass components and electrical and electronic components, he said.
Qhena added that plans for the BAIC production facility included the future construction of a supplier park in the Coega IDZ to facilitate supply.
BUSINESS REPORT