Sihle Zikalala with Mahindra chief executive, Rajesh Gupta, and Indian High Commissioner, Ruchira Kamboj, cut the ribbon to officially open Mahindra's vehicle assembly plant in Durban.
JOHANNESBURG - Mahindra South Africa, a wholly-owned subsidiary of Indian conglomerate Mahindra & Mahindra, has taken the first step in a planned expansion of its operations in the country with the official opening of a vehicle assembly facility in Durban.

It has outsourced the semi-knocked down assembly of its Pik Up bakkie range at an assembly facility based at the Dube TradePort special economic zone in Durban next to the King Shaka Airport to Automotive Investment Holdings (AIH) Logistics. The commitment by the Mahindra group to assemble vehicles in South Africa means three new vehicle assemblers or manufacturers have been attracted to the country in the past year.

Isuzu acquired the Struandale plant previously operated by General Motors (GM) when GM disinvested from South Africa, while Beijing Automotive Industry Holding is investing R11billion in a production plant in Coega.

Azar Jammine, the chief economist of Econometrix, stressed the importance of trade and investment relations between South Africa and India, both members of BRICS.

Jammine said it was remarkable that Mahindra, a very small player in a relatively small market, should want to assemble vehicles in South Africa, but believed Mahindra possibly had bigger ambitions and saw South Africa as the base for supply of a lot of automotive products and components to the rest of Africa.

Mahindra and AIH have jointly invested R10 million in facilities and equipment for the assembly plant, which commenced trial production this month and would employ 25 people when it is in full production in July.

Rajesh Gupta, Mahindra South Africa's chief executive, said it was planned that the new facility would assemble 200 Mahindra single and double cab pick-ups a month, or between 2400 and 2500 a year. But it could easily increase the volumes produced to 4000 units a year with the addition of a second shift.

Corrie Kotze, managing director of AIH, said the new assembly facility for Mahindra vehicles benchmarked equally in terms of quality and productivity with any other Mahindra facilities in the world. Gupta said the decision to assemble vehicles in Durban followed Mahindra’s exceptional vehicle sales growth since its establishment of a presence in South Africa in 2004.

“Mahindra has grown significantly since the launch of its first models in South Africa. In the last five years alone, it has grown its market share by a compound annual growth rate of over 4.6percent a year, which puts us in the league of the five fastest growing companies in the same period. “Much of this growth was achieved in a declining market, which indicates our increased acceptance and popularity in South Africa,” he said.

Gupta added the assembly of the Pik Up range in South Africa was a very important step but remained “only the first step in our long term plan that will see us increase employment, local sourcing and content and the complexity of our assembly facility in KwaZulu-Natal”.

Gupta said this launch of the assembly operation was the second phase of Mahindra’s expansion into South Africa and they would use it to increase its vehicle exports into Africa, the production of some of Mahindra’s other products such power generation sets and yellow metal products.

He said Mahindra intended to eventually move to completely knocked down manufacture in South Africa but did not know at this stage when that would happen.

Gupta said they would have about 10percent local content in the bakkies produced in the plant, with the tyres, battery and oil, locally sourced but planned to increase local content over time to 40percent.