The BMW Group will invest a total of R6 billion at its Rosslyn plant north of Pretoria to enable it to produce the next generation X3 within the next few years. BMW has produced the 3 Series at the plant for more than two decades and will continue to produce it until the end of its current lifecycle, which is expected to come to an end in the next few years, and then ramp up towards X3 production.
Of the R6 billion investment, R3 billion will be invested in new facilities and operations at the plant and around R3 billion in its supply base, launch costs and training.
Tim Abbott, MD of BMW Group South Africa says the swift towards the X3 model is driven by world demand. Currently, the X range accounts for 28% of BMW’s global sales, but in other words, roughly one in four BMWs sold is an X model. The expectation is that, this will grow to one in three in the short to medium term.
The X range will probably grow in relevance in South Africa and Africa as well, he says. “We currently don’t supply the 3 Series to the African continent, but going forward, we will start supplying [the] X3 both into South Africa and into Africa as well.”
At the moment, BMW exports about 50% of 3 Series volumes produced locally to the US, but since the US has its own plant for X3 production, the export mix is likely to change. He says there may be opportunities to export the X3 to other neighbouring countries in Africa, including Nigeria, Tanzania and Kenya.
BMW’s production plant in Spartanburg in the US currently produces the X3 exclusively, but expected world demand suggests it will outgrow its capacity in the years to come.
In October 2015, BMW sold 103 units of X3s in the local market and 509 units of the 3 Series models. Abbott says the primary objective of the Rosslyn plant is to supply the local market.
It is also likely to turn to export markets in Europe and will probably continue to supply vehicles to current export markets like Australia, New Zealand, Japan and South Korea. Ultimately however, this will depend on world demand.
At this stage, it is unclear when the last 3 Series model will be produced at Rosslyn, but work on the production line for the X3 will start next year. While it is not in a position to quantify the number of jobs its investment will create, Abbott says the opportunity for job creation lies especially with the supply base as it aims to increase the localisation of the new model. “By building the car and having more local production of supply here that will mean more jobs as well.” He added.
Its Rosslyn plant is projected to produce roughly 70,000 of the 3 Series models this year. Abbott says X3 production will depend on world demand, but it will watch the increasing share of X models with a lot of interest.
BMW’s announcement comes in the wake of the Department of Trade and Industry’s commitment to extend the current Automotive Production and Development Program (APDP) beyond its current 2020 timeline.
The South Africa automotive industry has been under pressure in recent times due to rand weakness, labour unrest and cost pressures. The German parent company is fully supportive of the investment decision. Its Rosslyn plant, which received the J.D. Power Platinum Plant Quality Award earlier this year, is the only plant outside the US to have been awarded a chance to build the X3.
This is due to the stable policy environment as a result of the APDP.
“We haven’t had strikes since 2013 so we have got a much more stable labour force,” Abbott says.
Mike Ochonma
