There is an automotive revolution taking place in the sometimes sleepy town of Springs. Two significant firsts are taking place there. One is the announcement of the first new light vehicle manufacturer, which is assembling and building vehicles in South Africa – in 40 years! The other is the news of direct Chinese investment in the South African light vehicle motor industry – for the first time ever.
The company in question is BAW South Africa, and it has been established by the Beijing Automotive Industry Holding Company (BAIC), the Industrial Development Corporation (IDC), and China Africa Motors (CAM).
BAIC, via its BAW subsidiary, has a 51% shareholding in the company; the two other shareholders share the balance.
R196 million has been invested in BAW South Africa, which will employ 469 people. When one factors in suppliers and dealers, over 1 000 new jobs will be created.
BAIC is China’s fifth largest automotive manufacturer, with annual sales revenue of more than 200 billion RMB, sales of 1,54 million complete vehicles and a number one profit increase ranking amongst China`s six largest automotive groups.
The company has joint ventures with Mercedes-Benz and Hyundai. It owns Beijing Auto Works (BAW), which produces a range of vehicles including Jeeps for the Chinese military, light commercial vehicles (LCVs), sport utility vehicles (SUVs), minibuses and medium commercial vehicles (MCVs).
BAW has already exported its vehicles to South East Asia, Africa, South America, the Middle East and Russia.
BAIC also co-owns Foton Trucks with Daimler. The company recently purchased the floorplan, engine and drivetrain architecture from Saab – and launched a range of vehicles based on this platform at the recent Beijing Motor Show. BAIC also owns a substantial supply chain company, which has joint ventures with major Chinese and global suppliers.
BAIC recently hired former Ferrari designer, the legendary Leonardo Fioravanti, as a consultant. A concept car designed by Fioravanti was on display at the 2012 Beijing Auto Show. This and the SAAB initiative is part of the company’s drive to develop its own brand of passenger vehicles.
John Jessup, head of sales and marketing at BAW South Africa, notes that the establishment of the company is a real automotive milestone for South Africa. “This enterprise brings with it new job creation and attractive product offerings in all major vehicle market segments, starting with the taxi market where we will be establishing many industry firsts in terms of servicing, financing and professional factory vehicle refurbishing. But, most importantly, this investment is an important indication of long-term commitment as opposed to ‘arm’s length’ importer/distributor agreements,” he says.
The manufacturing plant, located in New Era, Springs, will produce taxis on a semi knocked-down (SKD) basis but with a final line identical to that of completely knocked-down (CKD) manufacturing plant.
The taxi market is substantial. “These vehicles are responsible for 1,6 billion passenger trips in South Africa each year,” notes Jessup.
Jessup believes that there will soon be annual taxi replacement demand to the tune of 25 000 units in South Africa alone. “Then there is the sub-Saharan market, which will experience replacement demand in excess of this,” he reports.
BAW South Africa’s Springs factory – with an annual capacity of 9 600 vehicles – will be in its first phase of operations over the next three years. Thereafter, the plan is for BAW SA to move to full CKD manufacturing at far greater capacity levels.
According to Tony Godycki, head of production of BAW South Africa, there were numerous logistical challenges when it came to converting the plant from one which previously produced telephones into one producing taxis.
“Firstly, we had to get rid of tons and tons of telephone and communications wire. Then there was the fact that it was quite antiquated. For instance, the whole plant was air-conditioned with old-fashioned water chillers, huge compressors and underground tunnels,” he relates.
On an amusing note, Godycki says that 3 000 of the workers at the telephone plant were women – and the previous owners ensured that ablution facilities were more than adequate. “I think that there are more toilets here than in the whole of the southern hemisphere!” he notes with a grin.
According to Jessup, the taxis are just the beginning for the company. “We will also be entering the LCV, SUV and passenger car markets from next year,” he reveals, “although the decisions whether to fully import or locally assemble these models is still under review.”
But, for now, the focus is on appointing a quality network of dealers. “We are looking to appoint 30 dealers initially. They will be located in all the major centres, and we will have service dealers in important rural areas. We already have a very nice calibre of dealer on board. We are, for example, signing up existing ‘top-end’ German and Japanese dealers and many other highly reputable companies. To date 25 full dealers and five service dealers have been appointed. I think we will easily end up with 35 to 40 quality dealers; the interest in the BAW brand is palpable,” Jessup reports.