0 of 4
The Beijing Auto Industrial Corporation (BAIC) SA group is shaking off its bumpy and tardy manufacturing debut in SA, where it has fallen short of most of its predetermined production capacity targets, saying it has plans to gradually cultivate the local market to support production at its Gqeberha facility for both domestic and foreign sales.
This occurs at a time when SA’s car industry, which was negatively affected by the pandemic lockdowns, is in recovery thanks in part to the increased demand for less expensive and environmentally friendly vehicles which new, value-orientated manufacturers have leveraged on.
The R11bn project initiated in 2016 as a joint venture between China’s BAIC group and SA’s Industrial Development Corporation (IDC), was meant to build up capacity to produce about 50,000 cars a year when production ensued in 2018, and later shore up its capacity to 100,000 units in the second phase of development with an export target of 60% of local production.
However, a cocktail of labour disputes, pandemic-related delays and bureaucratic red tape has bedevilled the group’s SA production plans, where it assembles vehicles from kits imported from China. The transition to full manufacture — building vehicles from scratch with local components and body parts — is still lagging as set targets have repeatedly been missed.
According to sources, the government’s refusal to give BAIC preferential rates after the agreements to invest in a production facility and localise some of the value chain involved in the fabrication of parts has caused production to stagnate.
But BAIC vice-president and chair of BAIC SA Jianhui Wang said a turnaround was looming in the SA market, bolstered by the group’s continual communication with relevant government officials regarding regulatory red tape issues.
“We have built a perfect factory with our partners, which is a remarkable achievement under the influence of the global pandemic,” Wang told Business Day. “BAIC also has confidence in operating the factory well, and I can confirm that BAIC will absolutely not withdraw from the factory. This is our long-term strategy.”
He said the company was committed to creating more job opportunities and value for the local community, adding that “communication with relevant government departments is ongoing”.
In 2016, the IDC heralded its 35% stake in BAIC as SA’s biggest greenfield investment in 40 years. However, the project has fallen short of meeting targets and the return on the investment leaves little to be desired. The IDC did not respond to questions about the investment.
The Financial Mail reported last month that BAIC hoped to shore up its capacity to begin the full manufacture of cars and bakkies late next year, in preparation for commercial production in early 2026.
If successful, this will see the ball rolling on the group’s initial aims to service the sub-Saharan and North African markets, and eventually the Middle East as well as South America, from SA, while prioritising local suppliers.
Wang said because the SA market was one of BAIC’s key overseas markets, having received attention and investment from the group for a long time, its attempt to successfully enter the local market would require patience, pointing out that SA was the group’s market and export base to the rest of the continent.
“For a new brand and greenfield factory in SA, we need some time to cultivate the market, including markets outside SA that can be sold to,” he said, “I believe we will definitely be able to achieve this goal in the future”.
Chinese vehicle makers are gaining traction in SA, and this was evident in Standard Bank data which recently revealed that Haval was the most popular Chinese brand it financed since 2022, followed by Chery and BAIC.
This sentiment was echoed by WesBank CEO Ghana Msibi, who said the entry of new value-orientated companies had not only benefited the sector’s recovery post-Covid, but that the trend was expected to continue as the market attracts even more new competitors from the Far East.
“We expect to see a continued shift in market share in favour of new value-orientated brands,” Msibi said at the 2024 Festival of Motoring. “From a WesBank perspective, we’ve already seen Asian brands growing their share to about 26% of all new-vehicle purchase activity, and we expect that to continue over the coming months.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.