The next generation of BMW cars built in SA must include electric models if the local division of the German luxury car maker is to retain its export markets, BMW SA CEO Peter van Binsbergen has said.
However, the company, which is in an industrywide race to develop electric cars amid tightening emission standards in Europe, cannot do so without active SA government support to encourage the sale of electric vehicles (EVs) on the local market.
BMW exports more than 95% of X3 cars built at its assembly plant in Rosslyn, Tshwane. The plant, which has annual capacity for 76,000 vehicles, built 69,463 in 2019 and 57,750 in Covid-afflicted 2020.
All use the traditional internal combustion engine (ICE) powered by petrol or diesel. However, several of its biggest markets, including the UK and others in Europe, plan to ban liquid-fuel cars from 2030.
Rosslyn began building the current X3 in 2018. Given cars’ typical seven-year life cycle, its replacement is due in about 2025. “That means it will continue after 2030,” said Van Binsbergen. “An electrified product is essential for us.”
Some world markets will allow ICE engines for longer so BMW Germany has said all its cars will be built in three variants: ICE, all-electric and “hybrid” (a combination of petrol and electric). Van Binsbergen said discussions with Germany on a future SA product mix have begun. “We are fighting for an electric option,” he said.
Germany wants to see SA encourage the use of EVs locally. Where many countries have incentivised their purchase, SA has done the opposite, by imposing higher import duties. It is among reasons why hybrid and all-electric cars have made barely a dent in the market.
Mercedes-Benz SA builds some hybrid cars for export, and Toyota SA says it will start assembling its own later this year. However, the industry wants EV incentivisation to be included within the SA Automotive Master Plan, the next stage of government automotive policy due on July 1.
‘Future-proof’
Whether an EV strategy will be ready by that date or if it is something that can be added later, Van Binsbergen said the government is sympathetic to the idea that the SA motor industry has to “future-proof” itself in an increasingly electric automotive world.
Van Binsbergen, who became CEO on January 1, is the first South African to lead the company since its creation in 1975. He admits being the first local to run the company brings challenges. “It’s not about pressure. It’s about responsibility; I don’t want to let anyone down.”
He can avoid that by reversing BMW SA’s falling domestic sales. In an admittedly distorted Covid-19 year, annual sales fell below 10,000 for the first time in 2020. Numbers have been sliding for several years. At its peak, the company was selling nearly 30,000.
It’s not just BMW SA. The overall car market has been sliding backwards since 2014. Premium and luxury brands have suffered most as SA’s economic woes have pushed buyers into cheaper options. Last year, as the overall new-car market fell 30%, premium brands lost 36%.
They will not automatically recover when the economy improves. Last week Cyril Zhungu, Standard Bank’s head of automotive retail finance, said the market has experienced “a complete change in preference rather than a temporary move based on affordability”.
The BMW SA retail model depends on Van Binsbergen proving him wrong.
“Sales below 10,000 can’t profitably sustain our current dealer network,” he said. “We want to return to sustainable volumes by 2025.”
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