Is Chinese carmaker Beijing Automotive Industrial Co (BAIC) finally getting ready to build vehicles at its “white elephant” Eastern Cape assembly plant? BAIC South Africa CEO Charles Wang says the company hopes to start trial production runs in August. Commercial production is intended to follow “very soon”, though Wang says: “We can’t give an exact time.”
That uncertainty is par for the course. Since 2016, when Chinese and South African government officials turned the first sod at the site in the Coega industrial development zone, near Gqeberha, every stated deadline has been missed. Like the African elephant, which has a gestation period of nearly two years, BAIC’s 48ha white factory complex overlooking the N2 highway has taken forever to give birth.
The plant was to have produced its first vehicles in 2018, before reaching 50,000 annual capacity in 2022, rising to 100,000 by 2027. So far, however, it has built nothing. Wang blames Covid as the main cause of delay, even though the pandemic started nearly two years after the first vehicles were due. He adds that spiralling shipping freight rates have added unexpected costs to the project.
What he doesn’t mention is that the project has also been beset by local disputes over labour and construction materials.
All that is now in the past, says BAIC, and the plant is almost ready to go. Wang says most production areas, including assembly lines and the body shop, are done. The final part of the jigsaw, the paint shop, is nearing completion.
BAIC is also building its marketing base. This week it signed an agreement with banking group Absa to finance vehicles in South Africa. Charl Potgieter, head of vehicle and asset finance at Absa, says brand sales have the potential to blossom in the same way as other Chinese brands such as Haval and Chery.
He says: “There is strong growth in Chinese vehicles in South Africa. We are very excited about BAIC’s future here. It has a growing dealer network and amazing vehicles.”
The company’s Beijing X55 car is a finalist in this year’s South African car of the year competition. Wang says the current national network of 32 BAIC dealers will grow to 40-50 by the end of 2023.
He expects BAIC sales to grow “20%-30%” in the next year. The company does not yet release its figures but he says it hopes to sell 5,000 vehicles over that period.
It’s not clear yet what vehicles the Coega plant will produce, or in what quantities. Back in 2016, BAIC said it would start with small cars, then add SUVs and bakkies. It also said 40% of production would be for South Africa and 60% for export — though officials contradicted one another over where those exports would go. The only common thread was Africa.
Wang says several strategic decisions still have to be made. Some will be affected by South African automotive policy. The government is dragging its heels on finalising a local policy for electric vehicles (EV). Chinese motor companies are world leaders in EV technology and production and Wang hints EVs may have a place in BAIC’s future here.
More immediately, recognising that production volumes of BAIC vehicles may initially fall well short of the plant’s capacity, Wang says the company is open to the idea of building vehicles for other brands — a process known as contract manufacturing.
The Industrial Development Corp (IDC), a 35% partner in BAIC’s South African operation, has previously floated the idea of building a separate multi-brand assembly plant for companies unable to afford the huge cost of setting up their own operations.
Wang says BAIC is willing to consider contract manufacturing at Coega. “It’s negotiable. It depends on cost and profit.”
BAIC originally announced the Coega development would cost R11bn, including the IDC’s 35%. So far, says Wang, BAIC itself has spent about $330m — about R6bn at current exchange rates.
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