BMW’s R4.2bn electric car investment a ‘huge step’ for stagnating industry

German carmaker BMW’s decision to invest R4.2bn to manufacture electric cars in SA is proof that the motor industry can no longer wait for the government to offer clear guidance on the future of electric vehicles (EV), say senior industry executives. 

“We are all getting to the stage where we can’t defer decisions any longer,” Neale Hill, president of Naamsa and Ford Africa, said on Friday.

Last week, Renai Moothilal, director of the National Association of Automotive Component and Allied Manufacturers (Naacam), told a conference that urgent action is needed to halt the industry’s “stagnation”. 

According to BMW in Germany, the R4.2bn would enable BMW Group SA (BMW SA) to build a plug-in, hybrid-electric version of the next-generation X3 sports utility vehicle from 2024. The company’s Rosslyn assembly plant in Tshwane will also make petrol and diesel X3s but will be the only BMW plant in the world to make the hybrid. 

“This will be a huge new step,” said Milan Nedeljkovic, BMW’s global board member for production and the chair of BMW SA. “It will be built here for the world.” 

The current X3 has been made at Rosslyn since 2018 and more than 300,000 have been built so far.

The latest investment will make BMW SA the third big manufacturer to build EVs or hybrid vehicles in SA alongside Toyota SA and Mercedes-Benz SA (MBSA). 

Unlike MBSA, which exports all its hybrids, BMW SA CEO Peter van Binsbergen said his company’s X3 hybrids will be available in SA, along with petrol and diesel models. 

The company exports more than 90% of its petrol and diesel cars. Of the more than 50 countries that receive them, many will ban the sale of petrol and diesel cars and bakkies in the next few years, in pursuit of global environmental goals. It’s a similar problem for all SA’s major manufacturers. More than two-thirds of all vehicles produced in SA — overwhelmingly with internal combustion engines (ICE) — are exported. 

Van Binsbergen is among CEOs frustrated by the government’s apparent inability to recognise the urgency required to shift to EV technology. While ICE and EV vehicles are offered identical incentives under the Automotive Production & Development Programme (APDP), companies say EVs need more to accelerate the transition. 

In particular, they want the government to offer consumers the kind of price incentives that have kick-started EV demand in other countries. Trade, industry & competition minister Ebrahim Patel has said bluntly that such a plan is unaffordable. A policy white paper on new-energy vehicles, which also encompass hydrogen and other forms of emissions-free automotive power, should have been published in 2021 but is now expected only in 2024. 

ICE ban

Motor companies say this is cutting it fine if they are to have the certainty required to make multibillion-rand investment decisions in time. Some markets will ban ICE vehicles in 2025. The UK, SA’s biggest export destination, will follow in 2030 and the EU in 2035. 

Van Binsbergen said BMW SA couldn’t wait any longer for the government to make up its mind. The BMW group is committed to electrification and the SA subsidiary needed to follow suit to future-proof itself. In other words, if it didn’t go electric now with a model that will still be manufactured when major markets start to ban ICE, it would threaten Rosslyn’s long-term future. Production of the new X3 will begin in the second half of 2024.

Nedeljkovic said the R4.2bn investment would secure the future of the plant and 20,000 jobs at BMW SA and its suppliers. He added that future vehicles built at Rosslyn are likely to include full-electric vehicles, with no ICE component.

Naamsa CEO Mikel Mabasa also welcomed the BMW SA investment but said it doesn’t alter the fact that policy inactivity is muddying the local industry’s future. He told a Tshwane auto investment conference that the department of trade, industry & competition lacks the capacity and knowledge to move faster.

Industries such as mining and forestry have entire government departments catering to their needs. The motor industry — despite contributing 4.9% to GDP, 21.7% of SA manufacturing output and 12.4% of exports — is serviced by six people within the department. It also supports nearly 1-million direct and indirect jobs. “It’s about time that we, as a country, asked ourselves how properly to support the industry.”

Moothilal told the same conference that despite long-term policy support, the SA motor industry is losing ground to international competitors. Motor industries in countries such as Thailand are “building up a head of steam” while SA’s remains stagnant. The difference is Thailand’s policy clarity and goal-based industry development. He said: “We have similar products to Thailand but they have progresses much further than us.”

Comparing progress with goals set out in the 2021 SA Automotive Master Plan, he said “it is clear we have not moved at the speed we hoped”. 

furlongerd@fm.co.za