Motor industry braces for slowdown after BMW SA suspends production

The motor industry is bracing itself for more vehicle-production slowdowns after the news that BMW SA will suspend manufacturing for a month at its plant in Rosslyn, Tshwane, because of the Covid-19 pandemic.

The plant, which builds the X3 sports utility vehicle, will halt production by the end of this week. The company hopes to restart operations on April 20, but says that will depend on circumstances.

The decision, announced in Munich on Wednesday by BMW group CEO Oliver Zipse, came a day after the National Association of Automobile Manufacturers of SA (Naamsa) issued a statement saying local motor companies did not expect the coronavirus outbreak to have an immediate effect on operations.

After a meeting of manufacturers, components suppliers and vehicle importers, Naamsa said there were “no planned disruptions to any of our manufacturing lines across the country”.

The Rosslyn decision, however, was mainly in response to events elsewhere. BMW assembly plants across Europe will close over the same period. Zipse says the decision will help protect workers from the coronavirus, but it is also in response to falling demand for new cars.

He says the BMW group has abandoned hopes for record sales this year, and will be “significantly below” 2019.

The coronavirus is having an enormous effect on the global economy with  car sales plunging. European sales, at their lowest level since 2013 so far this year,  fell 7% in February.

Substantial markets

More than 95% of BMW SA’s X3 production is for export, much of it to Europe, including the UK. Rosslyn has capacity to build about 80,000 vehicles a year.

About 64% of total production by SA motor companies is exported, mostly to Europe. Besides BMW, the SA-based operations of Mercedes-Benz, Volkswagen, Toyota and Ford all have substantial markets there, though the last three sell much of their production in SA.

BMW is the latest motor company to suspend operations at some or all of its European car plants because of the coronavirus outbreak. Daimler, Volvo and Nissan have also joined a group that already included Ford, Vauxhall, Volkswagen, Toyota, Peugeot, Citroën, Fiat-Chrysler and Renault.

Naamsa CEO Mike Mabasa says the BMW SA decision could create a precedent for more companies to halt or slow SA production.

“After the BMW announcement, other local CEOs tell me they are watching the situation in Europe very closely.” He says further SA cutbacks cannot be ruled out.

With the domestic new-vehicle market also in decline, he says local carmakers hope to see trade & industry minister Ebrahim Patel early next week to discuss a government stimulus package to encourage the purchase of consumer goods.

Questions to BMW SA about details of the shutdown, and its effect on employees, was not answered at the time of writing.