Don’t mess with the status quo, says BMW’s production chief
BMW’s global head of production urges the South African government to continue the incentives for exporters, writes Mark Smyth
With the market for new vehicles in SA continuing to decline, it is fortunate that many of the automotive manufacturers based in the country rely more on their export volumes than on local sales.
This month, stakeholders are meeting to discuss the way forward for the industry when it comes to the Automotive Production Development Programme (APDP).
The current framework expires in 2020, but both the National Association of Automobile Manufacturers SA and Trade and Industry Minister Rob Davies are confident that the post-2020 APDP plan will continue as it is until 2035.
Recently Davies told Motor News that the discussions are "more or less concluded", adding that there are "some concerns and issues" but nothing that he sees as presenting any major hurdles. He fully expects the new programme to attract new companies and new investment in the years ahead.
That will be good news for Oliver Zipse, member of the board of management for BMW AG responsible for global production. He told us that it is imperative the South African government follows the existing APDP framework.
In particular, he says that as a predominantly export market, it is crucial the government maintains its policy of incentives.
"If you take it away, then you’ve seen what happened in Australia," he warned, making the clear comparison to Australia where the incentives were removed and the car manufacturing industry collapsed.
Zipse is monitoring the economic situation closely, but is also watching the political situation. He told us that whatever happens with political leadership, BMW will remain but only "as long as the foundation of export is not taken away".
He knows the local market well. He was the deputy plant director in charge of the bodyshop for the BMW plant in Rosslyn, Tshwane between 1999 and 2002. Now he is the global boss of BMW production and one of the people most instrumental in switching the Rosslyn plant from 3 Series production to the new X3.
In fact, Rosslyn will be only the second plant after the Spartanburg, US plant to produce the X3. From Rosslyn, BMW will export to Europe and Asia.
Asked if there is also the potential to export to other markets in sub-Saharan Africa and if Africa is the next big thing as some commentators believe, he said that the "premium market in sub-Saharan Africa is almost nonexistent". He cites the lack of proper credit as one of the major reasons for this and adds "we want it differently of course, but we are far away from Africa being the next China".
One of the reasons for continuing to produce in SA is also the number of suppliers in the country. He says that the supplier base in SA compared to the rest of the (global) industry is not too bad. However, he stresses that suppliers follow the original equipment manufacturers and unless they get tax incentives to remain in a country then it is not worthwhile for them.
His comment comes as calls are being made for an increase in localisation of components, but there are few genuinely South African suppliers. The automotive industry is working on nurturing new suppliers but it takes time — Zipse says between 18 and 24 months.
And what of a new era of electrification? In early discussions it did seem that the electric vehicle version of the new X3 would be built at Rosslyn. Zipse categorically ruled that out.
The BMW Group will embark on a new level of electrification from 2020. Many of the cars for 2020 and beyond are already planned on two main platforms with electrification capabilities. There will be a new generation of electrical architecture and components, known as "generation 5". That architecture will be prepped for autonomous technology.
Zipse also promises better and more powerful batteries. Currently BMW builds every part of the technology itself, with the exception of the batteries, but the company evaluates that on a step-by-step basis.
Whatever happens with technology or with incentives, Zipse appears confident that BMW remains committed to future production in SA.