What can you buy for R6bn? If property is your thing, the money will get you the world’s most expensive home — a 188-year-old mansion in the hills overlooking Nice, in the south of France. If you’re a car freak, you can afford nine Ferrari 250 GTOs. Built in 1963, only 39 were made, specifically for collectors.

Alternatively, R6bn will buy you hundreds of robots, a world-class factory, state-of-the-art vehicle assembly lines and jobs for thousands of South Africans.

German car makers Volkswagen and BMW have taken the third route. With the orderliness typical of their nation, both have recently announced the conclusion of R6bn investments in their SA subsidiaries. VWSA has begun to build the latest Polo and Vivo car models, and BMW SA is about to switch production from the 3-Series car, which has been built here since 1983, to the X3 sports utility vehicle (BMW prefers to classify it as a sports action vehicle).

Both companies announced their investment plans in 2015. BMW always meant to spend R6bn, VW rather less. Its original R4.5bn budget was inflated by a relatively weak rand and the need to add extra production capacity.

So where does the money go? The biggest share of VWSA’s outlay, R5.5bn, was dedicated to capital expenditure at its Uitenhage plant, near Port Elizabeth. Of that, R3.4bn went to production facilities, mainly logistics, assembly, press tooling and the paint and body shops. The body shop is now home to 330 new welding robots. Another R2.1bn bought tooling for local content; at over 60%, VWSA has one of the highest levels of SA-sourced content in the industry.

Other bills included R217m for local content development, R444m for production start-up costs and R72m for quality assurance.

Converted into euros or US dollars, R6bn is at the lower end of international automotive investments, but the VWSA and BMW SA projects are important in the parent companies’ global strategy. Both SA subsidiaries are responsible for group activities across sub-Saharan Africa.

In the case of BMW SA, that’s still a nascent responsibility. One of the reasons for the switch to X3 is that it’s better suited to the region’s driving conditions. Tar roads are often scarce outside cities.

Local CEO Tim Abbott says it may take some years for BMW to become a significant sub-Saharan presence but at least now it has a product that can do the job. The next step is to set up a supporting marketing and service network.

VWSA is far ahead. In January, MD Thomas Schaefer announced a joint venture with the Rwanda Development Board, to assemble VW kits in the central African country and provide the capital, Kigali, with "mobility solutions" like car-sharing and Uber-style ride-hailing. It’s the first such VW programme anywhere in the world.

Since 2016, VWSA has exported SA-produced kits for reassembly in a Kenyan joint venture. It also maintains a watching brief over VW Germany’s Nigerian reassembly operations which, like those of other multinational manufacturers, have been at a virtual standstill for the past couple of years as Nigeria’s new-vehicle market has collapsed.

Schaefer and his team are now looking at joint ventures in other sub-Saharan countries. Ghana and Tanzania are among those considered to have potential.

SA apart, African markets are tiny individually but global motor companies live in hope that, at a time when many mature markets are close to saturation, Africa — often called the motor industry’s "final frontier" — will one day offer the sales growth that has been awaited for many decades.

While they wait, BMW SA and VWSA will get their immediate volumes from elsewhere. Annual X3 production capacity at BMW SA’s Rosslyn assembly plant, near Pretoria, will be up to 75,000. To begin with, about 96% of production will be exported, mainly to Europe, where markets include Germany, the UK, France and Spain. Rosslyn is one of only two BMW sites building X3; the other is in the US.

VWSA is also export-heavy. Of the 133,000 cars Uitenhage expects to build this year, 83,000 are scheduled for export. Again, Europe is the primary destination. In line with VWSA’s long-term manufacturing strategy, the main export model is the new Polo, which was launched in January. Vivo, based on the previous Polo range launched in February, is mainly for local consumption.

Both the BMW SA and VWSA programmes have been made possible by the government-administered automotive production and development programme (APDP), whose incentives include investment rebates of up to 30%. Talks are under way on a successor to the APDP, which will expire at the end of 2020.

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