Continued support through export credits is “the single most important ingredient” in German car maker BMW’s discussions with the South African government, and not land expropriation without compensation, or the push for increased black economic empowerment within the local auto sector, says BMW management board member for production Oliver Zipse.

South Africa’s Department of Trade and Industry is currently developing a new auto sector support programme to replace the Automotive Production and Development Programme, set to run until 2020.

Speaking at a media round table in Munich this week, Zipse, who is also the chairperson at BMW Group South Africa (BMW SA), said the German car maker had been in South Africa “for fifty years”, and that it always found “constructive ways to push forward”.

He said every country has “its specific ways” in dealing with its challenges and history, and that BMW was ready to “be a local industrial citizen” within South Africa.

However, he cautioned that any move from the South African government “to turn away” export credits might “be very dangerous”.

He noted that the Australian motor industry “vanished in five years” when policy changed in that country.

He said local production worked in South Africa, in that BMW SA earned export credits from the cars it produced at Rosslyn, through the APDP, and then used these credits to import vehicles to sell in the local market.

Without this model, there was little reason for the German car maker to have a plant that “far away from all markets”. He said the South Africa automotive manufacturing sector was “not a natural industry”.

“If you change that system, the system will close down in five years”.

Should the support model from government change, it would not endanger BMW Group SA’s current X3 production and export programme, but possibly any decision to produce a successor model in South Africa.

He said the plant might then shrink again to the size that it was prior to becoming an export plant, facilitated through the implementation of the APDP predecessor, the Motor Industry Development Programme.

He added that a positive decision on export credits from the South African government would not see the Rosslyn plant expand any further.

The Rosslyn plant this year moves from 3 Series sedan production to X3 sports-utility vehicle production.

An investment of R6.2-billion will see production capacity increase to 76 000 units a year.

Zipse said production of the X3 should “safeguard the existence of the Rosslyn plant”, as the global SUV market was expanding rapidly, with sedan sales seeing a sharp decline.

LOCAL CONTENT
Any drive from the South African government to increase local content – the percentage of locally produced parts on a vehicle by volume – would only be possible if the local new-vehicle market increased in size, said Zipse.

He said any push by government to increase local content beyond the current scope, might “force manufacturers to leave. It will have a very negative effect. I say it very bluntly. I’ll be extremely careful to talk of more localisation”.

He said BMW SA sales dropped, roughly speaking, from a peak of 30 000 units a year to 18 000 units a year.

The total South African new-vehicle market peaked in 2006 at 714 000 units, with sales at 558 000 units in 2017.

While the exact local content on the BMW 3 Series remains unknown, with BMW SA noting that the definition used by different manufacturers varied markedly, the local manufacturer did note on Thursday that the local content on the new X3 would increase from the 3 Series.

“To significantly increase local content further would require local production of drivetrain components, such as engines and gearboxes,” said BMW SA spokesperson Alex Parker.

Zipse did note, however, that BMW was “ready to make its contribution” to a proposed R3.5-billion industry fund, set up by South Africa’s major vehicle manufacturers, to help develop black-owned companies in South Africa’s automotive supply chain.