State entity upbeat over delayed Chinese factory
Although construction of the R11bn Chinese vehicle-assembly plant was “three or four months” behind schedule, it would be ready to build vehicles in the first half of 2018 as planned, Industrial Development Corporation CEO Geoffrey Qhena insisted on Monday.
He was responding to mounting industry speculation that the IDC and partner Beijing Automotive Industrial Company (BAIC) were reconsidering the timetable for the plant at the Coega industrial development zone near Port Elizabeth.
IDC manufacturing director Abel Malinga admitted the pace of later investment could be influenced by demand for BAICbrand vehicles.
The Coega plant, which will build cars, sports utility vehicles and bakkies, is intended to reach 50,000 annual capacity by 2022 and 100,000 by 2027.
Malinga said the first phase would continue as intended, but timing for the higher target could be determined by sales.
Besides SA, the plant is expected to supply the rest of Africa, the Middle East and South America. Once it is up and running, it will be the first greenfields mass-manufacturing vehicle assembly plant in SA in more than 40 years.
Doubts have been raised due to the lack of signs of progress on site since Chinese and SA officials launched the project at a ceremony in September 2016.
Qhena said work would begin in earnest in July.
The BAIC brand is virtually unknown in SA. The first imported product, a small car, was launched only in April, so BAIC faces an uphill task getting known in the year before Coega manufacture is due to begin.
Adding to the challenge is that in the decade since Chinese motor companies began selling products in SA, they have made little headway in the market.
Qhena said: “BAIC has conducted a lot of market research into why other Chinese companies have failed in order to avoid making the same mistakes.”
Despite doubts expressed by market analysts about the feasibility of the Coega investment, he remained confident that exports and eventual local market demand would pay off.
On the lack of site progress, Malinga said: “There have been delays but we felt it better to get them all out of the way before
starting construction. We don’t want stop-start progress.”
Qhena and Malinga were speaking in Springs, Gauteng, at a ceremony for another IDCBAIC joint venture. BAIC subsidiary BAW has been assembling minibus taxis from imported kits since 2012. From next year, it will move into full assembly and lift local content.
A R250m upgrade is to include a new paintshop and bodyshop.
Consultant Tony Godycki said the expanded operation would be able to build panel vans, luxury buses and electric buses. Its increased annual capacity of up to 2,400 vehicles would also be used to generate exports into Africa.
Chinese embassy officials said nearly 150 large and medium-sized Chinese enterprises were operating in SA with a combined investment of more than $14bn.