BMW warns SA over in­cen­tives

• Ger­man car maker will not ex­pand its Ross­lyn plant and views the gov­ern­ment’s plan to re­duce ex­port cred­its as dan­ger­ous

Business Day - - FRONT PAGE - Dave Fur­longer Ed­i­tor at Large

BMW in­vest­ment in its SA sub­sidiary has peaked and the Ger­man car maker is un­likely to in­crease man­u­fac­tur­ing ca­pac­ity be­yond cur­rent lev­els, global pro­duc­tion head Oliver Zipse says.

BMW in­vest­ment in its sub­sidiary in SA has peaked and the Ger­man car maker is un­likely to in­crease man­u­fac­tur­ing ca­pac­ity be­yond cur­rent lev­els, global pro­duc­tion head Oliver Zipse said on Wed­nes­day.

Rather, BMW would re­con­sider its whole pres­ence in SA if the gov­ern­ment fol­lowed through on sug­ges­tions that it re­duce ex­port in­cen­tives.

BMW SA’s Ross­lyn assembly plant, near Pre­to­ria, is about to be­gin pro­duc­tion of the X3 sport util­ity ve­hi­cle af­ter a R6.2bn in­vest­ment from the Ger­man par­ent. The plant re­cently stopped pro­duc­ing the 3-Se­ries sedan af­ter 35 years.

When the in­vest­ment was an­nounced in 2015, Ross­lyn was to be one of only two plants in the world to build X3. Now, with de­mand stronger than ex­pected, an­other plant will open in China in a few weeks.

Though Ross­lyn’s planned an­nual ca­pac­ity had been raised slightly to nearly 80,000 to soak up some ex­tra sales, Zipse made it clear it would re­main a smallscale pro­ducer. “We will def­i­nitely not ex­pand the plant more than we al­ready have,” he said.

In re­cent years, BMW SA has ex­ported more than 80% of its lo­cal pro­duc­tion and that share is likely to in­crease ini­tially with X3. Un­der the 2013-20 Au­to­mo­tive Pro­duc­tion and De­vel­op­ment Pro­gramme, ex­ports earn cred­its that al­low man­u­fac­tur­ers to im­port ve­hi­cles at re­duced, or even zero, duty.

Some gov­ern­ment of­fi­cials want to see th­ese in­cen­tives re­moved af­ter 2020. Trade and In­dus­try Min­is­ter Rob Davies said in Fe­bru­ary that while he wanted as much con­ti­nu­ity as pos­si­ble in the next phase of au­to­mo­tive pol­icy, there would be some un­pop­u­lar changes.

Zipse said: “It is im­por­tant that you con­tinue your frame­work of ex­port cred­its. If the new SA gov­ern­ment takes this away, it might be dan­ger­ous.”

He pointed to the ex­am­ple of Aus­tralia, which has lost its mo­tor in­dus­try af­ter the gov­ern­ment scrapped many in­cen­tives. “If you en­dan­ger ex­port cred­its, there is no rea­son we should have a plant in SA,” Zipse said.

Though there was no dan­ger to the soon-to-be-launched X3, its suc­ces­sors could be in doubt.

Zipse was speak­ing in an in­ter­view in Munich fol­low­ing the re­lease of BMW’s 2017 an­nual re­sults. He said the com­pany was not wor­ried by po­ten­tial threats from land ex­pro­pri­a­tion or pres­sure for more black par­tic­i­pa­tion in the in­dus­try.

Multi­na­tional mo­tor com­pa­nies have re­jected calls to hand over eq­uity in their South African sub­sidiaries to black em­pow­er­ment part­ners and have of­fered in­stead to un­der­write a R3.5bn fund to de­velop black com­po­nents sup­pli­ers. “We are ready to make our con­tri­bu­tion to this fund,” he said.

How­ever, he said the gov­ern­ment must be re­al­is­tic in its pur­suit of in­creased lo­cal con­tent. BMW SA has one of the in­dus­try’s low­est lev­els of lo­cal con­tent, im­port­ing more than two-thirds of the parts that go into its ve­hi­cles.

Lo­cal man­age­ment has ex­pressed its de­sire to do bet­ter but Zipse said im­prove­ments would be small. “Our level will re­main around where it is.”

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