The newest car brand in SA, BAIC of China, is set to commence local assembly and production of two new models into the market.
Buhle Hanise, CFO at BAIC SA, told CFO Talks that the recent easing of lockdown restrictions to Alert Level 4 means the car manufacturer can now scale up to 50% employment, which allows for limited operations.
BAIC, the car brand owned by The Beijing Automotive Group, announced its arrival in SA in 2017 with an investment of R11 billion in a vehicle plant in Port Elizabeth. The South African entity is 35% owned by the Industrial Development Corporation. The first two models to be manufactured in SA are the D20 and the X25 SUV, though Chinese-made versions of the vehicles have been available in SA for several years.
Hanise explained that the company is planning to start local assembly of the two models. “We have been allowed to commence with limited operations, and our health and safety teams have been going through the factory to prepare for this. We have partnerships one or two dealerships in SA as a pilot, and will expand this in time.”
BAIC sold 2.26 million cars worldwide in 2019, with more than a quarter of this coming from sales of Beijing Benz, manufactured under partnership with Mercedes-Benz. It also has a joint venture with Hyundai. The vehicles are sold in 80 countries, with SA being the latest new market launch for the company.
What about the demand for new vehicles in a post-Covid economy?
Hanise says there is little doubt that people will be spending less in the coming months, and this will be a challenge. “However, the reality is that SA still very dependent on car transport, and this is creating demand for vehicles, in part because of the difficulties in alternative means of transport, such as trains. General Motors left SA a few years ago, so we expect to be able to take over some of its market.”
The lockdown has forced companies and management to re-examine every aspect of their businesses. One thing the Covid-19 crisis has illustrated is the reliance many companies had on just one or two clients. “We’re going to see a lot of business rescue going forward, and companies are going to be cutting jobs.
“Companies are going to have a Plan B in place. They will need to look differently at their balance sheets, and create buffers in the form of savings and reserves. Covid-19 has shown us business will never be normal again. One thing that will become vital is technology, as the Fourth Industrial Revolution forces us to become part of the developed world. The big question we will have to answer is how do we support entrepreneurs, who may not be able to rely on companies giving them jobs as in the past?”
The crisis affects everyone, including government, she says: “To fix SA, we need more younger people in government, and we need to encourage entrepreneurship, starting in our schools.”
You can access more podcasts with leading CFOs, head over to CFO Talks.
The headline has been changed to reflect the fact that BAIC is about to start assembling vehicles in SA. The previous headline implied the launch of the products were delayed as a result of Covid-19, which is incorrect.