China's 5th largest manufacturer, BAIC has begun assembly of its X25 compact crossover in Port Elizabeth as part of an R11-billion joint investment with the Industrial Development Corporation (IDC). BAIC, which entered the local new vehicle market in 2017, will also increase its dealer footprint to 27 outlets by the end of the year.
Like most of us, I hadn't heard of BAIC (pronounced “Bike”) until quite recently, but the Chinese vehicle manufacturer is one of the largest manufacturers in the world. China is a vast car market that has largely kept to itself (that is to say it has made relatively minor forays into Western markets, including ours), but currently, with the backing of the Chinese government, the multi-billion-dollar industry is keen to expand globally.
This week the Chinese President, Xi Jinping, alongside President Cyril Ramaphosa unveiled the very first South African assembled BAIC X25, which was produced at the manufacturer's South African factory, located in Port Elizabeth's Coega Special Economic zone, via live video link. As reported in the general media recently, this historic event marks the start of strong SA-China economic relations over the coming years.
BAIC claims that since the start of the project, more than 1 540 construction jobs have been created and local SMMEs have secured R200-million worth of contracts associated with it. The BAIC agreement was signed in 2015 and is one of 26 bilateral agreements signed between South Africa and China. Together this agreement totals a staggering R94 billion, of which R11 billion will be invested by BAIC.
The recently completed 1st phase includes the ability to assemble vehicles that are shipped into South Africa in semi-knocked-down (SKD) form. The SKD vehicles will be built on a rudimentary production line until the production switches to completely-knocked-down (CKD) later this year. BAIC aims to roll off the first (CKD) X25 in the final quarter of 2018 and to increase the number of its dealers from 17 to 27 by the end of the year.
A big concern for South Africans is how foreign investment affects our local economy – if the local industry will benefit from these investments. It is with that in mind that BAIC SA will endeavour to set up relationships with local business to supply up to 30% of the parts needed for BAIC cars by 2019. The next milestone will be to increase that ratio to 60% within the next few years. For context Volkswagen South Africa sources around 70% of its Polo Vivo parts from local suppliers.
BAIC chairman Xu Heyi said South Africa was a gateway to other African nations and the factory was a way for BAIC to expand into the Middle East and Latin America. BAIC intend to ship 60% of the cars manufactured in South Africa to other nations, thus increasing the worldwide footprint of BAIC and simultaneously setting up a satellite plant in a strategic location. Incidentally, the Coega plant is the first BAIC plant outside China.
BAIC X25 compact crossover
The X25 is a 1.5-litre compact crossover that competes with products such as the Renault Duster and Ford Ecosport. BAIC CEO is confident that thanks to the experience the company has gained in their domestic market, “BAIC can compete with any car company in the world,” Xu Heyi said, before adding that producing the X25 locally would ensure that the price of the vehicle would be much lower than if it was imported from China.