Chinese manufacturer to use Coega as base for African expansion

Chinese government-owned
vehicle manufacturer First
Automotive Works (FAW)
has started construction on
a R200-million completely
knocked down (CKD) medium
to heavy truck assembly
plant in the Coega Industrial
Development Zone.
Speaking at the official
signing ceremony, FAW
chairperson Jin Yi said the
deal had been sealed through
incentives offered to the
Chinese manufacturers by
both the Department of Trade
and Industry and the Nelson
Mandela Bay Municipality.
FTW was unable to obtain
more information on the
incentives. What can be
gleaned from the official
information released at the
signing is that the plant will
benefit from the Special
Economic Zone (SEZ) tax,
employment and training
incentives announced by
finance minister Dr Rob
Davies. This would mean the
creation of an SEZ within the
Coega IDZ.
When the first vehicles start
rolling off the assembly line in
18 months’ time, the plant will
be one of the only CKD truck
assemblers in Africa.
Kenya has an assembly
industry as it has prohibited
the importation of medium
and heavy-duty commercial
vehicles with a 3-ton or more
load capacity unless they are
completely dismantled and
contain no components that
may be produced locally.
FAW will not be sourcing
components in South Africa
initially for its planned
production of 5 000 units a
year, but is looking to develop
the industry, according to Yi.
Speaking at the ceremony,
he described South Africa as
the “Gateway to Africa,” and
said that the new plant was a
“critical component” of FAW’s
global strategy.
While much of the African
heavy and medium market
is dominated by secondhand
imports, the window
of opportunity that FAW
may have identified is that
it is becoming increasingly
difficult and costly to source
Euro 1 and Euro 2 diesel
engines capable of running
on the high sulphur content
fuels still found throughout the
African continent.
Auto industry sources tell
FTW that China faces similar
challenges outside of the main
cities.
FAW is therefore likely to
continue manufacturing the
older technology engines for
its own and emerging markets,
and Euro 3 and Euro 4 power
plants for South Africa and
other markets where emission
levels have been gazetted.
This will put it in a strong
position in markets currently
dominated by European and
American manufacturers,
which are phasing out the
production of the older
technology engines.
When pushed on local value
add, Li said South African
companies, engineers and
workers would build the new
assembly facility, which will
cover a total of 10 000 sqm of
land in the first phase.
This is in contrast to other
Chinese projects FTW has
seen elsewhere in Africa,
where workers, professionals
and materials are all brought in
from China.
Li also said that the majority
of the 500 people working
in the plant would be South
African.
Another 30 000 sqm
has been reserved for
subsequent production of light
commercials and cars.