BMW South Africa is to shut down its Rosslyn manufacturing plant in Pretoria for two weeks because of risks posed by Covid-19 and the resulting impact on demand for new vehicles.

The temporary closure of the plant will affect about 2 500 workers and other group employees.

Alex Parker, manager of business communications at BMW South Africa, said on Wednesday the company will start to shut down production on Thursday, with BMW’s car plants in Europe and in South Africa to be shut by the end of the week.

Volkswagen has also suspended production for two weeks at plants in Europe operated by the Volkswagen Passenger Car brand but its plant in Uitenhage, near Port Elizabeth, is unaffected at this stage.

Initially Volkswagen production facilities in Wolfsburg, Emden, Dresden, Osnabrück, Zwickau, Bratislava (Slovakia), Pamplona (Spain) and Palmela (Portugal) are affected, as are components plants at Brunswick, Chemnitz, Hanover, Kassel and Salzgitter, and the Sitech distribution arm.

Parker said that with global demand in the car market expected to drop, BMW is responding by adjusting production well in advance and using its broad spectrum of flexibility tools.

Responsible behaviour

“The operation of our engine and component locations – as well as our international automotive plants – will be decided in the next few days. This will depend on the development of demand,” said Parker. “Initially, the flexibility instruments agreed upon by the company will apply to the employees concerned.”

Parker declined to comment on whether a “no work, no pay” policy will apply to workers and employees affected by the shutdown.

Oliver Zipse, chairman of the board of BMW, announced the closure of all BMW plants in Europe and in Rosslyn on Wednesday at the group’s annual accounts press conference in Munich in Germany.

Zipse said responsible behaviour is needed in times like these, adding that medical experts and scientists are giving clear directions as to what needs to be done to slow down and contain the spread of the Covid-19 pandemic.

He said BMW as a company has diverse responsibilities in this situation, including to protect its employees and their families as best it can, to support society in its fight against the virus and, at the same time, to maintain its operational capabilities and prepare for what comes “after the virus”.

“We have made far-reaching decisions that affect our daily business. Many people are focusing on their health and well-being and what is most essential right now.

“Our production is geared towards sales development forecasts – and we are adjusting our production volumes flexibly in line with demand.”

Andile Dlamini, head of group communications at Volkswagen Group South Africa, said on Wednesday that the Uitenhage plant is still operating as normal on three shifts a day from Monday to Friday and is still receiving parts to assemble cars.

But Dlamini confirmed that Volkswagen South Africa is checking what is happening in Europe to see if it impacts on their supply chain.

Dlamini said Volkswagen South Africa produced about 160 000 vehicles last year, with about 110 000 or 68% of them destined for the global export market.

He said it is too early to say if the Uitenhage plant will have to move to short production weeks because of a reduction in the global demand for vehicles.

‘Significant’

Mike Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (Naamsa), said on Wednesday they are concerned that the impact of the coronavirus on the industry is going to “be significant”.

“The longer the current situation persists, it will obviously continue to make the situation even worse and also in relation to global shutdowns,” he said.

Mabasa said the plant shutdowns announced by BMW will have a “huge impact” on Naamsa’s export, sales and production forecasts for this year.

Naamsa has forecast that exports of South African-produced vehicles will increase by 1.2% to 391 900 vehicles this year from 387 139 vehicles last year, with total local production rising by 0.38% to 634 400 vehicles from 631 983 vehicles last year.

Mabasa agreed that the travel ban announced by President Cyril Ramaphosa and by other countries will disrupt the tourism industry and is likely to result in the car rental industry delaying vehicle purchases.

He said it is very difficult to say what action each of the local vehicle manufacturers will take to mitigate the reduction in vehicle demand and sales.

“I’m sure each of them will have different strategies to mitigate against the current challenges,” he said.