The manufacturing of the X3 will replace that of the 3-series sedan, which has been assembled at BMW SA's Rosslyn plant, near Pretoria, since 1983.
The investment is believed to be the biggest to date in SA's motor industry.
BMW SA MD Tim Abbott said more than R3bn would be spent upgrading Rosslyn and another R3bn on components suppliers, launch costs and training.
The announcement came a week after the Department of Trade and Industry announced that it would continue to support the motor industry once the incentive-based automotive production and development programme (APDP) expires in 2020.
Delays in announcing the results of a programme review had caused fears that the policy stability, which has attracted substantial foreign investment in recent years, might be under threat.
Trade and Industry Minister Rob Davies yesterday said that since the APDP was launched in 2013, it had attracted R25bn in investments from vehicle and components producers. The review would pose no drastic changes or disadvantages to investors.
"We envisage building on the success of the APDP," he said.
Abbott would not say when assembly of the X3 would begin but it is expected to be around 2019, when the lifecycle of the current BMW SA 3-series is due to end.
If so, the investment will be made during the APDP and BMW SA will be able to recoup at least 20%, and possibly up to 30%, under the programme's automotive investment scheme.
Motor companies can also currently earn duty rebates on imported vehicles and components. Some - including Volkswagen SA, which earlier this year committed itself to spending R4.5bn in the next two years - say they have received government assurances of further similar benefits.
Rosslyn plant director Stefan Huelsenburg said BMW SA would have to "renovate and restructure" the assembly plant. Upgrades would begin next year. Production of the 3-series would continue during the process but there would be a shutdown to switch from the old product to the new.
The current 3-series is the sixth generation of the car. The first built in SA from 1983 was the second generation.
As subsequent models have arrived, production has increased, particularly since BMW used the APDP's predecessor, the motor industry development plan, as an export launchpad.
With the third generation 3-series, Rosslyn averaged 19,000 cars annually between 1994 and 1998; the fourth generation averaged 38,500 from 1998-2005; and the fifth generation 49,000 from 2005-2012. In the three years since then, BMW SA has built about 200,000 units of the model.
More than 80% of production is for export, mainly to the US. Last year, the company built 68,721 cars, of which exports accounted for 61,735. This year, output is expected to touch 70,000. Aggregate 3-series assembly at Rosslyn passed the 1-million mark this year.
Rosslyn is one of four BMW plants producing the 3-series. Its share will eventually be allocated to other plants.
It will be one of two building the X3, as the junior partner to BMW's Spartanburg, South Carolina, plant in the US. Spartanburg is the global production centre for BMW X-series models, which range from X1 to X6 and will shortly be joined by an X7.
Source: Business Day
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