Wilowvale Motor Industries (Private) Limited (WMI) had to cut down its production targets for BAIC vehicles due to shortages of foreign currency, WMI chairman Ben Khumalo has said.
In emailed responses to questions sent by Business Weekly, Mr Khumalo said the partnership, which also includes a local company Astol Motors had to cut down its production target for the year to approximately 300 from the initial target of 490 for the year.
“Regrettably we have had to revise our production target for this year downwards to +/-300 units due to the shortage of foreign currency.
“Our actual production for the year will depend to a very large extent on the amount of foreign currency that will be available to pay for the kits,” said Khumalo.
Mr Khumalo said the company has since produced 60 vehicles since the launch of the BAIC product on March 27, 2017.
“All 60 units produced have been sold. We are currently in the process of receiving into the WMI bonded warehouse the next batch of kits to build another 90 units,” said Mr Khumalo.
“We have for now directly as WMI re-engaged 30 employees previously laid off and anticipate engaging more employees as market off-take and production increases.”
Mr Khumalo said the new product has received faster acceptability in the market than anticipated.
“We plan to increase production accordingly if we can get around some of the constraints to production,” he said.
“Our biggest and most limiting factor is the non-availability of foreign currency. To date we have not been able to remit any payments to our Chinese supplier of the kits.
“Our applications for foreign currency are in the queue and hopefully will be met soon. Otherwise this is one single biggest threat to the viability of the project.” Mr Khumalo said the other limiting factor is the local shortage of cash resources and affordable credit facilities to enable a wider range of customers to afford new vehicles.
He noted that some potential customers for new vehicles have as a result been forced to settle for second hand imports instead of new vehicles.
“As you may be aware the new vehicles market has shrunk over the years from the high levels of over 20 000 units per year in the late 1990’s to well below 4 000 units per year post-dollarisation.
“With over 20 brands in our market competing for this small customer base the competition is quite stiff resulting in immense pressure on margins and profitability,” said Mr Khumalo adding that there is need to adopt strategies to limit imports, “especially imports of second hand vehicles and to create our own viable second hand market.”
“I believe that our local financial institutions can also play a bigger role by making available longer term credit facilities with cheaper and less stringent conditions than is the current position.
WMI which was closed for approximately five years, resumed operations at the end of March this year following the joint venture with Beijing Automobile International Corporation (BAIC) and Asto l Motors.
In the joint venture, Beiqi Zimbabwe will be responsible for procuring the semi-knocked down kits from BAIC in China, while WMI will assemble the vehicles on a contract basis and Astol Motors together with Amtec, will sell the vehicles and offer after service support.
Under the deal, WMI is expected to assemble 3 000 units in three years.