Merc SA adds three AMG models to production line in R200m investment

Mercedes-Benz South Africa (MBSA) will, in the second half of the year, add three new derivatives to its production line at the company’s East London plant, in the Eastern Cape.

The new derivatives are AMG models, which refers to Mercedes-Benz’s range of high-specification performance vehicles.

Within the Daimler group – MBSA’s parent company – Mercedes-AMG set a new global record last year with sales of around 100 000 vehicles – up 44.1% on 2015 sales.

“The new AMG models being added are the Mercedes-AMG C 43 4MATIC, Mercedes-AMG C 63 and the Mercedes-AMG C 63 S,” said MBSA CEO Arno van der Merwe on Monday.

Speaking at the company’s yearly results briefing in Pretoria, he said the total investment for the new model introductions would be more than R200-million.

The new derivatives would also add complexity to the plant, bringing yet more technological innovation to the facility, ensuring it became “more competitive”.

The AMG engines will be fully imported.

The newcomers mean that the East London plant will have the capacity to produce ten C-model derivatives by the end of the year.

The AMG investment adds to C-Clas sedan and C 350 e plug-in hybrid assembly at the plant.

Hybrid assembly – a first for MBSA – started in September last year.

Van der Merwe said MBSA and Daimler invested R461-million in the East London plant in 2016.

“The breakdown of this investment number is around R260-million for capacity increases, hybrid introduction and various tooling changes. Structure projects, which ensured improvements in our paint shop, amounted to roughly R100-million, with various plant projects, including quality improvements and replacements, adding another R100-million.”

MBSA’s East London plant produced 106 500 vehicles (passenger cars and commercial vehicles) in 2015, growing this to a record number of 118 700 vehicles in 2016.

C-Class production in 2016 reached 114 000 cars, with around 90% exported to 80 markets.

“Our hybrid export numbers are also looking exceptional, with just under 2 000 units exported in the six months since production started in our East London plant,” said Van der Merwe.

He noted that the East London plant was operating at capacity, but that some production could still be added through labour flexibility, agreed upon in a recent landmark agreement.

He said continued labour, quality and market stability could see the East London plant deliver “improved production numbers” in 2017.

He noted that the East London plant also delivered a 28% improvement on the hours per vehicle from 2013 to 2016.

Van der Merwe said he regarded a plant with production volumes of around 150 000 units a year as a globally competitive plant.

MBSA reported a 10.8% jump in revenue for the year ended 2016,  to R73.4-billion.

Earnings before interest and tax of R5.6-billion were achieved for the same period – an increase of 27.3%.

“This year the South African economy has faced severe headwinds,” said Van der Merwe.

“With the threat of investment status downgrading by ratings agencies, the exchange rate environment was, and remains, volatile.

“However, we continued to steadily increase local production of the C-Class, also introducing C 350e hybrid models for export, thereby increasing foreign currency earnings to balance exchange rate pressures within the business.”

*Van der Merwe is due to start work in his new position as Beijing Benz Automotive Company president and CEO on April 1. Andreas Engling takes over the reins at MBSA, also on April 1.