JOHANNESBURG (Bloomberg) -- BMW will build its X3 in South Africa to ease pressure on its U.S. factory that specializes in SUV output.
BMW today said it will invest more than 6 billion rand ($417 million) in its South African operations to start production of the X3 SUV, replacing local production of the 3-series sedan.
The X3 will be built at the Rosslyn plant north of Pretoria and will be sold locally and exported, BMW South Africa Managing Director Tim Abbott said.
The automaker will continue to produce X3s at its South Carolina plant, which is also earmarked to add output of the X7.
BMW’s plant in South Carolina in the U.S. currently produces all X models except the X1, which is built in Germany. The factory will be at full capacity in 2016, Abbott said.
Abbott said 28 percent of BMW's global vehicle sales are X models. "We see the X3 as being, long term, a high-demand vehicle in countries like Nigeria or Kenya or Tanzania," he said.
BMW has not announced projected production volumes for the X3 from Rosslyn. The additional potential markets in Africa will help sales prospects, Abbott said.
BMW wants to make sure X3 production meets demand, which it expects to be "substantial" in Africa, he said.
Carmakers are expanding in South Africa even as economic growth slows and after strikes forced production halts in the last two years.
South Africa’s automotive-incentive program has attracted companies such as BMW, Ford Motor and Volkswagen to set up and invest in factories in the country. The government’s statement this month that the system will be extended beyond 2020 "was very important to us," Abbott said.
The number of vehicles produced in Africa’s most industrialized economy is projected to rise to 622,000 this year, according to the National Association of Automobile Manufacturers of South Africa.
BMW will spend more than 3 billion rand on the Rosslyn factory, plus an additional 3 billion rand on suppliers, startup costs and training.
Production of the 3 series will continue at Rosslyn until the end of the current model’s life cycle, after which the switch will be made to building the X3, Abbott said, without providing a timeline.
BMW’s Rosslyn facility was the company’s first foreign plant when it was established in 1973. The factory is expected to produce about 70,000 3-series vehicles this year and produced its one-millionth vehicle in February.
Correction: An earlier version wrongly stated that building the X3 in South Africa would be the first time the SUV has been built outside the U.S. The X3 was previously built by Magna Steyr in Austria.