JOHANNESBURG -- China's BAIC has agreed to build an 11 billion-rand ($759 million) auto plant in South Africa, the biggest investment in a vehicle-production facility in the country in four decades.
BAIC plans to produce four models at the site. The Chinese company will own 65 percent of the project, with the balance taken by a partner, South Africa's state-owned Industrial Development Corp.
BAIC plans to start production at the facility in 2018, International CEO Dong Haiyang told reporters in the southern coast city of Port Elizabeth on Tuesday.
The plant will have a capacity of 100,000 units a year by 2027, he said at the Coega Development Corporation (CDC) industrial development zone where the factory will be located.
The CDC broke ground on the plant on Tuesday, it said in a statement. The plant will build cars from completely knocked down kits.
The announcement comes as a boost for South Africa's car-manufacturing industry, which has been among the bright spots of an economy expanding at the slowest pace since a recession in 2009.
The government's auto-incentive program has attracted companies including Toyota Motor Corp., Ford Motor Co. and BMW Group to set up and invest in factories. The industry has the potential to boost production by almost 50 percent to more than 900,000 vehicles a year by 2020, the local producers' group said in May.
About 60 percent of the BAIC's South African plant's output will be earmarked for export, initially to east, west and north Africa, Dong said. Vehicles could be sent to Europe at a later date, he said. The project will create more than 2,500 jobs, according to the joint statement.
The Port Elizabeth facility is BAIC's first integrated auto-manufacturing plant outside its home market, Chairman Xu Heyi said in translated speech.
The company, China's fourth-largest automaker by sales, also has partnerships with Mercedes-Benz and Hyundai Motor Co. in its home market.
South Africa is not the only place that BAIC plans to start manufacturing vehicles, Wei Huacheng, a company executive, said in a translated response to a question from a reporter. "There are some other places we are considering. We have got ongoing projects," he said.
The South African plant will be constructed in two phases, with capacity of 50,000 units a year after the initial development, the companies said. That will double during the second stage.
South Africa exported 173,796 vehicles to Europe last year, up from 116,007 the year before, according to data from the National Association of Automobile Manufacturers of South Africa. Europe was the country's biggest export market for vehicles followed by North America with 53,804 models exported, up from 48,408 in 2014.
Automotive News Europe contributed to this report