South African strike could push BMW to manufacture elsewhere

The ongoing auto worker’s strike in South Africa is seriously hurting the auto industry. If BMW and other auto manufacturer’s agree to the 15% wage increase triple the inflation rate that the workers are asking  for, it will also hurt the auto industry as well. So we face a difficult dilemma. BMW and other automakers who have plants in South Africa can just move their production to locations that will give labor at a lower cost.

The status of South Africa as the number one production hub in the continent has been helping a lot in their economy. In fact, this industry accounts for 6-7% in their $280 billion economy every year. Approximately 420,000 cars are produced every year are exported to other African countries, Europe, and the United States. They easily gained this reputation because they have the best ports, transportation, and parts supplier networks in the African continent. But now, they will be competing against the world. Looks like they fail to realize that the auto industry in South Africa is just growing, and they are killing it already. The number of  cars manufactured in South Africa is very little compared to Korea for example — a small Asian country that makes about 4 million cars a year.

China and India offers very low labor costs. The average monthly salary for South African workers, including overtime and benefits costs US$874, while the city worker in China just receives US$263. An entry-level factory worker would cost less than half of that amount, with food and accommodation included.