BMW will pour around 200 million euros ($218 million) into the factory at Plant Rosslyn, in Pretoria, which was BMW's first foreign plant outside of Germany.
Starting next year, "we will manufacture the BMW X3 as a plug-in hybrid for global export in South Africa," Milan Nedeljkovic, board member for production, said in a statement.
The investment will make the country the second after the U.S. to manufacture and export the X3 hybrid.
The continent's most industrialized economy began manufacturing the X3, the firm's best-selling model, in 2018.
South Africa boasts a booming automotive industry — the country's largest manufacturing sector — which contributed 4.3% of the gross domestic product in 2021 according to the International Trade Administration.
BMW's Pretoria plant has produced over 1.6 million vehicles, the group said, exporting to more than 40 countries globally, including 14 across the continent.
The vast majority of cars assembled in South Africa get exported to other countries.
Toyota has been manufacturing its Corolla Cross hybrid SUV at its Prospecton Plant in the country's third-largest city of Durban since 2021.