The vehicle manufacturing industry in South Africa is currently facing unprecedented challenges, including Volkswagen as the global market rapidly shifts towards New Energy Vehicles.
One of the major concerns is the uncertain future of the Polo model, which is produced in large numbers by Volkswagen South Africa (VWSA) for export markets, particularly Europe. This uncertainty has raised questions about the future viability of the Kariega-based plant in the Eastern Cape.
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Volkswagen international brand boss Thomas Schäfer, expressed his concerns about the Kariega plant during a recent visit to the country. He mentioned that the plant was once ranked among the world’s most cost-competitive facilities.
However, in recent years, the costs associated with overcoming disruptions caused by load shedding, port delays, and rising labour costs have put the country in a less favourable position.
Schäfer emphasized the need to evaluate the rationale behind building cars in a less competitive factory that is far away from the real market with high consumption. He stated, “We’re not in the business of charity.”
While acknowledging the efforts made by VWSA employees to mitigate the country’s problems, Schäfer called on the South African government to step up and address these challenges.
He highlighted the importance of government intervention to solve issues related to load shedding, port delays, and labor costs. Without a concerted effort from the government, South African corporations may be forced to relocate their investments elsewhere.
As a response to the challenges, Volkswagen had previously considered adding a third model to its South African production operation to reduce reliance on Polo exports.
This new vehicle would be Polo-based but feature unique “SUV style” body panels and a competitive price tag below the T-Cross.
There were also discussions about the potential development of a bakkie spin-off of this new model range in collaboration with Volkswagen of Brazil.
However, an official announcement regarding the third model for local production is yet to be made, and Schäfer’s recent statements cast doubt on whether it will proceed.
Last year, the Kariega plant produced over 132,000 Polo models, with the majority being exported. VWSA currently supplies left-hand drive and right-hand drive cars to 38 international markets.
Additionally, it is the only plant in the world producing the Polo GTI. The plant directly employs nearly 4,000 South Africans, with an estimated 50,000 people supported through the value chain. In December 2022, the facility celebrated a significant milestone with the production of its 2-millionth Polo.
VWSA has implemented measures to mitigate the country’s power crisis, including real-time load management and the installation of 2.3 MW of solar capacity at the plant. The company also purchases additional electricity from solar-based private suppliers.
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However, water scarcity remains a challenge, and VWSA has attempted to address this by installing a rainwater-capturing system for the engine plant. Despite these efforts, South African corporations can only do so much to mitigate the challenges.
The government’s active involvement is crucial in addressing the myriad issues faced by the vehicle manufacturing industry. Without a comprehensive approach, many investments may be compelled to relocate to more favourable environments.
Volkswagen Not Sure Of Continuing Manufacturing In South Africa Due To Persisting Challenges
