The head of Volkswagen Group South Africa (VWSA) has said that the company does not want to pull out of the country, but that there are still several issues that need to be addressed for it to continue operating here.
This statement was made by Martina Biene, the chairperson and managing director of VWSA this week, following an interview where Thomas Schaefer, the head of the VW global passenger brand, said that he was “very worried” about the company’s future prospects on the tip of Africa.
Persevering despite adversity
In a recent interview with Reuters, Schaefer noted that the cost of operating in South Africa has become detrimental to its ongoing production, citing persistent load-shedding, rising labour costs, and logistical issues to do with the country’s reliance on road transport, a lack of railways, and port delays as the main concerns.
These issues have grown significantly worse over the past few years, and the executive said that the effect was that South Africa was no longer an appealing location to invest in as an automotive manufacturing haven.
“Eventually you have to say, why are we building cars in a less competitive factory somewhere far away from the real market where the consumption is?” he said.
“I’m very worried about it … We’re not in the business of charity.”
VW is one of the country’s longest-serving car brands, having been operating here for nearly 80 years, during which time it has produced millions of the iconic Polo hatchback spread out over four generations.
The comments made by the head of the global brand are therefore a huge concern for South Africans employed by the manufacturer and by general consumers alike, but VWSA’s Martina Biene has since confirmed that there are currently no plans to cease operations here.
In an interview with eNCA, Biene said that the German automaker’s local division has no intention of leaving, but that Schaefer’s comments should be taken as a warning.
With regards to increased operating costs, Biene said that the Kariega Plant in the Eastern Cape needs to rent generators to offset load-shedding, which ends up costing VWSA R130 million over the course of two years.
This is money that is simply being wasted and is not being used to invest in a product or upgrade the facilities, she explained.
Biene also said that the national government’s lack of decisions was another point of concern, in reference to how South Africa has still not created any meaningful legislation regarding electric vehicles (EVs).
Kariega’s Polos are primarily produced for export to Europe, but the continent is planning to ban the sale of internal combustion engine (ICE) cars as soon as 2035, which could leave the Polo without its biggest market.
In preparation for this, VW has been gradually shifting focus to its ID. line of EVs, but South Africa’s lack of incentives for doing so means that the carmaker is actually looking at African countries like Egypt and Ethiopia as more viable candidates for investment at this time.
As a silver lining, VWSA is planning to increase its Polo production to a record 163,000 units in 2024, as Kariega will soon become the sole producer of the hatch for Europe following VW’s Spanish Pamplona Plant’s conversion to the ID. 2.
VW has stated its intention to introduce a third model to its domestic production line alongside the Polo and Polo Vivo on multiple occasions, but these plans have been put on hold by its rising operating costs.
“We want to build a 3rd product in our Kariega plant… But as I said, generator purchasing or renting doesn’t help with our feasibility calculations,” said Biene.
She warned that if the company is unable to find solutions for these problems by the end of 2024, it will have serious issues sustaining its operations in South Africa.
Keyword: VW doesn’t want to leave South Africa – But it’s getting harder to stay