“We’re not a charity” - Volkswagen boss casts doubt on future of SA plant

Published Nov 27, 2023


South Africa’s vehicle manufacturing industry is facing unprecedented challenges as the world shifts rapidly to New Energy Vehicles.

Volkswagen South Africa (VWSA), for instance, produces the Polo in prolific numbers for world markets, but with that model facing an uncertain future in key export markets such as Europe, the future viability of the Kariega-based plant in the Eastern Cape has been called into question.

Volkswagen international brand boss Thomas Schäfer’s recent words during a visit to the country are nothing short of chilling.

Schafer mentioned how the Kariega plant was once ranked among the world’s most competitive in terms of cost, Reuters reported.

The Volkswagen Polo is VWSA’s export champion but its future remains uncertain.

However in recent years the costs of overcoming disruptions caused by load shedding, as well as crippling port delays and rising labour costs have put the country in a somewhat less favourable position.

"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?" Schäfer said.

"I'm very worried about it ... We're not in the business of charity."

Schäfer acknowledged that VWSA employees had done what they could to mitigate the country’s problems but said South Africa’s government needed to step up to solve the problems, Reuters reported.

Late last year Volkswagen said the company was considering adding a third model to the South African production operation to make it less reliant on Polo exports.

The vehicle would be Polo-based but with unique “SUV style” body panels and a competitive price tag that positioned it below the T-Cross. Earlier this year VWSA CEO Martina Biena also hinted that a possible bakkie spin-off of this new model range, that could be developed in conjunction with Volkswagen of Brazil, was also under consideration.

At the time Volkswagen said that a decision on the third model for local production would be announced around the fourth quarter of 2023, however an official announcement has yet to be made and the latest statements by Schafer cast doubt on whether it will actually go ahead.

Volkswagen produced just over 132,000 Polo models at the Eastern Cape plant last year, and most of these were exported. VWSA currently supplies left-hand drive and right-hand drive cars to 38 international markets. It’s also the only plant in the world that currently produces the Polo GTI.

It currently directly employs almost 4,000 South Africans, with a further 50,000 people said to be supported through the value chain.

The local facility reached a significant milestone in December 2022, with the production of its 2-millionth Polo.

VWSA has put measures in place to mitigate the country’s power crisis, including real time load management, as well as 2.3 MW of solar capacity at the plant and additional electricity purchases from solar-based private suppliers like PowerX.

However water remains a challenge too, something the company has attempted to overcome by installing a 200 kilolitre rainwater capturing system for the engine plant.

Click here for a closer look at what VWSA is doing to mitigate the country’s energy and infrastructural challenges.

However, the bottom line is that South African corporations can only do so much mitigating. Without a concerted effort from government to address the myriad challenges, many investments are simply going to move elsewhere.

Which is a pity because South Africa has the potential to become something of a battery manufacturing powerhouse thanks to its proximity to minerals like cobalt and lithium.

"There's a realistic chance that South Africa, with enough focus, with all the raw materials in the neighbourhood, they could be a champion," Schäfer said.