German-owned carmaker Volkswagen Group Africa (VWGA) is to invest R4bn in building a new car at its Kariega assembly plant in the Eastern Cape.
The car, a small sports utility vehicle (SUV) developed in Brazil, will be built at Kariega from 2027 on the same assembly line as the current products, the Polo and Vivo cars.
Announcing the investment on Tuesday, MD Martina Biene said most of the R4bn would be spent on production facilities, tooling, quality assurance and local content. For the last of these, R1.2bn will help local component suppliers gear up for the new vehicle.
The first phase of the upgrade will take place at the end of 2024 during the annual industry shutdown.
In addition to the R4bn, another R130m has been set aside to hire two huge electrical generators to protect Kariega from load-shedding. Like other motor companies, VWGA has suffered production losses because of Eskom’s failure to supply regular power. The R130m will cover expected costs for two years.
Until recently, the local company was called Volkswagen SA. Biene said the new name reflected the company’s continued commitment to Africa as a whole. She said the investment disproved rumours circulating late in 2023 that VW planned to disinvest from SA.
The rumours stemmed from misrepresentation of comments from VW global passenger car CEO Thomas Schaefer when he spoke of challenges facing the SA motor industry. Load-shedding was a major obstacle, along with the country’s dysfunctional transport infrastructure, particularly the railways and harbours.
Biene has said before that these were significant disincentives to foreign investment. She admitted on Tuesday that persuading Volkswagen Germany to stump up the R4bn had been a "hard sell", but she said there had never been any doubt about the parent’s intention to stay in SA.
Biene said: "We plan to build cars in this plant for years to come. SA is an important market for the Volkswagen group, particularly in terms of our long-term goal to establish our footprint on the African continent, which is seen as the last frontier of automotive development."
Trade, industry & competition minister Ebrahim Patel said the investment was "testament to the company’s confidence in our country".
In a further boost to the company, Biene said that from July Kariega would be the only plant in the world to build the Polo range, after VW’s Spanish plant halts production. This would provide Kariega with another 20,000 annual exports.
Polo production will end in 2030 and Vivo in 2029. Variants of the SUV could take up some of the slack. Biene expects Kariega to build 165,000 vehicles in 2024, of which 127,000 will be Polo exports, but new products could be added.
She said the first generation of the new SUV will use only petrol- and diesel-driven internal combustion engines. She has said previously Kariega was unlikely to build electric vehicles before 2035.
Biene added that the R4bn investment would secure the roughly 4,000 jobs at VWGA and provide opportunities for additional jobs at components suppliers.
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