Volkswagen AG board member and Volkswagen Passenger Cars CEO Thomas Schaefer has told the SA government to “focus” on fixing the country’s regulatory, energy and logistics problems. He said that while production at the brand’s Eastern Cape plant is safe “for now”, he issued blunt warnings about the future.
“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?’ I’m very worried about it ... We’re not in the business of charity,” Schaefer said.
Volkswagen directly employs 3,500 people at its plant in Kariega, and Schaefer’s comments reflect heightened anxiety among local automotive executives who, including their components supply chain and service centres, employ at least 110,000 people and contribute 6.4% of GDP, according to the 2021 SA Automotive Masterplan.
“For now, we’re safe. The other Polo factory in Spain is being changed to build entirely electric vehicles. SA will be chockablock, filled all the way through to [2026 and 2027]. Polo Vivo can run until 2027. We’re working on a third model, something more usable in the Africa context. It’s close to being decided.”
Schaefer said logistics and energy crises in SA pose a threat to production facilities here. “You must put yourself in the shoes of the guys in Wolfsburg [Volkswagen’s headquarters in Germany]. We are in a crunch time in the car industry. You have unbelievable investments you need to make to stay in the game. We are investing €180bn in the next five years, and we had ideas for €200bn. We have to prioritise to find the best possible way to serve our shareholders, and [in that context], additional costs make projects unfeasible.
“We rank all the projects and investments and look at the best yields and strategic relevance, and then messages like this come out: ‘Oh, the ports are stuck, you can’t get the materials in, we have to cancel shifts because there is no electricity, the market is not doing all that great, what are the people doing?’ Well, let’s cancel!”
Schaefer was quick to add that this wouldn’t happen “on my watch”.
“But we have to say, come on guys, let’s focus.” VWSA CEO Martina Biene “is in constant contact with the government, finding solutions ... she says she gets enough attention ... which is good, because if you lose attention on this, it starts getting dangerous.”
Schaefer warned that any automotive policy that does not include incentives for consumers to transition to electric vehicles (EVs) would fail.
The motor industry has been waiting for an updated version of the masterplan since 2021, when a green paper was circulated that addressed the complexities of battery supply chains, but there has been disagreement on how much support the government can offer consumers to switch to EVs.
Schaefer was adamant an export-only policy, excluding such local incentives, would fail. “No. You have to take the consumers on the way with you ... if there is no consumer benefit, I doubt you will handle the transition. SA is a small market — 350,000 passenger cars — heavily leaning into the A0 small vehicle space, so unless you focus on that and make that feasible with consumer support, it’s not going to happen. You can roll it in over a certain period, whenever is affordable from a government point of view, but it’s better to start that process.”
Import tariffs
He said reducing import tariffs on EVs as a stand-alone action would denude the manufacturing base. “It’s not a good start, because you then undermine the local production. You need to take local manufacturing value-add with you. Again, with concentrated action, there could be many battery factories in SA.”
Schaefer was positive about the development of the African market and spoke highly of the work being done at the African Continental Free Trade Area secretariat to address issues around logistics, customs and currencies.
“If you unlock that, there’s a phenomenal opportunity. That’s why we want to be in the game early enough, be there when it gets created and not be a follower.
“It’s very much in our interest to help Africa develop a car industry.”
He said it would be “no problem” for the continent to grow to a market of 5-million units once the “cheap drug” of imported used cars begins to dry up.
“The rest of the continent would love to have a car industry. It creates jobs, it’s long-term investment. Now we have it ... I would fight to keep it,” he said.
Additional reporting by Reuters
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