Volkswagen Group Africa, one of South Africa’s biggest auto manufacturers, says it will start manufacturing electric vehicles (EVs) only in about 10 years’ time, since the African market is not ready for them.
In a telephone interview this week, the company’s spokesperson, Andile Dlamini, said they would continue manufacturing internal combustion engine (ICE) vehicles at the Kariega plant in the Eastern Cape for the foreseeable future.
This flies in the face of the EV white paper released by trade, industry & competition minister Ebrahim Patel, which envisages production starting in 2026. The white paper was finally released in December, after warnings that South Africa’s vehicle manufacturing industry was at risk if the country delayed the transition to EV production. Europe and the UK, the markets for three out of every four vehicles coming off South African production lines, are set to ban ICE-powered vehicles by 2035.
This week, VW announced a R4bn investment to upgrade facilities at the Kariega plant in preparation for the 2027 launch of a third SUV model — an addition to its production line-up.
It will also introduce a test fleet of its highly successful ID.4 all-electric SUVs in South Africa in the second half of 2024, but these will go to selected customers, journalists and business partners for "customer
experience and insights", said Dlamini.
National Association of Automobile Component and Allied Manufacturers CEO Renai Moothilal agreed with the company, saying South Africa did not have the supporting infrastructure to cater for EVs.
"The EV white paper announced by Patel in November also allows for transition to EV production by giving additional investment incentives. Manufacturers of EV components can get a much higher cash grant for these lines," he said.
"This — coupled with recent investment announcements by other original equipment manufacturers, who are doing plug-in hybrids [similar battery technology to pure EVs] — means the South African production environment is already changing and set up for transition to any new technology. As a relatively small producer by global standards, the South African automotive sector should maximise all opportunities for production and localisation, irrespective of technology," Moothilal said.
He described Volkswagen’s R4bn plant upgrade as "positive", since it positioned South Africa as the sole producer of Polos globally. He also said adding a small SUV to its production line would mean component manufacturers who supplied the plant would benefit from additional volumes,
allowing them to recover from losses suffered in the wake of Covid.
"While it may not be EV-specific, the markets these vehicles are being sold to
will continue to absorb ICE vehicles in the period these vehicle platforms are planned, sustaining and growing employment and other economic benefits in South Africa," Moothilal added.
VW Group Africa said its plan for the increased investment was to manufacture the new SUV model alongside the iconic Polo and Vivo on the same production line. "This strategic move not only underscores our commitment to innovation, but also strengthens our position as a key player in the South African landscape."
Most of the investment would go towards capital expenditure for production facilities, manufacturing tooling, local content tooling, and quality assurance. More than R800m would be spent to enhance automation in the body shop, and in excess of R400m would go towards procuring new press cooling. The first phase of the plant upgrade would start at the end of 2024.
Martina Biene, MD for the group’s Africa operations, said the investment announcement reaffirmed the firm’s commitment to South Africa, where it has been manufacturing vehicles for more than 70 years.
"Plant Kariega is an important manufacturing plant within the Volkswagen Group production network. Since 2011, Volkswagen has invested R10.28bn in production facilities, manufacturing equipment, local content tooling, and training people. The new investment is a vote of confidence in the future of the plant. It also futureproofs jobs, not only for our people, but also for those employed in our supplier network."
South Africa remains an important market for VW, particularly in terms of its long-term goal to establish a footprint on the African continent.
"As most global vehicle markets transition to EVs, markets like South Africa will continue manufacturing and selling vehicles with ICEs for the foreseeable future, owing to customer demand and slow production of EVs in these markets. However, for the Volkswagen brand the electrification journey begins this year with the introduction of our ID.4 test fleet in South Africa and Rwanda," Biene added.
The Nelson Mandela Bay Business Chamber welcomed the investment, as the VW Group remains the largest private employer in the region. "Furthermore, 40% of the country’s automotive component manufacturers were in Nelson Mandela Bay, said the chamber’s CEO, Denise van Huyssteen.
The auto manufacturing industry contributes 4.9% to GDP, employs thousands of workers directly, and supports thousands employed throughout its value chain.
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