INSIGHT | Volkswagen eyes African future

Volkswagen South Africa (VWSA) will now trade as Volkswagen Group Africa (VWA) as it seeks to expand its operations on the continent.

Speaking at the Volkswagen Indaba 2024 event last week, MD Martina Biene said that the region boasts massive business potential.

Biene described Africa as being untapped territory for new vehicle markets as many countries rely largely on grey imports.

Population growth, urbanisation, the emerging middle-class and the development of automotive policy under the African Continental Free Trade Area agreement, were cited as reasons for the company to take confidence in its continental endeavours.

Already, the brand has operations in Rwanda, Ghana and Kenya, involving assembly from semi-knocked-down kits (SKD).

“The SKD concept also seems a bit strange, but that's how VW started in China, assembling 500 units 30 years ago, now it's three million cars in 20 plants, including gearboxes and engines,” Biene said, adding that Africa could emulate this trajectory.

In October, Biene took over as president of the African Association of Automotive Manufacturers from Stellantis SA MD Mike Whitfield, who served since 2020.

But while Volkswagen and its greater African roll-out forms part of a long-term strategy, Biene reiterated the commitment the South African market, with long-standing operations dating back to 1951.

“We’ve been in this country for 72 years and we’ll remain for 72 years to come,” the MD told media attendees at the Kariega production facility in the Eastern Cape.

The plant will be extended to accommodate increased production, as from June onwards, it will be the sole supplier of the Polo for export markets. But an even greater talking point is the prospect of a third model line to be produced at the facility, alongside the Polo and Polo Vivo.

Speculation is rife as to what that product might be – with many anticipating that Volkswagen may finally introduce a light commercial vehicle similar to the compact Saveiro pick-up sold in South America.

Last year, VWA produced 140,430 vehicles, 7,182 more than in 2022. In the domestic sales tally, it recorded 67,411 vehicles – a figure comprising Volkswagen passenger cars and commercial vehicles, as well as sales of models from premium division Audi.

To ensure electricity supply is ramped-up for the increase in activities at the plant, VWA is making investments in infrastructure.

This includes R55m towards the erection of solar panels, capable of generating 3MW. This promises to bolster existing photovoltaic panels at the site, as well as existing efficiency measures, such as rainwater-harvesting methods and waste reduction practices.

Biene took the opportunity to boast about the ways in which VWA invests in the country.

The company lays claim to employing 3,900 people directly, paying more than R3bn annually in salaries. In 2022 and 2023 the firm spent R143.5m in Corporate Social Initiative projects.

In addition to the prospect of a third, locally produced model, buyers can look forward to new imports from VWA this year. Four models were unveiled and displayed at the Indaba.

The updated T-Cross will feature enhanced interior features and subtle stylistic tweaks. There is an all-new Tiguan, redesigned from the ground-up, plus the significantly revised Touareg. Electric vehicle (EV) fans can look forward to the ID.4; spearheading the plug-in range ambitions for Mzansi.

But Biene said EV models were likely to remain a niche in our country – Kariega was not likely produce them for the time being.

“We are not ready as SA for EV, in the near future, in terms of larger production numbers, in Europe Volkswagen has enough plants to produce for their demands.

“We will be on the internal combustion side for quite a while – but we are looking for alternative markets to offset this export potential over time.”

This is where the Africa expansion will come in.

Lastly, we asked whether VWA was worried about encroachments on market share from brands like Suzuki. The Japanese automaker exceeded the 5,000 new units mark for the first time in January, edging close to Volkswagen in second place.

The collective sentiment among executives is that the overall value and brand equity offered by Volkswagen would continue to hold it in good stead among consumers on the local market.