Volkswagen invests $20m in Rwanda

Volkswagen has taken a leap of faith with an investment of $20 million (R277 million) to start local assembly of its vehicles in Kigali, Rwanda.

The operation will start small. Although the facility has the capacity to produce an estimated 5 000 vehicles per year, the first phase will probably only see production of about 550.

Overall production, which will involve the assembly of semiknocked down kits, is estimated at about 1 000 units during the first year and will include the Polo and Passat, with the Tiguan, Teramont and possibly the Amarok to be added in future.

The market for new car sales in the landlocked East African nations is limited; about 3 000 new cars are currently sold each year. (In South Africa, about 600 000 new vehicles are sold yearly.)

Like many other nations in Africa, cheaper used vehicle imports dominate the market, making it difficult for automakers to produce new cars without tariff protection.

Production in Kigali is the culmination of a process that started in the middle of 2016, says Thomas Schaefer, managing director of Volkswagen Group SA.

Volkswagen started looking at nations that “want to make a difference” and “change the way they organise themselves”. During this process, the German automaker identified four nations – Rwanda, Kenya, Tanzania, and Ethiopia – and reached out to their authorities. It started assembly in Kenya in December 2016.

To overcome the initial challenge of the small new vehicle market in Rwanda, new vehicles will largely be used for mobility solutions, including car sharing and e-hailing.

While cynics may consider the move – which follows a period of political and economic turmoil in South Africa – a vote of no confidence in Africa’s most industrialised economy, Schaefer says such a notion is “complete rubbish”.

He has been promoting the initiative with the department of trade and industry for some time.

“What we need to understand in SA [is that] if we don’t get Africa right as a joint market for our SA operations, we can say goodbye to the South African motor industry in the next 10 years.” – Moneyweb

Production in Kigali is the culmination of a process that began in the middle of 2016. Thomas Schaefer Managing director of Volkswagen Group SA