VW Group Africa to invest R4bn in Kariega plant
● Huge cash injection to pave way for production of compact SUV, providing job security to thousands of employees in SA
Volkswagen Group Africa has reaffirmed its commitment to the Eastern Cape and its residents, announcing that it will invest R4bn in its Kariega plant.
The announcement was made yesterday by VW Group Africa managing director and Association of African Automotive Manufacturers president Martina Biene at an investment announcement event.
Biene said the investment would enable the plant to start manufacturing a compact SUV from 2027 after more than seven decades of producing predominantly Beetles and various variants of the Citi Golf and Polo.
The group changed its name from Volkswagen Group SA earlier this year, emphasising its intent to expand its operations on the continent — making the Garden Town the hub of the multibillion-dollar automotive manufacturer’s fifth continental region.
The Kariega plant will also be the sole manufacturer of the Polo for the world from July.
The event was attended by a host of dignitaries including trade, industry and competition minister Ebrahim Patel, premier Oscar Mabuyane, the German ambassador to SA, Eswatini and Lesotho, Andries Peschke, Nelson Mandela Bay Business Chamber chief executive Denise van Huyssteen, Naamsa chief executive Mikel Mabasa and Bay mayor Gary van Niekerk.
Biene said the latest investment signified Volkswagen’s commitment to stimulating the African economy which the group viewed as “the last frontier for automotive development” pertaining to internal combustion engines (ICE).
“SA is our home and Volkswagen belongs to SA, we are committed to SA and its people,” she said.
“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 for automotive development.
“As such, we have recently renamed our local company to Volkswagen Group Africa, to represent our steering responsibilities and ambitions to grow the Volkswagen brand on the continent.
“The new model has the potential to be sold in other African markets where Volkswagen has a presence.”
Biene said though the R4bn investment would not necessarily increase the number of jobs at the plant, it would provide security to its more than 4,000 direct employees in SA as well as several opportunities for growth for the more than 50,000 indirect jobs supported through its almost 73-year operation in the country.
She said the plant was also looking to increase export units to its 38 global markets by about 20,000 this year, with 101,557 units exported last year.
The third model will be manufactured on the same production line as the Polo and Polo Vivo.
The majority of the R4bn would be allocated to capital expenditure for production facilities, manufacturing tooling, local content tooling and quality assurance.
Almost R877m would be used to enhance automation in the body shop and about R418m to procure new press tooling in the press shop.
The first phase of the plant facility upgrade would begin at the end of the year during the plant shutdown.
“As most global vehicle markets transition to electric vehicles, African markets like SA will continue manufacturing and selling vehicles with internal combustion engines (ICEs) for the foreseeable future, owing to customer demand for ICEs and slow introduction of electric vehicles in these markets,” Biene said.
“However, for the Volkswagen brand the electrification journey begins this year with the introduction of our ID.4 test fleet in SA and Rwanda.”
Localisation of production of the Polo and Vivo was at 46% and 58% local content levels respectively, and the new model aimed to achieve about 40% local content through R1.2bn of the investment. She
said despite having to overcome challenges including load-shedding, finalisation of policies and a global semiconductor shortage, Volkswagen Group Africa remained committed to expanding across the continent.
She also bemoaned the fact that the Eastern Cape’s three original equipment manufacturers (OEMS) VW Group Africa, Isuzu Motors SA and Mercedes-Benz SA were the only ones not exempt from load-shedding.
“Despite these challenges ... we are still here today to witness the announcement of this latest major investment.”
Patel welcomed the investment, saying it was a testament to the company’s confidence in SA, where the automotive industry contributed 2.9% of GDP last year.
“This is a milestone for VW in SA and the automotive sector in the Eastern Cape.
“Soon I will be able to say [at international conferences] that if you see a Polo anywhere in the world, it was made here in SA.”
He said the sector had returned to and exceeded pre-Covid levels, with a record almost 400,000 vehicles exported last year and more than sixmillion since SA became a democracy.
Patel emphasised the importance of localisation of products and harnessing Southern Africa’s rich mineral resources to put the sector among the top competitors globally, adding that a highlevel team was investigating possible long-term solutions for the load-shedding issues faced by OEMs in the Eastern Cape.
“With all the investments announced here in the Eastern Cape, the province is taking its rightful [place] as the automotive hub of the country.”
Mabuyane said the R4bn investment was a significant contributor to the growth of the province, which had attracted investments totalling about R171bn over the past four years.
“The importance of VW Group Africa to the economy of Kariega, the Eastern Cape and SA cannot be underestimated,” he said.
“The other most recent investment is R34m in solar photovoltaic panels and a further R55m in solar panels in its employee park.
“With the negative impact of load-shedding in our province, we have noted VW Group Africa’s commitment through these investments and our province is grateful.”
He said his administration was spending government resources to improve economic enablers in the province such as roads, ports and rail infrastructure as well as energy security.
“We are also constantly lobbying for pro-investor policies in government that are favourable to the auto industry because we are a province that hosts the largest number of OEMs in the country.
“Therefore, for us, the auto industry is the lifeblood of our economy.
“We do feel that, with the continued confidence displayed by VW Group Africa in our province, we also must do more to assist.
“I am therefore requesting that any support the province can provide to VW Group Africa must be brought to our attention through the structures of both the [Automotive Industry Development Centre Eastern Cape] and Naamsa,” Mabuyane said.
Van Huyssteen welcomed the investment and said it highlighted the company’s long-standing commitment to Nelson Mandela Bay, as the country’s largest automotive manufacturer. “Volkswagen is the biggest private employer in our metro and indirectly creates ongoing employment throughout the local automotive supply chain,” Van Huyssteen said.
“Furthermore, over 40% of the country’s automotive components manufacturers are located here, jointly representing 41% of employment throughout this sector.
“Nelson Mandela Bay, as a two-port metro, has a strong manufacturing base on the African continent, and is the ideal investment location for automotive manufacturing and exports.
“However to realise this, it is vital that challenges with regards to logistics, energy and local service delivery are urgently addressed to create an environment that will build business confidence and stimulate further investment and job creation.”
Though Biene did not divulge much detail about the third vehicle planned for production at the plant, together with her team she previously unveiled the new T-Cross, Tiguan, Touareg and the ID.4, which is due to be launched this year.
Since 2011, the group has invested R10.28bn in the Kariega plant.