Johannesburg - Volkswagen South Africa (VWSA) is to invest more than R4.5 billion in South Africa by 2017 to increase the production capacity of its Uitenhage plant by 50 percent to 150 000 units a year and for the production of at least two new vehicle models.
Thomas Schaefer, VWSA’s managing director, said yesterday that Volkswagen believed in South Africa and would invest in the country significantly.
“South Africa is a production location for the future. It is part of the Volkswagen family and we will stay. We are here for the long run,” he said.
Schaefer said VWSA had to compete against the other 118 factories worldwide in the Volkswagen group for investment and the production of new models.
Azar Jammine, the chief economist at Econometrix, said the investment announcement was “excellent news in the midst of all the gloom”.
“The economy is not collapsing completely. If companies are optimistic about the African economy, it’s totally worthwhile to produce in South Africa,” he said.
Jammine added that the depreciation of the rand meant without a doubt that South Africa had become a cheaper base for production than it was a year or two ago.
Schaefer said the investment would create a significant number of new jobs, but it was difficult to provide an exact number.
“We are going on to a three-shift operation with the new models from the two shifts we are running in the factory now,” he said.
However, Schaefer said the new vehicle models would be produced at a higher automation level than its previous models.
The latest investment is on top of the R5.9bn VWSA has invested in South Africa between 2007 and last year for the current generation Polo and Polo Vivo models, and plant and infrastructure.
Schaefer said VWSA would announce the two new vehicle models it would be producing locally within the next few weeks.
A decision about the production of a third model in South Africa would be taken by the end of this year or early next year, which would require “significant further investment”.
End of lifecycle
Matt Gennrich, VWSA’s general manager of communications, said the current Polo and Polo Vivo models would in a European context probably come to the end of their lifecycle in the next 18 months to two years and the new models it would be producing in South Africa “may or may not be in addition to what we currently produce”.
Schaefer said the latest investment by VWSA in South Africa included more than R3bn in production facilities and quality, about R1.5bn in investments in its suppliers and tooling and about R20m in training for its employees.
“South Africa is not a logical production location for the motor industry, as only 0.6 percent of the world’s vehicle production is situated here. However, due to the strategic location and the potential of Africa as a future market for exports, as well as the security that the APDP (Automotive Production and Development Programme) provides for investors, ongoing investments in our vehicle manufacturing base make sense.”
Far behind
“Exports will again play a key role in our strategy going forward,” he said.
Schaefer said Volkswagen had an assembly operation in Nigeria since earlier this month, but “they are far behind still in this whole game”.
“South Africa is the only significant production base in Africa. We (South Africa) are at a different level of automotive development,” he said.
Schaefer added that there were many advantages to producing in South Africa.
He said the government was “super supportive” with the APDP and Automotive Incentive Scheme and VWSA was assured during its discussions with the government of continued support for the automotive industry beyond 2020.
BUSINESS REPORT