Johannesburg - Volkswagen South Africa’s (VWSA) announcement that it is to invest more than R4.5 billion in the country by 2017 is indicative South Africa is punching above its weight in the global automotive industry.
VWSA managing director Thomas Schaefer admitted this week that South Africa was not a logical production location for the motor industry because only 0.6 percent of the world’s vehicle production was situated in the country.
South Africa’s automotive industry last year only accounted for about 566 000 vehicles out of the total 89.8 million vehicles that were produced globally.
However, Schaefer stressed South Africa “is a production location of the future” and the latest investment phase by VWSA was a vote of confidence in the country as a suitable vehicle production location for local and export markets.
Schaefer said due to the strategic location and the potential of Africa as a future market for exports, as well as the security the Automotive Production and Development Programme (APDP) provided for investors, ongoing investments in VWSA’s vehicle manufacturing base made sense.
Matt Gennrich, VWSA’s general manager of communications, said South Africa was the 13th biggest market globally for the Volkswagen brand and the 16th biggest market for its Audi brand.
“That shows we are small in numbers (volumes) but in the overall picture we play an important role,” he said.
Schaefer admitted it had been difficult in the past few years for VWSA to convince its German parent company to invest in South Africa, particularly with the labour instability in the country.
He said there were a lot of things that needed to be offset with good measures and hedging, including the instability of labour, the inflation rate and the volatility in the rand.
“But at the end of the day, South Africa plays an interestingly big role in the Volkswagen group. A lot of people love it, know it and have been here.”
Schaefer said for VWSA to convince its parent company to make the investment, it had discussions with the government to ensure it was supportive of the investment and the APDP was not going to run out in 2018, which would have been “the end of the industry”.
“The government assured us our investment is safe,” he said.
Schaefer added Volkswagen had had an assembly operation in Nigeria since earlier this month but “they are far behind 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 for an investment decision of this magnitude, VWSA was competing with the other 118 factories worldwide within the group.
The R4.5bn investment by VWSA is to increase the 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, and possibly a third.
Schaefer said VWSA would announce in the next few weeks the two new vehicle models it would be producing in South Africa and launching into the local market in 2017.
Ken Manners, the president of the National Association of Automotive Component and Allied Manufacturers, said on Friday the association applauded VWSA’s “far sighted commitment to further expanding its assembly activities in Southern Africa”.
SUNDAY INDEPENDENT