Volkswagen South African Dilemma: In a candid assessment, a senior Volkswagen executive expressed deep concerns about the future of the company’s operations in South Africa. Thomas Schaefer, the VW brand chief, highlighted several challenges plaguing the South African operations, including persistent power cuts, rising labor costs, and logistical issues.
Schaefer, involved in a global cost-cutting strategy, pointed to historical advantages that once positioned South Africa favorably in Volkswagen’s global network, citing competitive labor costs. However, he emphasized that challenges such as chronic power outages from the state-owned utility Eskom, increasing labor costs, and logistical bottlenecks are eroding these advantages.
“I’m very worried about it. We’re not in the business of charity,” expressed Schaefer, underscoring the need for decisive action to address the issues. He acknowledged the efforts of Volkswagen’s team in South Africa but emphasized the crucial role of the government in resolving the challenges.
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Volkswagen, present in South Africa for nearly 80 years, produced over 132,000 Polo and Vivo models at its Uitenhage facility last year, primarily for export markets. However, Schaefer raised concerns about the future of these export markets as wealthy countries pivot toward electric vehicles (EVs).
With plans in the European Union and Britain to ban sales of new internal combustion vehicles from 2035, the future of traditional car exports faces uncertainties. Schaefer indicated that there are currently no plans to introduce EV manufacturing in South Africa, citing the high cost of electric cars for domestic consumers. However, he suggested that with the right government policies, South Africa could become a hub for battery manufacturing, leveraging its proximity to critical minerals.
Despite the challenges, Schaefer sees potential for South Africa to thrive in the evolving automotive landscape, provided there is a concerted effort to address the current obstacles. The concerns voiced by the Volkswagen executive underscore the broader shifts and challenges faced by traditional automakers as they navigate the transition to electric vehicles and adapt to a changing global market.
Our Reader’s Queries
How did Volkswagen come to South Africa?
It may come as a surprise to some, but Volkswagen South Africa didn’t always go by the name VWSA. Back in 1946, a deal was struck between Industrial and Commercial Holdings and the Studebaker Export Corporation, resulting in the production of vehicles for Studebaker and commercial use. This marked the beginning of Volkswagen’s presence in South Africa, long before it became the well-known brand it is today.
In the October 2023 flash report, Toyota dominated the market with a share of 28.6%, followed by VW at 15.5%, and Suzuki at 10.6%. Hyundai also made a significant impact with a share of 6.2%. The report listed a total of 24 brands, each with their respective market share.
Who owns VW South Africa?
Volkswagen Group South Africa, founded in 1946, is a wholly owned subsidiary of Volkswagen Aktiengessellschaft (VWAG) in Germany. As the largest German investment in South Africa, it plays a significant role in foreign direct investment, technology transfer, and skills development.
What are the corporate information CSI focus areas of VW South Africa?
At Volkswagen, we are dedicated to supporting communities and helping them progress. To achieve this, we focus on key areas such as Youth Development, Education, Health and Community Wellbeing, Transformation, and our Employee Volunteer Programme. Through our investments in these areas, we aim to make a positive impact and drive change.