German vehicle manufacturer Volkswagen announced on Tuesday that it will invest R4-billion in its Kariega (formerly Uitenhage) plant for the refurbishment of production facilities, local content tooling, quality assurance and manufacturing equipment.

The investment is aimed at preparing the plant to manufacture a third model from 2027.

(From left to right) Nelson Mandela Bay Mayor Gary van Niekerk; German Ambassador to South Africa Andreas Peschke; Minister of Trade and Industry Ebrahim Patel; Volkswagen Group Africa Chairperson and Managing Director Martina Biene; Eastern Cape Premier Lubabalo Mabuyane and Volkswagen Group Africa Production Director Ulrich Schwabe at the announcement. (Photo: Supplied)

Martina Biene, the Chairperson and Managing Director of Volkswagen Group Africa said as most global vehicle markets transition to electric vehicles, African markets like South Africa will continue manufacturing and selling vehicles with internal combustion engines for the foreseeable future. She explained that there was still customer demand for vehicles with internal combustion engines and the introduction of electric vehicles to the market has been slow.

“However, for the Volkswagen Brand, the electrification journey begins this year with the introduction of our ID.4 test fleet in South Africa and Rwanda,” she said.

According to a statement issued by Volkswagen, most of the R4-billion investment will be allocated to capital expenditure for production facilities, manufacturing tooling, local content tooling and quality assurance. Nearly R877-million will be spent to enhance automation in the Body Shop. In the Press Shop, an estimated R418-million will be utilised to procure new press tooling. The first phase of the plant facility upgrade will begin at the end of 2024 during the plant shutdown.

Biene said the investment announcement reaffirms Volkswagen Group’s commitment to South Africa, where it has been manufacturing vehicles for nearly 73 years.

“Plant Kariega is an important manufacturing plant within the Volkswagen Group production network. Since 2011, Volkswagen has invested R10.28-billion in production facilities, manufacturing equipment, local content tooling and training of people. The new investment is a vote of confidence in the future of the plant. It also futureproofs jobs, not only for our people but also those employed in our supplier network,” Biene said.

The company confirmed that the third model will be an SUV and will be manufactured on the same production line as the Polo and Polo Vivo.

“Volkswagen Brazil is leading the design and development of the new SUV. Volkswagen Group Africa’s Engineering team has collaborated with Volkswagen Brazil for the adaptation of the new model to the local and continental requirements, that for example includes the development of a right-hand drive version,” a statement by the company explained.

Read more in Daily Maverick: Volkswagen investing $1.8bn in Brazil, betting on hybrids

The company added that localisation remains a key priority for Volkswagen Group Africa. Their VW Polo and the Polo Vivo currently have 46% and 58% local content levels respectively. The trend is set to continue with the new model, which aims to achieve approximately 40% local content through a R1.2-billion investment.

Biene added, “South Africa 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.”

Nelson Mandela Bay Business Chamber CEO Denise van Huyssteen said they were encouraged by the investment.

“This is a welcome development and highlights 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,” she said.

The metro is also home to around 40% of the country’s automotive components manufacturers.

The motor vehicle industry in Nelson Mandela Bay employs 41% of employed residents in the metro.

“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. We believe that it has the potential to be a Bay of Opportunity for existing and future manufacturers and investors.  However to realise this, it is vital that challenges with regards to logistics, energy and local service delivery are urgently addressed in order to create an environment that will build business confidence and stimulate further investment and job creation,” Van Huyssteen added. DM