{"id":817209,"date":"2025-03-17T15:30:15","date_gmt":"2025-03-17T13:30:15","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=817209"},"modified":"2025-03-17T15:30:20","modified_gmt":"2025-03-17T13:30:20","slug":"big-vw-problem-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/motoring\/817209\/big-vw-problem-in-south-africa\/","title":{"rendered":"Big VW problem in South Africa"},"content":{"rendered":"\n

Volkswagen says local car makers are undervalued in South Africa. They have little protection from cheaper imports and must pay the cost of government failures to remain operational.<\/p>\n\n\n\n

This, in turn, hurts investment in South Africa’s motor manufacturing industry and ultimately costs consumers more.<\/p>\n\n\n\n

Speaking at a National Automobile Dealers\u2019 Association (Nada) event this past week, Volkswagen Group Africa chair and MD Martina Biene outlined the company’s significant challenges in South Africa. <\/p>\n\n\n\n

This includes the additional costs imposed on manufacturers due to unreliable electricity supply, inefficient transport and logistics, and operational difficulties at the country\u2019s ports.<\/p>\n\n\n\n

Biene highlighted Volkswagen\u2019s recent investment in generators at its Kariega facility to mitigate the impact of an inconsistent power supply.\u00a0<\/p>\n\n\n\n

These are additional costs that manufacturers shouldn’t bear, which invariably detriment consumers.<\/p>\n\n\n\n

\u201cWe now have two generators that cost R130 million because we need quite a bit of power, but every day I run those generators, it costs R1.6 million,\u201d Biene explained. <\/p>\n\n\n\n

She noted that this was a direct cost of doing business in Nelson Mandela Bay, and the company would not recover these costs. <\/p>\n\n\n\n

\u201cThat is added to the pricing of cars because that money must come from somewhere,” she said.<\/p>\n\n\n\n

Compounding the issue is that these additional expenses are not just an issue for Volkswagen but extend to other manufacturers and sectors on which local car production relies. <\/p>\n\n\n\n

Earlier this year, automotive component makers and vehicle manufacturers, including Volkswagen and Toyota, called on the government<\/a><\/strong> to intervene in steel giant ArcelorMittal South Africa’s (AMSA) planned shutdown. <\/p>\n\n\n\n

The concern was that AMSA\u2019s closure would disrupt supply chains, threaten localisation efforts, and potentially lead to de-industrialisation. <\/p>\n\n\n\n

Despite these warnings, AMSA moved ahead with its decision to shut mills, citing similar challenges such as electricity shortages, transport inefficiencies, and regulatory red tape.<\/p>\n\n\n\n

Volkswagen and other local manufacturers contribute significantly to South Africa\u2019s economy through job creation, skills development, and transformation. <\/p>\n\n\n\n

The company employs 4,000 people, yet it faces intense competition from imported vehicles from brands that contribute very little to the country\u2019s economy. <\/p>\n\n\n

\n
\"\"<\/a>
Volkswagen <\/em>Chairperson and Managing Director Martina Biene.<\/em><\/figcaption><\/figure><\/div>\n\n\n

Biene pointed out that Volkswagen is the only local manufacturer producing a model in the small car segment, yet imported vehicles\u2014often significantly cheaper\u2014dominate the market.<\/p>\n\n\n\n

\u201cThat is not correct, and we don\u2019t price because of our margin,\u201d she said, explaining that South Africa\u2019s relatively low production volumes put local manufacturers at a disadvantage. <\/p>\n\n\n\n

\u201cVolkswagen only manufactures 27,000 Vivos a year in South Africa, whereas other cars in the segment are produced in countries where 300,000 to 400,000 vehicles are manufactured annually, benefiting from economies of scale.\u201d <\/p>\n\n\n\n

These mass-produced vehicles enter the small South African domestic market at highly competitive prices, making it difficult for Volkswagen and others to compete. \u201cThat is not right,\u201d Biene said.<\/p>\n\n\n\n

Biene first raised concerns about these systemic disadvantages at the South African Auto Week<\/a><\/strong> in Cape Town last year, warning that the high cost of production in South Africa threatens the long-term sustainability of local manufacturers. <\/p>\n\n\n\n

She reiterated that Volkswagen\u2019s substantial investment in generators at its Kariega plant highlights the cost burden local manufacturers face.<\/p>\n\n\n\n

\u201cVolkswagen globally will not understand a situation where we don\u2019t have power, which hinders me from putting forward a strong business case,\u201d Biene said. <\/p>\n\n\n\n

\u201cThere are 117 Volkswagen plants in the world, and that is my biggest competition in the market.\u201d<\/p>\n\n\n\n

Beyond electricity constraints, Biene pointed to the additional costs associated with transport, logistics, and port inefficiencies as further deterrents to new investment.<\/p>\n\n\n\n

These infrastructural issues make it difficult for local manufacturers to remain competitive in the global market, which makes it even harder to approve additional investments into South Africa.<\/p>\n\n\n\n

Biene stressed that local manufacturers will struggle to thrive without strategic government interventions.<\/p>\n\n\n\n

\u201cI don\u2019t want protection because I\u2019m not a protectionist advocate \u2026 but we need to incentivise local business, local manufacturing, and local trading,\u201d she said.<\/p>\n\n\n\n

\u201cSometimes, as local manufacturers, we don\u2019t feel as valued as we should be, and that is true also for legacy importers with a long-standing history in South Africa.\u201d<\/p>\n\n\n\n

Biene said the government should recognise the automotive sector’s importance and implement policies supporting its growth. <\/p>\n\n\n\n

South Africa risks losing its local manufacturing base without such measures, which would have severe economic consequences.<\/p>\n\n\n\n

\u201cWe\u2019ve invested in skills development, job creation, and infrastructure in South Africa,\u201d she said. \u201cYet, we find ourselves unable to compete fairly due to structural inefficiencies and a lack of support.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Volkswagen says local car makers are undervalued in South Africa, and government failures are making it hard to compete in the country.<\/p>\n","protected":false},"author":92,"featured_media":817216,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11119],"tags":[17543,1165,853,9547],"class_list":["post-817209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-motoring","tag-arcelormittal-south-africa-amsa","tag-load-shedding","tag-south-africa","tag-vw"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817209","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=817209"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817209\/revisions"}],"predecessor-version":[{"id":817309,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817209\/revisions\/817309"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/817216"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=817209"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=817209"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=817209"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}