Three days ago global Volkswagen brand CEO Thomas Schafer spoke to two journalists in Mzansi about a range of issues. One of these was the cost of doing business in this country, in light of several problems or “challenges” as politicians would put it. In the end a rather alarming article came out of the Reuters journalist that basically said that Volkswagen would be leaving the country because of these issues.
Yesterday Martina Biene, CEO of Volkswagen South Africa, clarified the situation. In a nutshell, Biene said there is no way that her company – which employs over 4 000 people directly and supports over 50 000 indirectly – would just pack up and leave. She emphasised that yes, load shedding, cost of labour (including strikes) and logistic problems (Transnet), are making it extremely difficult to do business in Mzansi, especially since the country is geographically far from the main global markets. Therefore transport costs are key to competitiveness and profitability. With Volkswagen AG encouraging competition among all its worldwide Plants, VWSA becomes less attractive as a manufacturing hub due to these problems. Over the next two years the company will spend over R130 million on renting power generators and paying for diesel just to keep the electricity blackouts away.
A new dimension is the electric vehicle sector, for which there is still no legal framework from the government. Manufacturers need this in order to be able to plan better and to be able to offer customers lower prices through government incentives, since electric cars are still so expensive.
More importantly, Europe and other parts of the world are moving into the electric car space and rejecting petrol-powered cars quite swiftly. A company like VWSA which exports most of its petrol-powered Polo products to Europe, is going to face massive wall selling those cars in the near future. Putting it bluntly, those markets will soon reject products like the Polo and others. The company’s Plant in Kariega, Eastern Cape, currently manufactures Polo and Polo Vivo to the tune of around 132 000 units per annum, and plans on increasing this figure next year. Most of the Polos are for export.