Volkswagen paints bleak future for South Africa but it’s less to do with loadshedding
A senior Volkswagen executive highlighted the company’s involvement in a global cost-cutting strategy to boost profitability and competitiveness amidst the transition to electric vehicles (EVs).
As reported by Yahoo Finance, this strategy is part of a series of measures to improve the group’s financial margins.
Volkswagen has been a significant player in South Africa’s automotive industry for nearly 80 years. The country’s competitive labour costs and strategic location once ranked it highly among Volkswagen’s global operations.
However, VW brand chief Thomas Schaefer expressed concerns during his visit to South Africa, noting the diminishing advantages due to escalating costs and logistical challenges.
Schaefer pointed out that the costs of mitigating power outages from Eskom, rising labour expenses, and inefficiencies in railways and ports have eroded South Africa’s competitive edge.
These factors contribute to the company reconsidering its operations in the country.
In 2021, Volkswagen’s South African facility in Uitenhage produced over 130 000 Polo and Vivo models, primarily for export.
South Africa’s electric vehicle manufacturing quagmire
However, the shift in global markets towards electric vehicles (EVs), and impending bans on internal combustion vehicles in regions like the EU and Britain, pose risks to these export markets.
Schaefer mentioned the absence of plans for EV manufacturing in South Africa, citing the high cost of electric cars for domestic consumers and environmental concerns regarding exporting them. He emphasised the need for government intervention to address these challenges.
Despite the challenges, Schaefer sees potential for South Africa to become a battery manufacturing hub, leveraging its proximity to essential minerals like lithium and cobalt.
This development hinges on focused government policies and the effective utilisation of regional resources.
“There’s a realistic chance that South Africa, with enough focus, with all the raw materials in the neighbourhood, they could be a champion,” he said.