Volkswagen South Africa (VWSA) has announced plans to invest over R4.5-billion in its South African operations over the next two years, setting the stage for the country’s largest passenger vehicle provider to expand its local offering and introduce new models to its local manufacturing line.

The investment would include over R3-billion in production facilities and “quality”, around R1.5-billion in local supplier capacity and a further estimated R22-million for the development and training of employees.

Noting that the automaker planned to introduced up to three – as yet unnamed – models to its Uitenhage-based factory by 2017, VWSA MD Thomas Schaefer told a media briefing on Thursday that all new models, which would be destined for the local and export markets, would be built on the company’s Modular Transverse Matrix (MQB) platform and would feature new technologies and driver assistance systems.

“South Africa is not a logical production location for the motor industry, as only 0.6% of the world's vehicle production is situated here.

“However, owing to the strategic location and the potential of Africa as a future market for exports, as well as the security that the [Department of Trade and Industry’s (DTI’s)] Automotive Production and Development Programme (APDP) provides for investors, ongoing investment in our vehicle manufacturing base makes sense,” he told journalists.

Schaefer added that VWSA felt comfortable that the investment in the local automotive sector would remain secure, despite the DTI’s current review of the APDP. 

“The DTI has been super supportive throughout the programme and we have been assured that the government wants us here.

“We’ve engaged with [Trade and Industry Minister Dr] Rob Davies and [have been given assurances] that there will be an APDP beyond 2020, that government won’t drop the automotive industry . . . it would be crazy if they let go of that, especially since the sector is well-established in South Africa. The government recognises this,” he reasoned.

VWSA’s most recent investment announcement would follow an investment pipeline of some R5.9-billion between 2007 and 2014, which saw it upgrading its manufacturing capabilities for the current generation Polo and Polo Vivo, as well installing additional plant infrastructure.

Noting that exports would, again, play a key role in its strategy going forward, Schaefer outlined that export volumes of Polo were expected to increase by 21% this year to 65 945 units.

The current localisation level was around 72% and the new models were expected to have an even higher local content level.

VWSA continued to dominate the passenger market in South Africa, accounting for over 21.4% of cars sold in this segment in 2014.

“Ongoing investment in new technologies and products will ensure that Volkswagen is positioned to continue to be the dominant player in the South African passenger market,” concluded Schaefer.