Volkswagen of South Africa (VWSA) will export 55 000 new generation Polo's next year, doubling this year's export volume of 28 000 units, of which 19 000 will be new Polo's.

In 2008, exports from the company's Uitenhage plant amounted to around 40 000 units, up from the roughly 35 000 vehicles recorded in 2007.

Next year will mark an historical achievement for the company in terms of exports, said VWSA MD David Powels on Thursday, speaking in Uitenhage at the launch of the Nelson Mandela Bay Logistics Park.

VWSA's list of export markets for the new Polo include the UK, Ireland, Australia, New Zealand, Malaysia and Singapore.

Production of the new Polo started in July already, explained Powels.

The plant may produce 90 000 units a year next year - Polo's and the Citi Golf replacement model included - he added, up from this year's 59 000 units. However, not all of these cars will be destined for the export market.

The Polo is also a big volume seller in South Africa.

The new Polo will be introduced to the local market at the beginning of 2010 only, and will replace the current Polo.

Uitenhage supplies "100% of worldwide right-hand demand", said Powels.

The Uitenhage plant is now effectively a "small-car plant", he added.

This should benefit the local arm of the German vehicle manufacturer, as sales of small cars have increased over the last few years, especially since the downturn in the global economy in 2008.

VWSA's export programme follows a four-year, R3,5-billion investment programme in plant, equipment, training and product development.

A further R500-million is to be spent in 2010 to complete the process, noted Powels.

VWSA's investment included a R780-million allocation to the body shop to increase automation from 25% on the previous Polo to the current 65%. The final assembly plant also received a R415-million boost, and the engine plant R380-million to produce a new generation engine.

LOCAL CONTENT

"One of the key factors enabling VWSA to capture the Volkswagen group Polo right-hand drive global market contract has been the investment on the part of a number of [component] suppliers in the Nelson Mandela Bay Logistics Park," said Powels.

"Collectively, Rehau, Benteler, Flextech, Faurecia and Grupo Antolin have invested approximately R600-million in the park.

"The investment had contributed significantly towards enabling VWSA to take local content levels in the new Polo to 70%."

To date, it seems as if VWSA may exceed this target, reaching 74%, up from the previous Polo model's 39%.

The only other vehicle platform to be produced at the Uitenhage plant will be a new entry-level vehicle - replacing the Citi Golf - to be announced in the first quarter of next year.

The target for local content on this model, destined for the local showroom floors only, is 68%, but Powels said it appeared likely to reach 72%.

The aim of increasing local content is to grow South Africa's global competitiveness as a vehicle manufacturer. However, doing this also requires sufficient component volumes to achieve economies of scale.

South Africa is 20% more expensive as a manufacturing destination than Western Europe, and 40% more expensive than China, said Powels.

He said VWSA is working to break even with Western European competitiveness levels by next year.

He said the company achieved increased local content by driving up competition through the introduction of new supplier companies, and by bringing in new technologies, or through merging these two concepts.

He used the example of a door trim panel for the previous Polo model, which had 10% local content, and which was 211% more expensive to produce locally than in Western Europe.

However, by bringing in a new component supplier, local content for the new Polo on this component had now reached 75%, with production costs equalling that of Western Europe.

Local dashboard production for the new Polo, previously fully imported, has seen the component being manufactured 10% cheaper than in Western Europe.

Owing to this, said Powels, each right-hand drive dashboard for the new Polo is made in Uitenhage.

The VWSA boss added that the drive to increase local content is far from over, as the company is now targeting a level of 85% South African-made components. (Some locally-made components that count as local content, still include some smaller imported parts.)

"We need to attract more second-tier and third-tier suppliers.

"We have to do more to become more competitive," he noted.

"Getting the next five suppliers here will be more difficult."

Powels said VWSA's new production programme and new-look plant - producing two platforms as opposed to the five before 2008 - ensured that it qualified for financial support under government's Automotive Production and Development Programme, to be implemented in 2013.

The programme will reward volume production, as opposed to the current Motor Industry Development Programme's export focus.