Volkswagen to invest R4bn to produce third model at Kariega plant

16th April 2024 By: Irma Venter - Creamer Media Senior Deputy Editor

Volkswagen to invest R4bn to produce third model at Kariega plant

VWA chairperson and MD Martina Biene

Volkswagen Group Africa (VWA) will invest R4-billion in its manufacturing plant in Kariega, in the Eastern Cape.

The investment will be used to prepare the plant for the addition of a third model to the company’s production line-up from early 2027.

The third model, which will be a compact sports-utility vehicle (SUV), will be manufactured on the same production line as the Polo and Polo Vivo.

VWA currently produces the Polo for the local and export markets, and the Vivo for the local market.

Most of the R4-billion investment will be allocated to capital expenditure for the production facilities, manufacturing tooling, local content tooling, and quality assurance.

Nearly R877-million will be spent to enhance automation in the body shop.

In the press shop, R418-million will be used to procure new press tooling.

The first phase of the plant upgrade will begin at the end of this year, during the facility’s yearly shutdown.

VWA chairperson and MD Martina Biene said on Tuesday that the investment reaffirmed Volkswagen’s commitment to South Africa, where the German car maker has been manufacturing vehicles for nearly 73 years.

“Plant Kariega is an important manufacturing plant within the Volkswagen Group production network,” she said at the investment announcement in Kariega.

“Since 2011, Volkswagen has invested R10.28-billion in production facilities, manufacturing equipment, local content tooling and training of people.

“The new investment is a vote of confidence in the future of the plant.

“It also futureproofs jobs, not only for our people, but also those employed in our supplier network.”

Export demand for the Polo from the VWA plant may trend downward towards 2030 as large swathes of the world shift to electric vehicles (EVs).

VWA expects to export 127 000 Polos to 38 global markets this year. The company is set to become the sole global Polo manufacturer in July.

The group produced 140 400 vehicles in total in 2023.

VWA says localisation remains a key priority for the group.

The Polo and Vivo currently have 46% and 58% local content levels, respectively.

The trend is set to continue with the new model, which aims to achieve about 40% local content through a R1.2-billion investment programme.

Volkswagen Brazil is leading the design and development of the new SUV, which will largely be aimed at world markets where EVs will be introduced at a slower pace.

VWA’s engineering team has, however, collaborated with Volkswagen Brazil to adapt the new model for local and African requirements, such as developing a right-hand-drive version.

“South Africa is an important market for the Volkswagen Group, particularly in terms of our long-term goal to establish our footprint on the African continent, which is seen as the last frontier for automotive development,” noted Biene.

“As such, we have recently renamed our local company to Volkswagen Group Africa, to represent our responsibilities and ambitions to grow the Volkswagen brand on the continent.

“The new model has the potential to be sold in other African markets where Volkswagen has a presence.

“As most global vehicle markets transition to EVs, African markets like South Africa will continue manufacturing and selling vehicles with internal combustion engines (ICEs) for the foreseeable future, owing to customer demand for ICEs and the slow introduction of EVs in these markets,” added Biene.

This said, though, the Volkswagen Brand this year starts its electrification journey with the introduction of a ID.4 test fleet in South Africa and Rwanda.