Volkswagen, one of the leading automotive suppliers in South Africa, has dismissed the rumours that it is planning to exit the local market. The company issued a statement on Monday, saying that it is committed to its operations and investments in the country.
The rumours started circulating on social media over the weekend, after a report by an online news outlet claimed that Volkswagen was considering leaving South Africa due to the economic and political instability. The report cited unnamed sources within the company, who allegedly said that Volkswagen was unhappy with the government’s policies on labour, taxation, and black economic empowerment.
However, Volkswagen South Africa’s spokesperson, Matt Gennrich, said that the report was “completely false and unfounded”. He said that Volkswagen had no intention of leaving South Africa, and that it was proud of its local production and sales performance.
“Volkswagen South Africa is a key player in the Volkswagen Group’s global strategy, and we have a long and successful history in this market. We have invested over R6.1 billion in our plant, products, and people in the past five years, and we have plans to invest even more in the future. We are also the market leader in passenger and commercial vehicles, with a market share of over 23%. We have a loyal and satisfied customer base, and we are constantly innovating and improving our products and services. We have no reason to leave South Africa, and we are here to stay,” Gennrich said.
He added that Volkswagen was also committed to supporting the local economy and society, through various initiatives such as the Volkswagen Community Trust, the Volkswagen B-BBEE Initiatives Trust, the Volkswagen Learning Academy, and the Volkswagen Driving Academy. He said that Volkswagen was also a signatory of the Human and Business Rights Commitment, which reaffirms the company’s adherence to ethical and responsible business practices.
However, despite the official denial, a senior Volkswagen executive involved in a global cost-cutting strategy said on Friday he was “very worried” about the future of the company’s operations in South Africa, which is fighting persistent power cuts and logistics snarls.
The company’s VW passenger car brand is in the midst of defining the key measures of a global scheme to boost its flagging margin – the first of a series of savings drives aimed at improving group profitability and staying competitive in the transition to electric cars.
The German automaker has been in South Africa for nearly 80 years. Factors like competitive labour costs once placed it among the company’s higher-ranking bases globally, VW brand chief Thomas Schaefer said during a visit to the country.
But the costs of mitigating power outages caused by chronic production shortfalls at state-owned utility Eskom as well as rising labour costs and logjams on railways and at ports have eroded that advantage, he said.
“Eventually you have to say, why are we building cars in a less competitive factory somewhere far away from the real market where the consumption is?” Schaefer said. “I’m very worried about it … We’re not in the business of charity.”
He said the company’s team in South Africa had done what it could to overcome what he called an “uphill battle” but that ultimately the South African government needed to step up to solve the problems.
Volkswagen produced some 132,200 Polo and Vivo models at its South African facility in Uitenhage last year, most of them for export.
Those export markets now risk disappearing, however, as wealthy countries move to electric vehicles (EVs).
The European Union and Britain are planning to ban sales of new internal combustion vehicles from 2035.
Schaefer said there were no current plans to introduce EV manufacturing in South Africa, since electric cars are currently priced out of the reach of most domestic consumers. Producing them for export would not be environmentally sustainable, he said.
With the proper government policies aimed at leveraging the country’s proximity to critical minerals like lithium and cobalt, however, it could become a battery manufacturing hub, he said.
“There’s a realistic chance that South Africa, with enough focus, with all the raw materials in the neighbourhood, they could be a champion,” Schaefer said.
