Volkswagen announces R4bn investment in Kariega plant

Volkswagen Group Africa on Tuesday announced a R4bn investment in its manufacturing plant in Kariega, Eastern Cape, earmarked for facility upgrades and preparations for the addition of a third model to its production line-up starting in 2027.

The investment will primarily focus on capital expenditure for production facilities, manufacturing tooling, local content tooling and quality assurance.

The upgrade project, scheduled to begin at the end of 2024 during a plant shutdown, will see significant investments in automation for the Body Shop (R877m) and new press tooling for the Press Shop (R418m).

This move reflects Volkswagen Group's long-standing commitment to South Africa, where it has been manufacturing vehicles for nearly 73 years.

Martina Biene, chairperson and MD of Volkswagen Group Africa, highlighted the importance of the Kariega plant within the company's production network. Since 2011, Volkswagen has invested R10.28bn in various aspects of the plant, including production facilities, manufacturing equipment, local content tooling and training programmes.

Biene emphasised that the new investment not only reaffirms confidence in the plant's future but also ensures job security for employees and those in the supplier network.

The upcoming third model, an SUV, will be manufactured alongside the Polo and Polo Vivo models, which are the top-selling passenger models for the Volkswagen Passenger Cars Brand in South Africa. The preparation for the new SUV production will provide training and upskilling opportunities for Volkswagen Group Africa's production employees.

Localisation remains a key priority for Volkswagen Group Africa, with the Polo and Polo Vivo models boasting 46% and 58% local content levels, respectively. The new SUV model aims to achieve about 40% local content through a R1.2bn investment.

Volkswagen Brazil is leading the design and development of the new SUV, with Volkswagen Group Africa's engineering team collaborating on adaptations for local and continental requirements, including the development of a right-hand drive version.

Biene underscored South Africa's significance as a market for Volkswagen Group, especially in its long-term goal of expanding the brand's footprint in Africa. The renaming of the local company to Volkswagen Group Africa reflects this ambition, indicating a strategic focus on growing the Volkswagen brand across the continent. The new model also has the potential to be sold in other African markets where Volkswagen has a presence.

While acknowledging the global shift towards electric vehicles (EVs), Biene noted that African markets, including South Africa, will continue manufacturing and selling vehicles with internal combustion engines (ICEs) due to customer demand and the slow introduction of EVs in these markets. However, Volkswagen's electrification journey begins this year with the introduction of its ID.4 test fleet in South Africa and Rwanda.