The future of Volkswagen in South Africa (VWSA) has been plunged into doubt, with the local subsidiary of the global marque warning that 2026 is a “make or break” year for the company in this country.
VWSA provides direct employment to about 4 000 people.
Read:
VW seeks solution as ‘SA tax’ hinders its ability to compete against imports
Volkswagen looks at making cars in Egypt to sell across Africa
Volkswagen Group Africa chair and MD Martina Biene said on Wednesday she wrote a letter to President Cyril Ramaphosa prior to Christmas telling him it is very important for VWSA to get an investment decision this year from its parent company for its next project.
She said Volkswagen Germany is asking what the economics is in the business space for investment in South Africa.
“We [VWSA] might have a business case but there are better business cases elsewhere because we don’t know whether that [its business case] is a sustainable way to spend money. So this year for us is make or break.”
Why no action?
Biene said there is an urgent need for automotive industry policy changes because the targets in the SA Automotive Masterplan 2035 (Saam) will not be achieved.
Other original equipment manufacturers (OEMs) based in South Africa have said the same thing.
Read:
SA auto sector faces perfect storm
Government must act to stop job losses and deindustrialisation – Numsa
The dtic considers ad valorem tax changes to lower car prices
She said Volkswagen’s headquarters in Germany is also saying it needs to see some movement in “South Africa’s [automotive] policies”.
ADVERTISEMENT
CONTINUE READING BELOW
Her letter to Ramaphosa followed multiple interactions VWSA has had with the Department of Trade, Industry and Competition (dtic), including its minister Parks Tau – and the interactions were “nice and we understood each other but nothing happened”.
“That was my motivation to write to the president,” she said, adding that Ramaphosa did not respond but there was subsequently a lot interaction between the dtic with Naamsa [the automotive business council]”.
“Am I happy with that? No!” she said.
‘Capital can go anywhere’ – Saville
Adrian Saville, professor of economics, finance and strategy at the Gordon Institute of Business Science, who was a guest speaker at the Volkswagen SA Indaba 2026 on Wednesday, said policy certainty is important but “policy certainty over a policy that doesn’t work is a dead horse”.
Asked if there is a realistic chance of a turnaround in South Africa’s automotive industry given the country’s policy history, he said there is always hope and there are still orders on the table “right now” but the prospects do not look good.
He said SA needs to seriously wake up on certain issues – it does not have the luxury of two or three years of debate and deliberating about a policy that is not working.
“The requirement [for a new policy] is urgent and if we don’t build fit-for-purpose policy urgently, then you have got the answer to that question.”
Saville said business leaders will tell you that “capital is absolutely mobile and I wish South African policymakers would wake up to that reality”.
He said there are 200 markets that businesses can chose to allocate capital to and “there is nothing special about South Africa”.
“Capital can go anywhere and I want to remind you that South Africa is an industrial graveyard,” he added, referring to the demise of Consolidated Frame Textiles, Conshu and Seardel Textiles.
ADVERTISEMENT:
CONTINUE READING BELOW
“So there is nothing unique or special that says to South Africa that we [business] will allocate to you in return for some favour.”
Not too late – Biene
Biene responded by stating that she is not willing “to give up now”, adding that the Automotive Production and Development Programme (APDP) and Saam 2035 is the blueprint for the Egyptian automotive policy that was only implemented five years ago.
She stressed the urgent need for the government to adapt more quickly to the challenges facing South Africa’s automotive industry when they see that something is not working.
In a reference to Saam 2035, Biene said SA’s auto industry is not producing a million vehicles a year and is not getting the scale it believed it would get – and not selling many cars into the domestic market to increase the scale.
She said the unions, all institutions and the supplier base are all on the same page, including the dtic – which just has to act.
“I don’t know what stops us from acting,” she said.
Biene said the Volkswagen group manufactures six million passenger cars a year worldwide and VWSA’s plant is the second smallest plant in the group ahead of Osnabruck in Germany – stresssing that VWSA cannot compete from a price perspective with cheaper vehicle importers because of the cost of doing business in South Africa and the lack of scale.
Listen: SA’s auto sector landscape: Tariffs, job losses, and calls for localisation
She said India’s labour costs were already 50% lower than South Africa’s before the automotive industry’s recent wage negotiations with the National Union of Metalworkers of South Africa (Numsa) and other unions.
But with policy changes, there are some instruments – not tariffs – that can be used to support investments by manufacturers into South Africa.
ADVERTISEMENT:
CONTINUE READING BELOW
She said South Africa needs to find other mechanisms to support manufacturing in the country because there are choices, adding that she is opposed to tariff increases.
Biene said she is a strong believer in the African Continental Free Trade Agreement (AfCFTA) as a way to grow the automotive industry and manufacturing in South Africa.
“We are all desperate to attract more investment and manufacturing to the country. We must have more manufacturing in South Africa to employ more people and bring additional component suppliers to the country.”
Read: Mahindra backs SKD production to attract major auto investment to SA
Biene referred to the recent announcement that Chinese vehicle brand Chery is to take over Nissan’s plant in Rosslyn, stressing that it would have been worse for South Africa if this had not happened.
She said she is waiting for Stellantis to come on board, and noted that it took Beijing Automotive Group 10 years to get into manufacturing in South Africa.
Stellantis announced in 2023 that it plans to develop a manufacturing facility in South Africa and had signed a Memorandum of Understanding with the Industrial Development Corporation (IDC), but these plans have been delayed.
Read:
Global auto group Stellantis plans manufacturing facility in SA
Stellantis considers producing new energy vehicles in SA
Mahindra boosts South Africa capacity as budget car demand jumps
“South Africa has a lot to offer in terms [of being] an entry point into the Africa market through the African Continental Free Trade Area,” said Biene.
“I hope it will lead to others investing and others finding a business case and investing.”
Follow Moneyweb’s in-depth finance and business news on WhatsApp here.
