Volkswagen AG said a plan to start producing a new pick-up truck in South Africa will hinge on improved tax breaks and other incentives to boost the industry.
For the investment to make sense, the company needs urgent policy action from the South African government, with Martina Biene, the Volkswagen Group Africa chairwoman, writing to President Cyril Ramaphosa in December asking for rapid reforms.
VW joins a growing group of automakers calling on South Africa to take measures to safeguard an industry under siege from surging imports and the rising cost of doing business.
Just one in three cars sold in South Africa are locally manufactured, down from 56% two decades ago.
VW’s Wolfsburg head office approved the plan to build the light pick-up last year, and it is likely to be similar to the Tukan pick-up due to begin production in Brazil in 2027.
“We all agree that this would be the next right vehicle for South Africa,” Biene said in an interview this week at the company’s facility in Kariega, on South Africa’s southern coast.
“We are now talking about our make-or-break decision for the investment.”
VW South Africa already produces the Polo Vivo and Polo, and also plans to start making a compact sports utility vehicle known as the Tengo, with first sales next year.
However, the government has been sluggish in announcing policies to spur an industry, which accounts for more than 5% of economic output.
Local carmakers also rely on Europe and the UK for more than three-quarters of exports. That concentrates risk, as both markets have deadlines to end internal-combustion engine car sales in the next decade.
That’s why the pick-up — known locally as a “bakkie” — is crucial to continuing local production.
“Europe does not need us anymore as an export market,” Biene said. “But we definitely also see Africa as a big opportunity. So that would be a car clearly focused on the African continent and exports outside Europe.”
The company could start producing the first units at the Kariega plant in 2029 or 2030, “if all goes well,” she said.
The policy changes Biene seeks from the government include:
- Raising the price threshold to levy an ad valorem tax on cars.
- Adjustments to how carmakers use rebates for exporting locally made cars
- Policies to grow the domestic market.
South Africa is reviewing its automotive policies, Frank Stevens, a director at the Department of Trade, Industry and Competition, said in an interview in December.
