The Volkswagen Group South Africa plant in Kariega in the Eastern Cape. Picture via the The Volkswagen website
Volkswagen has given South African consumers and government a clear warning over the energy crisis.
A senior executive at the company told Reuters on Friday that he was extremely concerned about WV’s future in South Africa.
The company is fighting an onslaught of power cuts and that has led to logistical failures.
Thomas Schaefer, VW Group Board of Management, CEO of the Volkswagen Passenger Cars brand and Head of the Brand Group Core told the media organisation that the car company is in the process of redefining how it measures its success and how it will try to boost sales in the future.
VW is trying to improve profitability and continue to transition to electric cars.
Its manufacturing plant is located in Kariega in the Eastern Cape and has just over 3,500 employees.
The automotive company has been in SA for almost 80 years and relished its time here due to cheaper labour costs when compared to other countries globally.
This advantage has been eroded, according to Schaefer, thanks to power cuts, higher labour costs and the major congestion issues at our ports and railway lines.
"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 noted. "I'm very worried about it. We're not in the business of charity."
He is calling on the South African government to take action and said that VW had tried what it can to overcome these major issues.
He noted that VW has been facing an uphill battle.
The international vehicle sales market is moving towards electric cars as the European Union and Britain look to ban the sale of new cars with internal combustion engines from 2035.
Schaefer said that there are no plans to have South Africa manufacture their electric vehicles, given the current issues the country is facing and the fact that it would not be financially or environmentally viable to produce them in SA.
Schaefer did say that South Africa has the potential to be a battery supplier, given our proximity to minerals like cobalt and lithium.
"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 explained.
It should be noted that in early November Finance Minister Enoch Godongwana said that government is committed to providing an implement tax and expenditure measures to help the automotive sector’s transition to new-energy vehicles.
Godongwana acknowledged that the automotive industry is a major export and source of employment for the state.
“The transition to New Energy Vehicles (NEVs) poses an existential threat to South African vehicle production,” Godongwana said in the Medium Term Budget Policy Statement.
“The goal is to make sure the sector remains a major contributor to the industrial development of the domestic economy. As such, the government plans to implement tax and expenditure measures to support the automotive sector during this transition.”
He concluded that the plan will be expanded in his 2024 Budget Review and that the broader strategy would include “a collaboration with other African countries to develop battery production capacity on the continent”.
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