Automotive leader unpacks strategy at Mandela University public lecture

Nelson Mandela University Vice-Chancellor Professor Sibongile Muthwa, left, and Faculty of Business and Economic Sciences Executive Dean Professor Hendrik Lloyd welcome Chairperson and Managing Director of Volkswagen SA Martina Biene to Nelson Mandela University

VWSA Chairperson and Managing Director Martina Biene outlined this along with other nuggets of company strategy at a public lecture held at Nelson Mandela University this week. 

She also let slip a name change for the automotive firm, from VWSA to Volkswagen Group Africa.

Hosted by the University’s Faculty of Business and Economic Sciences on 25 July, the event drew an audience of captains of industry, business thought-leaders and politicians.

“Africa is a continent of unlimited opportunities,” said Ms Biene, noting that the growth in vehicle manufacturing and sales seen in China and India yielded lessons for VWSA operations in Africa.

Ms Biene also announced the proposed name change, not yet officially released.

“We are ticking the last boxes, hopefully, to switch our mindset to that we now do business in Africa,” she said of the shift in name from VW South Africa to VW Group Africa.

Of the 121 VW plants around the world, there are only four in Africa and, of these, only the plant in Nelson Mandela Bay, is a fully fledged manufacturing facility. There are also semi-knocked down (SKD) manufacturing plants in Kenya and Ghana, and an SKD and mobility services operation in Rwanda.

Providing context, Ms Biene said Volkswagen’s journey in China had begun with one or two assembly plants. Today it manufactures vehicles and components at 40 plants.

“That's how an automotive industry always starts: you assemble cars, and we think probably we can repeat the Chinese story again, here,” she said.

Faculty of Business and Economic Sciences Executive Dean Professor Hendrik Lloyd echoed Ms Biene’s positive outlook on intra-continental trade.

“For too long we have seen Africa country by country, fragmented, and not as a continent,” Prof Lloyd said, adding that counties or regions which worked together would harness its potential.

Despite disruptions to the global economy, Biene sees “huge opportunities”. However, threats did include:

• Risk of recession
• Geo-political conflicts
• Volatile supply chains
• High raw material and energy prices
• Intense competition

In South Africa, loadshedding compounded the problems: “we can produce 171,000 vehicles a year – if there is a reliable supply of electricity and semi-conductors,” said Ms Biene.

The automotive industry has been forced to respond to growing calls for a greener, cleaner and safer way to move around. Europe, for example, has banned sales of new vehicles using fossil fuels by 2035, and Volkswagen itself aims to be carbon neutral by 2050.

The Volkswagen Group also aims to evolve from a car-builder into a software-driven mobility company. However, it will not reach that goal soon in South Africa as this country is lagging in electric vehicle (EV) production.

“All manufacturers have to go electric sooner or later but there is a lack of EV policy in South Africa,” said Ms Biene, mentioning “a bit of ping pong” between the DTI and Treasury on policy.

“To start the electric journey in South Africa, we need a policy that at least does not penalise the import of electric vehicles. We'll need to incentivise the import of EVs to start growing the numbers.

“Our threshold for a model to be locally produced is 50,000 [units] a year, otherwise our suppliers go bankrupt and we don't have a business case.”

Currently 30% of the cars VWSA manufactures – between 40,000 and 50,000 – remain in South Africa and 70% are exported, mostly to Europe. However, with a relatively small market for passenger cars in South Africa – around 375,000 per year – it makes sense to look within Africa for market share.

Another reason Ms Biene believes Africa is well positioned is due to rich natural resources such as lithium and cobalt.

“All the raw materials for electric vehicles are available to be mined either here in South Africa or neighbouring countries. Unfortunately, then they are shipped to China to be processed and bought back for a lot of money.”

An investment in processing raw materials locally therefore would be a savvy move.

From a population of 1.4 billion people in 2021, the young population of Africa is projected to rise to 2.5 billion by 2050. The GDP per capita is also likely to increase, along with urbanisation and a growing middle class.

What really sparked opportunity, however, said Ms Biene, was the “very low vehicle density” of 42 per 1,000 inhabitants in Africa compared to 569 in Europe.

She said the African Continental Free Trade Area (AfCFTA), which 54 out of 55 countries have signed, was nearing a stage that would enable intra-continental trade to flourish.

“There is growth potential, which of course also must go with economic growth because the people must earn money to be able to afford a vehicle.”