Volkswagen of South Africa is located on the outskirts of the industrial town of Uitenhage, 35kms from Port Elizabeth in the Eastern Cape province. The Company was formed in 1946 as the South African Motor Assemblers and Distributors (SAMAD). It is now a wholly-owned subsidiary of Volkswagen AG.

Volkswagen South Africa's local market share has more than doubled since the mid-1980's. The company achieved particular success with the introduction of the Citi-Golf in April 1995, with Volkswagen South Africa taking the lead in affordability in the SA car market. The Citi-Golf is essentially a cheap Golf Mark 1. The company's success in this highly competitive local market is further enhanced by the export of body and engine parts and catalytic converters to countries like Argentina, Spain, Belgium and Germany, as well as large numbers of built up units to overseas markets.

Volkswagen South Africa is also the largest foreign employer in South Africa and directly employs around 6,500 workers. The Volkswagen family contains more than 2,500 suppliers and a national network of 210 Dealerships.

Export growth

In 1998, Volkswagen South Africa was asked to supply 68,000 new generation Golfs to the UK market for 1998 and 1999. This contract was subsequently transformed into a life-of-model-project, although strike action this year has caused disruption to this flagship contract. Spare capacity in Europe has been used to meet demand for right hand drive models while the strike took place. In February, Volkswagen South Africa actually dismissed 1,300 striking workers, describing the strike as illegal. The two week strike had cost Volkswagen South Africa around R350mn on lost turnover, or 3,000 vehicles, 800 of which were due for export. There is some concern in the country that this strike could send the wrong signals to other investors in the industry at large: hence Volkswagen South Africa's determination to end the strike.

The initial R5 billion export order had represented a massive injection of foreign capital and investment into the South African economy, as well as demonstrating a strong vote of confidence in the future of the automotive industry in South Africa. This came on top of BMW's commitment to the country with the manufacture of the 3-series and has been followed by Opel building the latest Astra, Mercedes-Benz concentrating right hand drive C-class in South Africa and Fiat making the Palio in the country. It should be noted that local content, however, is only 30% in the South African-made Golfs. Furthermore, as a result of the import/export credit policy of the South African government, the export order enabled Volkswagen South Africa to import a wider selection of Volkswagen group models from Germany.

In particular:

  • The export order made Volkswagen South Africa into the biggest car manufacturer in Africa.
  • Production of the export vehicles started in July 1998.
  • Volkswagen South Africa is doubling its production output at its Uitenhage factory to up to 210,000 vehicles a year, including 50-60,000 Golfs for the local market.
  • To fulfil the contract, the company had planned to operate three shifts per day on a 24 hour basis and 6 days a week, to service the export order; however, strike disruption has caused this plan to be revised.
  • In excess of 1,000 new jobs have been created to service the new export order.
  • Capital expenditure totalling R150 million will be undertaken through the life of the contract to bring the project to fruition.
  • Volkswagen South Africa will also invest in excess of R10 million in training for employees working on the export programme.
  • The export order has been due to contribute some R5 billion annually towards South Africa's foreign exchange account, making the local car manufacturing industry second only to the mining sector in terms of generating foreign earnings for the country. Furthermore, component exports by Volkswagen South Africa now total over R600 million, almost double the value of components sold to Volkswagen Group subsidiaries in Europe and South America in 1997. Components exported include wiring harnesses, catalytic converters, sheet metal parts, alloy wheels and leather for car seats.

    Established global role

    The Golf export order followed on from an established export history with Volkswagen South Africa having been a supply point for a range of global markets for several years:

  • In 1994 Volkswagen South Africa had begun a three year export order for Jettas for China. This contract was worth R750 million in foreign earnings.
  • In 1997, Volkswagen South Africa exported 6,000 cars mainly to Europe, Australia and Africa.
  • Volkswagen South Africa also used to exports 500 Audi A4 vehicles to Australia per year. However this has fallen in recent years and in 1999 it was less than 50 units.
  • It is notable that total passenger car exports from South Africa in 1997 by all manufacturers were valued at R1.1 billion. Volkswagen South Africa's new export deal is worth five times this amount.
  • In line with the Government's MIDP (Motor Industry Development Plan) and as a result of the UK export programme, Volkswagen South Africa is earning rebates on the tariffs which the Government charges for imported vehicles and components. This means that the company can import a wider selection of vehicles for the South African market from sister companies in Europe and elsewhere. Local customers are, therefore, benefiting directly from the export deals through the availability of models that have not previously been sold in South Africa.

    1990

    Launch of the 2 litre Jetta 16V
    Launch of the 2 litre Golf

    1991
    Launch of 2.5 litre locally developed Transporter T2 Bus range
    50 000th Bus produced
    1992
    Launch of the new generation Golf and Jetta range
    Clinching of the 12 500 export deal for left hand drive Jettas to China
    1993
    Launch of the Golf VR6 and Jetta VR6
    Increased order for 17 220 Jettas to China
    Launch of Volksiebus
    1994
    300 000th Golf built in SA
    1.4 millionth vehicle built at Volkswagen South Africa
    1995
    Market share of 23.3% gives Volkswagen South Africa No. 1 position in SA passenger car market
    1996
    Volkswagen South Africa launches Polo Classic
    Volkswagen South Africa celebrates 50 Years of car building in Uitenhage
    Volkswagen South Africa maintains No. 1 position in SA passenger car market with a share of 23.1%
    1997
    June: 50 000th third generation Jetta is produced
    August: Volkswagen becomes the official Transport sponsor of the SA national soccer team, Bafana Bafana
    September: Volkswagen South Africa lands UK export order of 948 Golf GTi's
    October: Completion of 948 Golf Gti export order to UK
    November: Volkswagen South Africa lands further export order to UK of 4 500 third generation Golfs
    1998
    Volkswagen South Africa announces export order of 68 000 Generation 4 Golfs to Europe
    1999
    The Golf contract is confirmed as a life of model contract through to 2003/2004, but later in 1999 strike disruption causes problems with the export contract; in early 2000 some Golfs due to have been made in South Africa were actually made in Europe.

    Production Facilities

    The plant at Uitenhage is a full manufacturing operation for the Golf and also for models supplied just for the South African market, ie the Citi-Golf, the Transporter T2 bus and the Polo. For the Audi A4 it is really just a CKD operation.

    Manufacturing begins in the press shop from where pressed parts are assembled in the Body Shop, after which a C-Hook transport system, which operates above the main line, transports completed sub-assemblies and bodies from one station to another. Robot welding facilities dominate the assembly line and are also used in quality control procedures. Body shells are selected daily at random from the production line for a full dimensional check by robot. Deviations from specification to within 20 microns are highlighted for correction. The body shells are transported by conveyor to the paint shop where they are submersed in electro-coat water-based paint for maximum corrosion protection.

    Once the engine is fitted into the vehicle, the car's electrical functions are tested by the plant's Electrical Check Out System (ECOS). The car also undergoes extensive leak testing before final inspection.

    Volkswagen South Africa - its role in the community

    The Volkswagen Community Trust was established as long ago as 1989, specifically to assist communities in their development. A joint effort by Volkswagen South Africa employees in 1987 resulted in total savings of R7 million from the Company's operating costs; this sum which was paid into the Trust when it was formally established.

    Volkswagen South Africa also financially supports the Government's Reconstruction and Development Programme. Together with help from Volkswagen head office in Germany, it has established The Volkswagen International Training and Development Programme for the development of young leaders through overseas training. Recently, a project has been launched to provide affordable housing for employees.

    Volkswagen South Africa is also an official sponsor of the South African Olympic Team for the 2000 Olympic Games, and Volkswagen also supports the National Soccer team through being the official transport provider to Bafana Bafana.

    Ian Henry, AutoAnalysis