VW: South Africa Is on the Verge of Collapse

South Africa is undoubtedly a ruined auto industry, especially if taking into account the consequences of the economic recession. In order for the local auto sector to stay alive, the country has to act quickly, Dave Powels, head of VW South Africa and current president of NAAMSA, the South African auto makers' association, said according to a report by just-auto.com.

"The current worldwide situation has highlighted how uncompetitive we are," Powels said. "Investment and transformation has to happen now. We need to create competitiveness in the next two years. Otherwise in seven to 10 years' time, we might not have an auto manufacturing industry in South Africa."

To give you an idea on how badly the South Africa market got hit by the recession, the local industry fell from 497,000 units in 2007 and 527,000 in 2008 to 330,000 units in 2009, according to estimates. "We'll be back to 1997 levels, though we've invested at 2007 levels," said Stewart Jennings, president of NAACAM, the South African components industry trade body.

Powels explained that Volkswagen is taking several measures to counteract the overall market decline. The German brand will increase the production figures from 50,000 units per year to 75,000 or even 100,000. Furthermore, the Port Elizabeth facility will be upgraded to build the new Polo, replacing the current five models in production.

He said government support is mandatory in such a difficult market and asked for a short-term 2 percent cut in interest rates for manufacturing industries. "We need a competitive Rand - if we get this, a lot of other issues will look after themselves," Powels added talking about the Rand-Dollar exchange rates.