Volkswagen says Africa needs better auto policies to stimulate production

“There is a headquarters support to diversify because if China goes off, we are in trouble,” says Biene, who also heads the brand’s African operations. The company said in March that its total number of vehicles delivered in 2022 declined by 7%, due in part to Chinese supply disruptions. “With Africa’s huge potential, we want to be there.”

The company to date has managed a robust African presence only in South Africa, where it has operated for more than 70 years from Kariega in the Eastern Cape. In the last five years, it has increased investments on the continent, picking Ghana and Kenya as its West and East Africa hubs, but activity in these markets is limited to assembling.   

“We need [demand of] 15,000 vehicles of a single model a year, below that, it doesn’t make sense to talk [about manufacturing]. All these countries together, we are not anywhere near this 15,000 so we need a step-by-step approach,” Biene says.  

Policies

Second-hand vehicles dominate Africa’s mobility space. To change the status quo, Biene and the African Association of Automotive Manufacturers have been lobbying governments to develop policies that will discourage the demand for old, second-hand vehicles. Ghana, Kenya and Rwanda have taken the lead in restricting old vehicle imports.    

“We are lobbying but the countries need to come to the party. Countries like Kenya, Ghana and Rwanda are getting it right but some countries do not care. If all the countries put a policy in place and the market for new cars increases, then we can start to talk about the numbers,” Biene says.

Another challenge for auto manufacturers on the continent is fuel quality. “In the South Africa plant, we can build anything from Euro 6 to Euro 2 emission standards. That could also happen in Ghana, but for Nigeria, because they really have bad fuel, we have only two vehicles that we could potentially build [for that market].”  

“We want to become carbon neutral and we don’t want to accommodate bad fuel forever so we would rather not invest in these bad fuel engines anymore,” she said.  

Electric vehicles 

Is Africa ready for the global shift towards electric vehicles? Biene believes the continent needs a little more time. As a manufacturer, VW will need to see significant interest from consumers and favourable policies from governments to proceed with EVs for the continent.  

 “Wherever we build electric vehicles in Africa, we need 15,000 units a year, which is the minimum entrance barrier for manufacturing electric vehicles but we need to start now – with importation,” she says.  

“Starting with importing electric vehicles helps to create the market, then you find partners to set up charging infrastructures. Rwanda and Mauritius have implemented these policies although they may never manufacture because of their sizes.” 

In 2019, VW introduced its electric-powered Golf vehicle to Rwanda. The company remains confident in the move and could consider Mauritius its second destination.   

“They’ve removed import duties and VAT from electric vehicles because they want to encourage importers to bring in electric vehicles and that is why we are keen on partnering with them,” she said.   

In South Africa, the situation is the opposite. “South Africa currently penalises the importation of electric vehicles. Personally, I am disappointed in the South African government because it is not moving fast enough. A white paper was done by all South Africa manufacturers and importers, showing how it [EV policy] will work.”  

“It is not rocket science. You have to adapt it to local conditions but you don’t need to reinvent the wheel. We’ll soon see African countries overtaking South Africa,” Biene said.