The cost of owning a Volkswagen (VW) Polo or Polo Vivo in South Africa has become increasingly burdensome, thanks to a combination of infrastructure challenges in the country. While these vehicles are locally produced, factors such as an unreliable electricity grid, deteriorating railway systems, and inefficient ports significantly increase the cost of doing business, which ultimately affects car prices.
The Impact of Load-Shedding and Infrastructure Failures
According to Martina Biene, the head of VW Group Africa (VWGA), the company has been forced to take extreme measures to keep production lines running, including renting generators to mitigate the impact of frequent load-shedding. Over the last two years, VW spent a staggering R130 million to rent two generators, with operational costs reaching R1.6 million per day. These extra expenses inevitably find their way into the final pricing of vehicles. “That is a cost which is added to my business,” Biene explained, emphasizing that this financial burden stems from the infrastructure issues plaguing the Nelson Mandela Bay Municipality, where the vehicles are produced.
Local Production of the Polo and Polo Vivo
The VW Polo and Polo Vivo are assembled at VW’s plant in Kariega, Eastern Cape. The Polo, a popular model, is exported globally, while the Polo Vivo is exclusively sold within South Africa. However, the inflated cost of doing business locally has put these models at a disadvantage in the price-sensitive South African market. Cheaper imports from countries like China and India are able to undercut local prices, putting pressure on the competitiveness of locally produced vehicles.
Despite the challenges, VW contributes significantly to the South African economy, employing over 1,100 suppliers and contractors, and investing in community projects like building schools in the Nelson Mandela Bay area. Yet, Biene voiced concerns that the contributions of local manufacturers and long-established importers are not fully appreciated. “There is a lot of benefit from local manufacturers and long-standing importer relationships,” she said. “And sometimes I feel that’s not valued.”
Challenges in Production Volume and Competitiveness
The economic burden on local manufacturers is compounded by high production costs and low output numbers. VW only produces around 27,000 Polo Vivo units annually, far fewer than the hundreds of thousands of vehicles produced by Chinese and Indian automakers. This discrepancy in production volume means that VW cannot take advantage of economies of scale to reduce costs. Added to this are the steep electricity and logistics costs, making it even more challenging for the Polo Vivo to compete with imports from abroad.
The desire to remain competitive is not about maximizing profit, but rather about ensuring that VW can offer a product that stands up to the competition. “It’s not that I want to make more profit, I just want to be competitive,” Biene remarked.
Future of the Polo and Polo Vivo: Looking Ahead
Looking ahead, VW is planning to introduce a new model, the Tera, at its Kariega factory by 2027. This compact SUV is expected to be the most affordable option in VW’s global SUV range and is being developed specifically for emerging markets. The Tera’s arrival, backed by a significant R4 billion investment, could further shift the local automotive landscape and possibly affect the sales of the Polo and Polo Vivo, both of which may face production challenges in the future due to evolving regulations, particularly in Europe.
With stricter emission regulations on the horizon, the future of the Polo, especially in the European market, is uncertain. VW’s global leadership has hinted that the demand for small petrol-powered vehicles will wane significantly as new emissions standards take effect, possibly leading to the discontinuation of the Polo. However, for the Polo Vivo, Biene has indicated that it will remain available as long as there is demand, with its future beyond 2030 still unclear.
Key Features of the VW Polo and Polo Vivo
| Feature | VW Polo | VW Polo Vivo |
|---|---|---|
| Engine Options | 1.0 TSI, 1.6L, 2.0L | 1.4L, 1.6L |
| Transmission | 5-speed manual, 7-speed DSG | 5-speed manual, 6-speed automatic |
| Fuel Efficiency | 4.5 – 6.0 L/100 km | 6.0 – 7.0 L/100 km |
| Safety Features | ESC, 6 airbags, Hill Hold Control | ABS, airbags, Stability control |
| Infotainment System | 6.5-inch touchscreen, Apple CarPlay | 4.5-inch display, Bluetooth connectivity |
| Price Range | R300,000 – R400,000 | R240,000 – R280,000 |
The Struggle for Local Competitiveness
In conclusion, the relatively high cost of VW’s cheapest car in South Africa is a direct consequence of poor local infrastructure. The additional expenses from unreliable power supply, logistics inefficiencies, and low production volumes make it harder for these vehicles to remain competitively priced, especially against cheaper imports. To address this, Biene advocates for policies that incentivize local manufacturing, rather than imposing extra costs on it, which could help create a more favorable environment for domestic carmakers.
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