Volkswagen has 60 plants around the world, with Uitenhage ranking somewhere in the middle of them all for cost index, productivity and efficiency, not so long ago. In particular, South Africa had a cost index of 120% versus a Cost Index of 100% for Western Europe and 80% for China. This meant a Volkswagen built in South Africa cost 40% more to produce than one built in China… a cost that is inevitably passed onto the consumer.
Then in 2008, thanks to a R3.8 billion investment (the biggest in the company’s history), Volkswagen South Africa benefited from a huge two year turnaround to mark a 142% increase in exports. In 2009, Volkswagen exported 19 000 right-hand drive Polos to Western Europe. In 2010, Volkswagen were contracted to deliver 71 500 units. Last year, they exported 81 000 Cross Polos and regular Polos. By localising more material supply and production at Uitenhage, Volkswagen South Africa was able to improve Uitenhage’s cost index from 120% to a remarkable 70%. That now ranks South Africa higher than China or India.
It is no wonder then that Volkswagen South Africa’s export business is on the boom. Volkswagen have just announced it will now export an additional 12 000 engines to China from its Uitenhage Engine Plant. Volkswagen say the facility is now operating at full capacity after receiving the latest export order from China. The additional order means the plant will now run at full capacity with three working shifts for the remainder of the year.
The engine plant is scheduled to produce 107 200 engines in 2012 of which 50 200 engines are for the locally built Polo and Polo Vivo models, whilst 57 000 engines will be produced for three export markets, namely India, Mexico and China. China is Volkswagen South Africa’s biggest export market for engines. The engine plant, which opened in 1980, has to date produced over 1 662 000 engines. These include engines for the Citi Golf and T3 Bus.
“Exports are a key element of our business model and whilst our Polo exports tend to grab the headlines, engines and components form an integral part of our export strategy,” said David Powels, Managing Director of Volkswagen Group South Africa. “This additional order confirms our ability to supply our Group customers. With the uncertainty in world markets at the moment, it is a welcome additional order for our plant,” concluded Powels.