The macro importance of new VW Polo

By Stuart Johnson 

At the launch of the sixth-generation Volkswagen Polo at Uitenhage, late last week, the importance of this new model was brought home to roost by Volkswagen South Africa’s Chairman and Managing Director, Thomas Schaefer.

“The Volkswagen Group retained its number one position in the passenger car market in 2017, with a 21,8 per cent market share. One in every five cars bought by South Africans last year was either a Volkswagen or an Audi.  The run-out year in 2017 (where production switched over from the fifth to the sixth-generation Polo at the Uitenhage factory) saw  the Volkswagen brand alone , without sister brand Audi, retain passenger car market leadership with a share of 18, 9 percent.”

Mr Schaefer and his team  can be justly proud of this achievement, for as early as the second quarter in 2017, huge changes to the production facility at Uitenhage had already been made to  accommodate the run-up phase to the new 2018 model Polo and the new Polo Vivo, which will be launched in a few weeks’ time in February.

The radical decision made by VWSA was to change the production process fundamentally. Previously, Polo and Polo Vivo had their own separate production lines within the Uitenhage plant. Now, for the 2018 Model year cars and beyond, both Polo and Polo Vivo are being built on the same production line. This despite the two cars using two entirely different platforms.

“Despite the ramp-up of our new models  (in 2018) we had another excellent production year and produced some 110 000 cars which was 2 280 more than our projected budget.  Some 45 000 of these were for the local market, whist we still managed to produce and export 65 500 Polo’s to markets around the world. We also produced 122 000 engines of which we exported 95 000 to markets like India, Malaysia and Mexico.

“In 2015 I announced that we would invest around R4.5 billion rand in new product and facilities. The good news is that in fact we have invested over R6.1 billion Rand. This is partially due to the exchange rate fluctuations and partially due to approval of some additional investments in the plant.

“Where has the investment gone? The biggest portion is in Capital Expenditure for production facilities, local content tooling, checking and manufacturing equipment and IT investments. Then the start-up costs which include the pre-series cars, endurance testing and technical support and training. This is followed by development cost for local content releases.

“Volkswagen continues to have a high level of local content and the new models are not at the 72% of the current generation due to the engine, but still at a high level of over 60%”, said Mr Schaefer.

One of the advantages of the new one-line system for both Polo and Polo Vivo models now is that it makes the plant much more flexible in terms of market fluctuations. Whereas previously if demand fell off for Polo , then workers on this line would have less work, while workers on the Vivo line, if demand increased for this model, were then working longer hours. Now, all the line workers are employed on one line, a system that is much fairer to all factory employees.

Volkswagen employs some 3 800 people, which makes it the largest single employer in the Eastern Cape region, and contributes some R2,3-billion annually to the local economy. The company also does business with over 1 500 suppliers, and VW business through the  Ngqura and Port Elizabeth ports amounted to 8,5 per cent of total imports and 1,58 per cent of exports.

For 2018, total production of  Polo and Polo Vivo cars at Uitenhage ( the only two cars produced locally by VWSA) will increase from 110 000 units last year to 133 000 cars this year. Of these, 83 000 will be exported, and the rest will be for the local market.

The increase in production is also due to the fact that VWSA is now also producing Polo GTI models in both left-hand drive variants for the global market. Previously, the GTI model, introduced  here on the fifth-generation Polo, was imported. By 2019, total production volume will be increased to 160 000 vehicles, and this will require a third shift being introduced at the factory, and will mean the recruitment of some 300 additional employees.

The VW Polo and Polo Vivo have been huge success stories for the company and have been the market leaders in their segment since they were launched in 2010. The latest Vivo, to be launched in February 2018, is now based on the outgoing, fifth-generation Polo. The previous Vivo was based on a fourth-generation Polo.

*For more information on the new VW Polo for 2018, read Chad Luckhoff’s launch report.