Volkswagen has warned that 2026 will be a decisive year for its operations in South Africa, raising fresh concerns about the future of local vehicle manufacturing and thousands of jobs.
The company says it is struggling to justify further investment as production costs rise, imports increase, and government policy remains slow to change.
Jobs and Investment at Risk
Volkswagen Group South Africa employs about 4,000 people at its Kariega plant in the Eastern Cape. Those jobs are now under threat as the company’s German parent reviews where to allocate future investment.
Volkswagen Group Africa chair and managing director Martina Biene confirmed that she wrote to President Cyril Ramaphosa late last year. She warned that South Africa risks losing the next major production project.
“We may have a business case, but there are better business cases elsewhere,” Biene said.
“This year is make or break.”
Policy Delays Raise Alarm
Biene said Volkswagen has held several meetings with the Department of Trade, Industry and Competition. While discussions were positive, they did not lead to action.
South Africa’s Automotive Production and Development Programme (APDP) and Automotive Masterplan 2035 were meant to expand vehicle production. Instead, output has declined and imports now dominate the market.
Economist Adrian Saville said the problem is not uncertainty alone, but ineffective policy.
“A policy that doesn’t work is a dead horse,” Saville said.
“Capital can move anywhere, and South Africa does not have time to delay.”
Imports and Falling Production
Volkswagen’s Kariega plant produced just over 156,000 vehicles in 2025. This makes it one of the smallest factories in Volkswagen’s global network.
At the same time:
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Imports account for nearly two-thirds of vehicles sold locally
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Exports to Europe are falling as that market moves to electric vehicles
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The plant faced short-time working late last year
These pressures have made it harder for local manufacturers to compete on price.
A Narrow Window to Act
Volkswagen plans to introduce new models and hybrid technology in the coming years. However, the company says these steps alone will not secure its future in South Africa.
Clear policy reform, faster decision-making, and improved competitiveness are now critical.
With other manufacturers scaling back and suppliers closing operations, Volkswagen’s warning signals a broader crisis. The decisions taken in 2026 may determine whether South Africa remains a serious automotive manufacturing hub — or continues to lose ground.