South Africa’s automotive sector is facing renewed uncertainty after German carmaker Volkswagen warned that it may be forced to shut down its vehicle manufacturing plant in Kariega, Eastern Cape, placing more than 4,000 direct jobs at risk and threatening tens of thousands more across the wider automotive value chain.
Volkswagen Group Africa (VWGA) said the potential closure stems from inadequate and delayed government policy support, particularly around incentives and regulatory clarity needed to keep local vehicle manufacturing globally competitive. The warning has intensified concerns among policymakers, labour unions and industry stakeholders, given the sector’s importance to employment, exports and industrial development.
The Kariega plant has long been a pillar of South Africa’s automotive industry. Since 2011, Volkswagen has invested more than US$538 million in the facility, underscoring a sustained commitment to local manufacturing. In 2024, the company pledged a further $210 million to upgrade the plant ahead of planned production of a new SUV model expected to come on stream in 2027.
Despite these investments, Volkswagen says prolonged engagement with the Department of Trade, Industry and Competition has not yielded the policy reforms required to secure the plant’s future.
“Words without action are not leadership – they are negligence,” said Martina Biene, Chairwoman of Volkswagen Group Africa. “2026 will be a make-or-break year for Volkswagen in South Africa.”
The potential shutdown would deal a severe blow to the Eastern Cape, a province already grappling with high unemployment and weak economic growth. Lawmakers have warned that losing such a major manufacturing hub would deepen social and economic pressures in the region.
Volkswagen’s concerns reflect broader challenges across South Africa’s automotive sector. Earlier this year, Chinese automaker Chery acquired Nissan’s Rosslyn plant in Pretoria, bringing local production of the Navara pickup to a halt. While Chery pledged to retain much of the existing workforce, uncertainty remains over the full absorption of employees.
“This situation highlights the instability facing the sector,” said Nissan Africa president Jordi Vila, noting that workforce transitions following plant acquisitions often come with significant risks.
Labour unions have stepped up calls for urgent state intervention. Irvin Jim, General Secretary of the National Union of Metalworkers of South Africa, said the government’s response so far had been inadequate. “We need a decisive and coordinated state response. We are openly being raided, and there is no sense of urgency,” he said.
Industry players also point to rising tariffs, an influx of cheaper vehicle imports from China, and weakening domestic consumer demand as factors compounding pressure on local manufacturers.
A central issue flagged by Volkswagen is South Africa’s New Energy Vehicle (NEV) policy, which the company says is outdated and misaligned with global market realities. While the policy prioritises battery electric vehicles, Volkswagen argues that these remain largely unaffordable for most local consumers.
“The NEV policy is too narrowly focused on battery electric vehicles,” Biene said, calling for a broader framework that includes hybrids and transitional technologies to support competitiveness during the global shift toward cleaner mobility.
Although Volkswagen Group Africa is largely insulated from United States tariffs, it faces mounting domestic risks, including a shrinking local market, heavy dependence on exports and growing exposure to carbon penalties in the European Union. These pressures, the company warns, could undermine South Africa’s ability to retain automotive investment as global manufacturers accelerate the transition to new energy vehicles.
The fate of the Kariega plant now hinges on whether South African policymakers can deliver timely and effective reforms. With thousands of jobs and a key industrial base at stake, industry leaders warn that failure to act could trigger lasting damage to the country’s manufacturing reputation.
“It is time to stop the proverbial presses and focus all our attention on this pending disaster,” one industry observer said, as the sector awaits decisive action.
