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New VWSA chief outlines vision for navigating the electric revolution and African market growth

16th April 2021

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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An informal ‘contract’ signed at a conference, on a serviette, can hardly be viewed as a binding document, but somehow it saw Volkswagen Group South Africa (VWSA) chairperson and MD Dr Robert Cisek make his way to Kariega (formerly known as Uitenhage) to take over the reins at the local arm of the German carmaker.

“I’ve travelled through every country in Asia, but I’ve never been to Africa – only Kariega, twice, as head of production strategy for Volkswagen,” says Cisek.

“I got on so well with the team here that, when we were all at a production conference in Berlin, I signed an informal contract on a napkin that I would join the VWSA team at some point.

“A year later, this ‘contract’ materialised,” he says. “Coming to South Africa was really an easy sell for me.”

The 44-year-old Cisek describes himself as “not a typical German”, in that he is half- Indonesian, with a bit of Austrian, Czech and German blood thrown in as well.

He formally arrived in South Africa on November 1, with two stints back in Germany since then – one to spend Christmas with his family and the other to welcome his now five-month-old son.

He has three children, with his wife and baby boy having joined him in South Africa in February. His other children, a boy and girl, are set to arrive here later this year.

Prior to joining Volkswagen, Cisek worked at BMW, mainly in production, and before that he was a consultant, largely within the manufacturing sector.

Electric Cars
There are “two big things” on Cisek’s agenda for his tenure in South Africa.

“When I look at South Africa, the big question is how we’ll transition to sustain- able mobility,” he says.

“I strongly believe the future of mobility in South Africa will also be electric.

“Given the dependence of VWSA and the South African auto industry on exports and on the European market – and the acceleration towards electric vehicles (EVs) in these markets – we as VWSA, and as an entire local industry, need to make sure we don’t fall behind.”

Europe accounted for 72.8% of total vehicle exports from South Africa in 2020, with the UK, South Africa’s top vehicle export destination, announcing last year that it will bring forward the banning of internal combustion engine (ICE) vehicles by five years, from 2035 to 2030.

This may have a potential devastating effect on the auto industry, which is South Africa’s largest manufacturing sector.

VWSA’s export markets mirror those of South Africa more broadly, with Europe and the UK its biggest export destinations.

“Our markets for ICEs are breaking away and we need to think when is the right time to transition to EVs,” says Cisek.

“But first we need to create demand for EVs in South Africa, and I don’t think the conditions in the country are too bad for this to happen.”

Cisek adds, however, that there is “still room to create additional content on electrified vehicles in government’s Automotive Production and Development Plan and the South African Automotive Masterplan”.

“We are having discussions with the Department of Trade, Industry and Competition on this. Everyone in the auto industry understands that no one can do this on their own.

“Looking at how the market developed in Europe, it is clear we won’t create demand for EVs without some supporting regulations, such as more strict environmental regulations or direct commercial incentives.”

The second step in building a local new energy vehicle (NEV) manufacturing sector is for the local automotive industry to build EVs for the local market, as well as markets abroad.

(NEVs refer to plug-in hybrids, fuel-cell vehicles (which use hydrogen) and battery electric vehicles. Electrified vehicles refer to plug-in hybrids, hybrids and battery electric vehicles. EVs refer to battery electric vehicles.)

This production may have to include parts of the battery value chain, as it will make little economic or environmental sense to “ship around heavy battery packs”, says Cisek.

“When South Africa will have enough scale and competence to go into cell manufacturing – I cannot answer that. Cell manufacture is also a challenge, due to the high capital expenditure required.”

Cisek adds that it will make little sense to only manufacture the shells of vehicles locally, with the battery then added at the destination market.

When considering current timeframes, Cisek believes the next ten years in South Africa will still be dominated by ICE production, with hybrid production to expand, which is the first step in integrating a battery powertrain with an ICE.

As for VWSA specifically, Cisek says it is too early to say whether a hybrid or EV will be included in the next production cycle at the Kariega plant.

“When we talk about the successor to the Polo – and there will be a successor – the question is whether it will be another round of ICEs, or whether we’ll make the transition to EVs.

“At some point in time, we need to review our entire portfolio as VWSA.

“We have committed to the Paris Agreement at a group level, so the question is when we’ll need to do this.

“But the current Polo and Polo Vivo still have a good couple of years ahead of them.”

Meanwhile, ICE engine production is also continuing at VWSA.

As to when VWSA will introduce its first EV into the local market, Cisek says the company is “trying to get the ID.4 to South Africa as quickly as possible”.

“At a global level, Volkswagen is introducing a new EV almost every month. In South Africa, we’ll start with the Audi e-tron and then move to the ID.4.

African Expansion
The second of Cisek’s overarching goals is to expand Volkswagen’s position in sub- Sahara Africa.

However, this can only happen if the region grows its appetite for new vehicles.

Currently, the continent’s automotive market (outside South Africa) is largely saturated with imported second-hand vehicles. This creates a situation that negates the various positive hallmarks of a sophisticated automotive ecosystem –vehicle assembly; parts manufacture; vehicle finance; insurance; a vibrant, legal aftermarket; and vehicle servicing – all of which have the potential to create jobs and deepen industrialisation in Africa.

Cisek says the first requirement of any international automaker when it considers setting up an assembly plant is a government-led automotive policy that creates market demand for vehicles.

Cisek’s predecessor, Thomas Schäfer, successfully made inroads into the African market for both Volkswagen and the automotive industry in general, opening starter plants in Rwanda and Ghana, for example.

The model for a potential African automotive industry currently being touted by the African Association of Automobile Manufacturers (AAAM) is a hub-and-spoke model, with certain countries to specialise in vehicle assembly and others in component production.

“My impression from Thomas is that things are starting to fall into place, but that the devil is in the details,” says Cisek.

“When we talk about the localisation of components in Africa, we have to take note of the different levels of industrialisation between countries, as well as the vast distances between them, which increases logistics costs tremendously. Even the logistics costs in South Africa are some of the highest in the world.”

Developing a successful African auto sector is also linked to the development of other sectors, such as energy and power, with reliable and sustainable power supply a prerequisite for automotive assembly.

As to what type of powertrain any potential African plant should produce, Cisek believes that it will have little value to relegate the continent to ICE production, while the rest of the world moves towards EVs.

“The vision for Africa is not to sell more ICEs and to continue to pollute the planet. When we talk sustainability, we also need a sustainable automotive industry in Africa.

“As for those people who believe that Africa must wait and see how the EV market develops – EVs are a mature technology and ready to be rolled out.”

Cisek says Volkswagen believes that Africa has the potential to become the next significant global automotive market.

“We want to see Africa rise as China did in the 1980s.”

Covid and the Amarok
VWSA returned to a three-shift operation in September last year, following the earlier hard lockdowns necessitated by the Covid-19 pandemic.

“After the festive season, we tested more than 3 000 employees to make sure we all come back to a safe environment,” says Cisek.

“We are cautiously optimistic that VWSA, given our productivity performance, could this year come close to pre-Covid-19 levels in terms of exports, but not so for domestic sales.

“This means we could see close to 160 000 units produced in 2021.”

Production at VWSA reached 114 416 vehicles in 2020, down from 161 954 units in 2019.

Exports reached 81 935 vehicles in 2020, down from 108 422 units in 2019.

The total number of engines produced in 2020, for local Vivo production and the export market, numbered 47 300 units, down from 97 000 units in 2019.

“Market demand in Europe is not yet back to the levels we saw previously,” notes Cisek.

“But, given our strong competitive edge here in South Africa – because of our continuous productivity – we were able to secure a lot of the Polo supply allocation to the European markets.”

Domestic Polo and Polo Vivo production will, in 2022, see the addition of Amarok bakkie assembly, but not at the VWSA plant.

As part of a global shared production agreement, Ford Motor Company of Southern Africa (FMCSA) will produce the new-generation Amarok for VWSA at its Silverton plant, in Pretoria, alongside its own new Ranger bakkie.

“Volkswagen Group is spending €70-billion on the development of autonomous-drive and electric vehicles. You have to pick your battles,” says Cisek.

“Ford is an excellent partner for us to improve our offering in the commercial vehicle arena. They are global market leaders.

“We can benefit from their experience and vice versa – in Cologne, Germany, Ford will build electric cars based on our MEB platform.”

Cisek says he hopes the local production of the Amarok –which will also be produced for the export markets – will boost sales of the bakkie in South Africa.

Amarok sales have lagged the performance of other locally assembled bakkies, such as the Toyota Hilux, the Isuzu D-Max and the Ford Ranger.

When considering local production conditions, and what government could do to improve the competitiveness of vehicle and component manufacturing in South Africa, Cisek believes that creating stable “boundary conditions” will do the trick.

This refers to reliable power and water supply, for example, as well as the creation of a predictable and reliable transport system.

“The difference between targets and actuals is sometimes quite big.”

Cisek adds that VWSA will also, as Ford is doing at Silverton, move to green energy in the future, in line with Volkswagen’s adherence to the Paris Agreement.

FMCSA last year announced energy projects for its Silverton assembly plant aimed at ensuring that the plant is entirely green and energy self-sufficient by 2024.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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