The launch of its CitiGolf successor, and an unexpected export bonus for the new-generation Polo, will help Volkswagen SA (VWSA) almost double vehicle production at its Uitenhage plant near Port Elizabeth this year.
MD David Powels announced in November that the company had been selected as the sole international supplier of right-hand-drive, four-door Polos. In a deal estimated to be worth R30bn in export earnings, the company planned to ship out about 300 000 units over six years, starting with 55 000 in 2010.
But in an interview in Uitenhage this week, Powels revealed that because European plants can't meet demand for the new Polo in their domestic markets, including Germany, VWSA has won an additional order for 21 000 left-hand-drive Polos, to be delivered in the next six months.
It has also been named as the exclusive producer of left- and right-hand-drive versions of the new four-wheel-drive Polo Cross.
Though Powels describes the 21 000 order as a one-off, the plant's ability to meet unplanned production peaks is likely to stand it in good stead in the future. Uitenhage vehicle production this year will rise to a forecast 113 731 units, from fewer than 60 000 in 2009. Of the 2010 production, 63% will be for export.
The new Polo, which is also sold in SA, accounts for 78% of production. To meet the daily production target of 500 units, assembly lines are working 24 hours a day, five days a week.
Plant manager Tom du Plessis admits lines are stretched to capacity. "It allows limited time for maintenance and catch-up if something goes wrong. But we are coping."
Powels sympathises but says: "I recognise it puts a strain on us and on our components suppliers, but when an order for 21 000 extra cars comes along, particularly with the industry in a difficult state, you grab it."
VWSA is employing several hundred temporary workers until the 21 000 order is finished. "It's unfortunate that they may be back on the labour market in six months, but we have trained them, they will have jobs they would otherwise not have had, and they will be fully skilled at the end of it," says Powels.
The CitiGolf successor, the Vivo, will go on sale later this month. Based on the old Polo, the Vivo is expected to generate initial SA monthly sales of about 2 700. Du Plessis says daily production is just shy of 140.
The new car has big tyre tracks to fill. CitiGolf was around for more than 30 years and became a staple of the SA motor industry until production ended late last year. The final units were sold in January.
Like Citi, the Vivo is built only in SA and is chiefly for local consumption - though Powels hopes demand from neighbouring countries will provide added impetus.
However, it is not a straight replacement. The Citi was a hatchback, but Vivo will be available in both hatch and sedan. It will not try to occupy the "cheap" entry-level market with which Citi was associated. Prices start at just over R100 000 and rise to R151 000 - creating a slight overlap with the new Polo. There will initially be four sedans and five hatchbacks.
Powels notes that in 2009, sub-R100 000 new cars accounted for only 7% of SA sales, and R100 000-R150 000 cars for 21%. "Most of the cars under R100 000 are very small, with tiny engines. We don't have the ammunition to operate in that segment. The Vivo's engines are 1,4 and 1,6. Our aim is to be dominant in the segment above."He says the overall cost of owning a Vivo will differ little from that of a Citi, which could be bought new from about R85 000.
Because of the high number of young owners, limited safety features and the car's accident history, insurance premiums on the Citi were generally high. Vivo has standard features like power steering and dual airbags, and a variety of options including ABS antiskid braking. Powels expects insurers to go easier on the car.
But can it last as long as Citi? "Vivo is not a short-term project but I'm not sure there will ever again be a car that has the legs' of Citi," says Powels.
The hiatus between the end of Citi and launch of Vivo has allowed competitors to stake stronger claims on the entry-level market. Renault's locally built Sandero has done well, while Ford and Hyundai have new imports.
Vivo - Filling a gap in the market
Powels says he doesn't underestimate any of them, but adds a challenge: "Some companies may have temporarily moved into the space we vacated but we think we can pick up and be dominant again."International VW CEO Martin Winterkorn wants his group to overtake Toyota as the world's biggest motor company by 2018. Powels says subsidiaries such as VWSA have been set the same target in their domestic markets - "though we hope to achieve it here a little earlier".
An imported pick-up, the Amorak, will be launched in SA later this year to take on Hilux and other established names. It's part of a VWSA expansion in small and medium commercial vehicles.
Plans to become a significant player in the truck and bus market were cut short late last year when VW sold its heavy-vehicle division to fellow German company MAN.
Powels isn't complaining. VWSA is now able to concentrate on what he believes it does best: producing small cars. A few years ago, the company built a variety of VW and Audi cars, and minibuses.
WHAT IT MEANS
 VWSA has won an order for 21 000 cars
Production will almost double at its plant
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The launch of Vivo is part of a three-year, R4bn project to reinvent Uitenhage as a focused, globally competitive assembly centre. Vivo and the new Polo are now the only vehicles built there.
Volumes are still shy of those required to justify full-scale automation, but Powels says Uitenhage is well on its way to the aim of entering the top 10 VW plants in terms of overall quality. There are about 60 scattered around the world and VWSA is already in the top 10 in some measures.
Investment continues, however. A second modern paintshop will come on line in two weeks to meet increased production and there are plans to invest about R500m in a new bodyshop. A R200m parts and accessories national headquarters will open midyear in Centurion.
VWSA is also expanding local engine production. Uitenhage's engine plant will produce up to 95 000 four-cylinder car engines this year. Exports markets include India and China.
The quest to increase local content in SA-made vehicles to over 70% is leading to investment and job creation among suppliers. Late last year five multinational components producers set up nearby for a combined investment of R600m and created 700 direct jobs.
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