Volkswagen AG is actively exploring the possibility of establishing car production in Egypt as part of a broader strategy to expand its footprint across the African continent. This move, signaled by Martina Biene, Managing Director at Volkswagen Group Africa, comes as the automaker simultaneously scales back operations in its European heartland.
Why Egypt is a Good Choice
“We are very interested in Egypt as a production hub and hopefully, we can announce a business case anytime soon,” Biene stated, indicating the advanced stage of planning. Initial considerations lean towards utilizing existing facilities in Egypt to establish an assembly unit, with the potential for constructing a dedicated factory in the future.
This strategic shift is fueled by Volkswagen’s need to address rising costs, weakened demand, and intensifying competition from more affordable Chinese brands in Europe. Consequently, Volkswagen, along with its sister companies Audi and Porsche, are implementing measures to reduce production capacity, cut jobs in Germany, and curb overall expenses. Volkswagen itself plans to reduce its German production by over 700,000 units and cut 35,000 jobs by 2030.
Egypt’s Economic Goals
Egypt, currently recovering from a prolonged economic crisis, is actively positioning itself as a competitive manufacturing and export hub. The Egyptian government views the automotive sector as a key driver of future economic growth, estimating local demand to exceed $8 billion annually over the next decade.
Beyond the allure of a large domestic market, Egypt’s strategic location offers Volkswagen access to a broader consumer base in the Middle East and Africa. This factor distinguishes Egypt from Morocco, Africa’s current automotive leader, which predominantly focuses on exporting vehicles to Europe.
Volkswagen’s Future Plans
“In Morocco, the car business is very much focused on exporting to Europe,” Biene explained. “We are currently not looking for expanding our footprint with plants to export to Europe, because we’ve just closed plants in Europe.” This statement underscores Volkswagen’s commitment to serving the African market directly.
Volkswagen has historically faced challenges in cost-sensitive regions like Africa, India, and Southeast Asia, often competing with more agile and cost-effective rivals such as Toyota and Hyundai. However, the company currently operates a full manufacturing facility in South Africa and assembly plants in Ghana, Rwanda, and Kenya. Besides, its long-term ambition is to establish up to five production sites across Africa within the next 10 to 15 years, each strategically focused on different models and export opportunities within the diverse African market.
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