Germany's complete automobile manufacturer Volkswagen is considering Egypt as a new production base to target the African market. If Volkswagen, the largest automaker in Europe, establishes a production facility in Egypt, the largest population country in the Middle East, it could emerge as a strategic hub aimed at both Africa and the Middle East.
According to Bloomberg News on the 3rd (local time), Volkswagen is reviewing plans to establish a vehicle assembly line utilizing existing infrastructure in Egypt, and eventually build an independent local factory in the long term. Martina Biene, Volkswagen's executive director for Africa, said, "We see Egypt as a very promising production hub and hope to unveil a specific business plan in the near future."
The reason Volkswagen has identified Egypt as a production base lies in its geographical advantages and the growth potential of the African market. Volkswagen has been struggling against competitors like Toyota and Hyundai in price-sensitive markets such as Africa, Southeast Asia, and India, but it is currently accelerating its efforts to penetrate the African market. Currently, Volkswagen operates a complete automobile factory in South Africa and assembly facilities in Ghana, Rwanda, and Kenya.
Volkswagen plans to establish five production bases across Africa within the next 15 years, producing differentiated models at each base and exporting them to other countries on the continent. Executive Biene stated, "Morocco is a production base focused on exports to Europe," while "in contrast, Egypt has excellent access to domestic and regional markets in the Middle East and Africa."
This decision has drawn attention as it comes amid Volkswagen's large-scale restructuring efforts at its headquarters in Germany. The company plans to reduce its annual production in Germany by more than 700,000 units by 2030, resulting in a workforce reduction of about 35,000. Its subsidiaries Audi and Porsche have also conducted voluntary retirement programs to cut labor costs.
Industry analysts say that if Volkswagen's entry into Egypt materializes, it could lead to the diversification of the African automobile industry, which has so far centered around Morocco and South Africa. As the automobile industry rises as a pivotal part of the global supply chain restructuring, Egypt's strategic position is being highlighted anew.
This acquisition is also a vital opportunity for the Egyptian government. Over the past two years, Egypt has experienced severe inflation and foreign exchange difficulties, prompting it to focus intensely on attracting foreign investment and fostering manufacturing. In particular, the Egyptian government sees the automobile industry as a next-generation growth driver, and expects that this establishment of a production base will yield an average annual domestic demand of $8 billion (approximately 11 trillion won) over the next decade.
Bloomberg reported that if Volkswagen's investment decision goes through, it could significantly impact not only the industrial landscape of the Middle East and Africa but also Egypt's economic recovery.