Africa Automotive News September-October digital issue 2019

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Cover Story Africa: The new hub for automotive manufacturing Africa auto sector is struggling under currency policies and associated import controls set up to conserve hard currency and encourage local manufacturing The automotive manufacturing industry in Africa is growing fast. Automotive production in Africa is growing industry as more and more manufacturers move closer to their African customers and discover the advantages of low-labour costs and tax holidays. Demand for automobile spare parts in Africa is also growing. The automotive production industry in South Africa is nearly 100 years old. In the 1980s and 1990s, Nigeria achieved significant production and production occurs in Egypt and more recently Morocco. Smaller production activities take place in Kenya and some decades ago in Zimbabwe. However, currently significant modern assembly is largely located in South Africa. Formed in 2015, the Africa Association of Automotive Manufacturers (AAAM) works specifically to promote and facilitate the growth of the African automotive industry. Formed by executives from the world’s biggest car manufacturers, the African Association of Automotive Manufacturers (AAAM) embarked on a concerted push to revive and resurrect Africa’s auto industry. Since then, the newly-created African Association of Automotive Manufacturers (AAAM) has been working with key African governments to create the right policy environment for the sector to Flourish. Africa’s untapped demand combines with a steady increase in consumer spending which has been rising at an annual rate of 10% over the last few years. Moreover, analysts predict that by 2030, over half a billion Africans will have joined the middle class. “If the growth in vehicle sales keeps pace with growing consumer spending, annual sales of passenger cars in Sub-Saharan Africa will surpass 10 million units by 2030,” says South African consultancy B&M Analysts. Not surprisingly, one of the organisation’s first ports of call was government leaders in Nigeria’s capital Abuja. Fast-growing Nigeria is the jewel in Africa’s auto crown with just 44 vehicles per 1,000 inhabitants,far below the global average of 180 vehicles per 1,000 inhabitants, according to recent estimates by a Deloitte report. While new vehicle sales have jumped 22 Africa Automotive News l 2019 September-October issue l 2019
Cover Story in developing markets like China, India and Brazil over the last decade, growth in Africa has remained relatively slow. According to the International Organisation of Motor Vehicle Manufacturers (OICA), only 1.5 million new vehicles were sold across the African continent’s 54 countries with a combined population of 1 billion in 2016. South African consumers buy most new cars, and together with Egypt, Algeria and Morocco account for almost 80 per cent of the continent’s total auto sales, with only muted demand from important economies like Nigeria and Kenya. But far from being a disincentive to investors, the figures act as a rallying call. “When Volkswagen and General Motors moved into China the motorisation rate was lower than in Ethiopia today. The limited market was not a deterrent for the early movers who recognised China’s long-term potential,” says Karthi Pillay, Africa automotive leader, risk advisory at Deloitte. Mix with this a renewed determination amongst African leaders to diversify their economies through boosting manufacturing. New policies aimed at increasing domestic car production are starting to pay off. In 2016, China’s state-owned car manufacturer Beijing Automotive International Corp unveiled plans to build a R11bn (US$759mn) auto plant in South Africa the biggest investment in a vehicle-production facility in the country in four decades will earmark over half of its output for export, initially to East, West and North Africa. Elsewhere, after a four-decade break in production, Volkswagen is starting up its Kenyan production line once again. The signs are good. But with challenges ranging from imported used cars flooding the market to Africa’s weak manufacturing base and a lack of finance for would-be car owners, Africa promises a challenging operating environment. Import of used cars in Africa The biggest barrier to new vehicle sales in Africa is cheap, imported secondhand cars from the US, Europe and Japan. Consultancy Deloitte estimates that eight out of 10 imported cars in Ethiopia, Kenya and Nigeria are used cars. According to the Kenya National Bureau of Statistics (KNBS) the volume of imported vehicles between 2005 and 2017 grew at over 300 per cent from 33,000 to over 120,000 units. Governments are developing policies to limit the influx. In an effort to hike the price of second-hand cars to favour more new car purchases, Kenya has forbidden vehicles over eight years old from entering into the country, with plans to reduce this further. Similarly, Nigeria has increased its import duty on secondhand vehicles, most of which arrive in a bustling trade from the US into Africa via Benin’s Cotonou port. As a result, Nigeria’s imports of cars from the US plummeted from more than 100,000 a year to less than 40,000 units in 2015. Nigeria car sales Other signs of change include the enduring stagnation of the Japanese economy. It has resulted in sluggish sales of new cars there, which in turn has created a shortage in the supply of quality used vehicles. There has been “a deterioration of the environment surrounding the export of the used motor vehicles industry”, says Hiroshi Sato, chairman of the Japan Used Motor Vehicle Exporters Association. As crucial as controlling used-car imports September-October issue l 2019 Africa Automotive News l 2019 23
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Page 3 and 4: Contents Managing Editor Francis Da
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Page 17 and 18: Opinion Telematics Redefining Autom
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Africa Automotive News September-October digital issue 2019

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