The rising automotive opportunities of Africa
Car Manufacturers targeting the continent’s stronger economies. The untapped potential of the automotive market in Africa, and its fleet sector, is attracting vehicle manufacturers, despite volatile trading conditions.
Global research and consulting organisationFrost & Sullivan said the average level of motorisation in Africa is the lowest in the world, at an estimated 44 vehicles per 1,000 inhabitants. In 2014, the continent accounted for 1.55 million new car sales, roughly 1% of global new car registrations, and just 1.36 new vehicles per 1,000 inhabitants. To put this into context, there were 18.05 new vehicles per 1,000 inhabitants in China in 2016.
Africa currently imports high volumes of secondhand cars, and the opportunity to convert these buyers to new cars has strong appeal for manufacturers.
“If new vehicle sales on the African continent grow to 7 units per 1,000 inhabitants, total new vehicle sales will reach approximately 7.7 million units annually. This would shift Africa to being the fourth largest new car regional market after China, the USA and Europe,” said Ryan Bax, industry analyst for mobility at Frost & Sullivan Africa.
Growth of this scale still represents a formidable challenge, given the economic and political instability of the region.
“The weakening economics of developing nations, soft oil prices, growing exchange rate risk, and a preference for safe-havens has seen the market fall on a yearly, and even monthly, basis,” said Bax.
In Nigeria, for example, the new car market has plunged from 50,000 units in 2014, to approximately 7,000 units up to November, 2016. Yet Africa is not a single market, but a continent of independent nations, where some economies, like Morocco’s, hold more promise than others.
Renault already has a plant in Tangier, where it assembles the Lodgy and Dokker to meet local and international demand for entry-level models; and Peugeot will also start producing cars in Morocco in 2019, with the goal of raising output to 200,000 units in line with future market demand. The PSA Group has set itself the long-term ambition of selling one million vehicles in the Africa-Middle East region by 2025.
Carlos Tavares, chairman of the PSA Managing Board, said: "We must make this region a key driver of international growth."
South Africa is the dominant automotive market in Africa, with annual new car registrations of 360,000 (100,000 manufactured locally and 260,000 imported). About 20% of these are bought by leasing and rental companies, which operate a fleet of approximately 600,000 vehicles, according to the Southern African Vehicle Rental and Leasing Association. | 14/12/2016 | Jonathan Manning