CONRAD ONYANGO, BIRD
A growing number of automotive manufacturing hubs and fierce sales competition in the continent’s key auto markets has begun transforming the automotive sector across Africa. Now, the opening of the world’s largest single market is set to ignite that growth.
Underlying the growth of the market are shifting trends in mobility and a growing middle class with high expectations, according to a recent report. Until recently, many car buyers across Africa were prepared to buy second-hand imports from as far away as Dubai and Japan.
“The demand for new vehicles across the African region has increased,” says the research firm, Modor Intelligence in its Africa Automotive market growth trends and forecasts report (2021-2026).
Modor Intelligence shows continental sales of over a million new vehicle units per annum. The market is largely skewed towards passenger cars, which account for 73.81 percent of sales, while commercial vehicles account for 26.18 percent. South Africa dominates the market for new vehicle sales, though this is beginning to change, as other countries on the continent ramp up vehicle production.
African Development Bank’s 2020 Annual Development Effectiveness Review (ADER) shows Africa’s manufacturing growth outpaced the global growth rate. The continent’s industrial GDP expanded by 17 percent to 731 billion dollars in 2019.
South Africa, where 85 percent of the total new car sales are sold, has started facing stiffer competition from other fast-rising vehicle manufacturing hubs on the continent, with Africa keen to grow its 1 percent share of global new car sales.
“Western and Northern Africa is expected to drive the growth till 2023, where countries like Ghana and Morocco are expected to be the key players,” said Modor Intelligence.
South Africa’s Car Magazine reported, the country exported a total of 270,730 new cars and trucks across the world in 2020, despite the covid-19 pandemic. The exported units accounted for 60 percent of 447,218 vehicles that were manufactured that year.
In 2018, Morocco surpassed South Africa as the biggest exporter of passenger cars on the continent, with 7 billion US dollars in exports. Morocco’s domestic annual car sales now exceed 160,000 units, creating more than 220,000 direct jobs – and the automotive sector is expected to contribute 24 percent to Moroccan GDP by 2022.
Morocco has lost no time using its newfound status as a major marketing opportunity.
“Morocco has surpassed South Africa as the biggest exporter of passenger cars on the continent,” a press statement released by the Embassy of Morocco in South Africa recently announced.
The statement, titled “Morocco Becomes Africa’s new Automotive Manufacturing Hub” pointed to a rapid increase in manufacturing capacity in the northern kingdom.
“As of 2021, new passenger vehicles (PCs) recorded an increase of +10.77 percent with 115,611 units sold, transforming Morocco into a leading automotive manufacturing hub in Africa,” the announcement said further.
Morocco’s growing automotive sector has been boosted by a massive investment into infrastructure. Numerous free-trade agreements with the European Union and the United States have also opened up Morocco’s auto industry to these export markets.
In 2019, Ghana followed in South Africa’s footsteps by announcing it would offer a 10-year tax break for international car manufacturers building whole vehicles in the country – part of a number of measures to ensure the nation reaches developed-country status by 2030.
“Even if the target is met halfway, the Ghanaian automotive market is anticipated to grow at a tremendous pace, as the economic growth is directly proportional to the growth of automotive markets,” according to Modor Intelligence.
In the north, Algeria and Egypt are also coming on strong, with the latter’s new vehicle sales rising by love 26 percent to 231,238 units in 2020, compared to 182,713 units sold in 2019. Algeria has sizeable automotive assembly and manufacturing sectors.
Other African countries with a high market potential for vehicle manufacture include Angola, Ethiopia, Kenya, Ghana, Nigeria, Rwanda and Namibia – where multinational vehicle manufacturers have already set up production plants.
The establishment of a continental body to help drive the automotive sector across Africa is also seen as having a positive impact, as regulations become more streamlined.
“After the formation of the Association of African Automotive Manufacturers (AAAM), companies are expected to benefit from reforms and policies,” said the research firm.
All these developments, Modor Intelligence expects, will drive the value of the African automotive market to some 39.87 billion US dollars by 2026, from 28.45 billion US dollars in 2020.