Automotive Industry in Africa

AS 2012 UNFOLDS, the global automotive industry is cautiously optimistic about the opportunities for sector growth. With hopes rising that the worst of the recession is now behind the industry, there is a gradual shift away from merely surviving, with many companies now looking to opportunities for market expansion.

Nowhere is this more obvious than on the African continent. Whilst the North American and European markets maintain a largely internal focus, several major Asian car manufacturers are looking to Africa. For now, Africa’s share of the global automotive market remains low, with South African auto exports constituting less than 1% of total global exports1; however, the emergence in several countries of a growing middle class and economic growth driven by a resilient mining sector is giving rise to a sense that the continent may offer significant opportunities for the outside investor. As KPMG noted in their 2012 Global Auto Executive Survey, “Africa is possibly the last truly underdeveloped set of markets in the world, there may be greater potential here than many realise”2.

Analysts point to South Africa and Nigeria as the two powerhouses of the African automotive industry. The largest automotive market in Africa, which is South Africa, enjoyed steady growth in 2011, with car sales up by 15.6%3 from the previous year. During the same period, the commercial sector grew by 23% on the back of ongoing strong demand for commodities4. In Nigeria, the new vehicle market is also growing rapidly—up from 10,000 units in 2003 to 70,000 units in 20115. Whilst emerging from a relatively low base, the growth in the Nigerian market is indicative of the market potential and the emergence of a strong consumer class.

Neighbouring Ghana is following a similar trend, with recent discoveries in the oil and gas sector positioning the country as one of the world’s fastest growing economies6. With the country officially achieving middle-income status in 2011, Ghana is increasingly attracting the attention of manufacturers looking to capitalise on the country’s enhanced purchasing power.

Commercial sales are driving market growth in East Africa with the Kenyan market remaining a focus in the region. Whilst the domestic market remains small, manufacturers and automotive dealers have sought to position Kenya as a hub for companies looking to tap into the East Africa Community (EAC) market. Bringing together the republics of Kenya, Uganda, Rwanda, and Burundi and the United Republic of Tanzania, the EAC has a combined population of 133.1 million and a combined GDP of USD 79.2 billion. Amongst EAC members, growth in the resource sector remains a key driver for the industry.

The China Factor

Across the continent, large-scale infrastructure and local manufacturing have highlighted China as one the primary sources of foreign investment on the continent, with Standard Bank last year predicting that Chinese investment in Africa would reach USD 50 billion by 2015. China-Africa trade for 2011Nike Schuhe