The car market is growing in Africa. After the Covid-19 parenthesis, this market has enormous potential. Governments are setting up industrialization strategies, the big powers and the big manufacturers are eyeing the continent.
Covid-19 has slowed down the expansion of the car market
All automotive experts agree that Africa will be the new vehicle sales market of the future. Currently strongly dominated by the sale of second-hand vehicles, this trend seems to be slowing down to make way for an industrialization of the sector and the promotion of the sale of new vehicles. Several manufacturers have already taken this step and are now producing their vehicles on the African continent. In a context governed by environmental restrictions in Western countries, the main players in automobile distribution are turning to Africa to meet the growing needs expressed by the middle class, giving priority to markets in which the granting of credit for vehicle purchases is still underdeveloped.
The automotive market in Africa has great prospects
The African car market is valued at USD 30.44 billion in 2021, and is expected to reach USD 42.06 billion by 2027, registering a CAGR of 5.55% over the forecast period (2022 – 2027).
The COVID-19 pandemic had a very negative impact on the market, and the majority of the region’s markets have not recovered, and demand is still lagging behind pre-COVID levels. Demand for new vehicles in the African region increased through 2018. In 2019, due to a slowing economy, new vehicle sales declined by 4 percent to 1.17 million units from 1.22 million units in 2018. Passenger cars accounted for 73.81%, while commercial vehicles accounted for 26.18%.
However, demand in key countries such as Egypt, etc., is providing momentum and is expected to continue over the forecast period, creating a positive outlook for the market. Although there was a decline in overall new vehicle sales, commercial vehicles in 2019 increased by 0.33% to 308,319 units from 307,301 units sold in 2018. In 2020, Egypt saw an increase in new vehicle sales of 26.55% to 231,238 units. compared to 182,713 units sold in 2019.
The African market has one of the highest growth prospects in the world. Multinational automakers currently setting up production facilities in Angola, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Rwanda, South Africa and other countries clearly indicate that there is potential to boost manufacturing for the automotive market in this region. South Africa, Egypt, Morocco and Algeria have significant automotive assembly and manufacturing sectors.
Contract manufacturing is another major growth driver for companies with OEM manufacturing franchises. For example, Kenya Vehicle Manufacturers, in which the government has a stake, holds franchises for Mercedes-Benz, Volkswagen and Chrysler. Another local company, AVA, assembles medium and heavy commercial vehicles for Mitsubishi and Fuso and Scania, Toyota, Hino and Tata.
Growing government initiatives expected to increase demand in Africa for cars
The car market is growing in Africa
According to Mordor Intelligence’ report, the African market has strong growth prospects (See map of africa). Governments and regulators in the region have taken steps to import and export used vehicles. For example :
The Zimbabwe Automobile Association, along with other members of the African Council of Automobile and Touring Clubs, has called on importing and exporting countries to take steps to promote safer and cleaner used vehicles in Africa. The formation of the African Automobile Manufacturers Association (AAAM) has begun to benefit from reforms and policies. For example, any car company that sets up a local assembly plant in Nigeria, Kenya and Ghana could benefit from tax exemptions of up to 10 years and duty waivers.
The level of infrastructure is also increasing in Africa, which is likely to help the region’s automotive market. West and North Africa is expected to drive growth until 2023, where countries such as Ghana and Morocco are expected to be the major players.
- Ghana aims to become a developed country by 2030. If the country reaches even half of the target, Ghana’s automotive market is expected to grow at a rapid pace, as economic growth is directly proportional to the growth of automotive markets.
- Morocco’s integration into the global economy has been facilitated by the signing of numerous free trade agreements with the European Union and the United States. These trade agreements have contributed positively to the emergence of export activities in the country.
- Governments in the region are taking the necessary steps to encourage OEMs from around the world to locate their manufacturing facilities in the region, which should increase demand for new vehicles.
Big powers and big manufacturers are interested in the car market in Africa
Africa’s population is expected to double over the next 30 years, reaching 2.4 billion by 2050, according to United Nations projections. Over the same period, vehicle sales are expected to rise from 1 million in 2016 to 2.5 million in 2025. In Africa, women account for only 2% of car sales, compared to 33% in developed countries. So there is huge potential for growth. Consequently, the car market is growing in Africa.
A panel calling for a “better integration of the African automotive industry” was organized in the wake of the 14th edition of the US-Africa Business Summit 2022 held in Marrakech. After having relocated a large part of their production to other destinations, the major car manufacturers are now starting to turn massively to Africa, both for production and a growing consumer market. As a result, the giants of the sector are reinvesting in the continent, multiplying the creation of production units.