The Sub-Sharan Africa Automotive Market is expected to register a CAGR of 4.20%.
The automotive industry in Sub-Saharan African countries is relatively small with only 422,611 new vehicles sold in 2018. The market is highly dominated by the used-car sales which accounted to 449,324 units in 2018. However, the governments across the region are taking initiatives to boost the automotive industry by implementing ban on importing used vehicles.
Nigeria has banned the importation of automobiles through the land borders to curb smuggling, particularly used cars from neighboring countries. According to the data from the National Automotive Design and Development Council (NADDC), Nigeria spends about NGN 2.88 trillion (USD 8 billion) on the importation of about 300,000 to 400,000 cars, yearly.
To discourage the importation of vehicles and encourage local vehicle production, Nigeria slammed 70% import duty and levied on imported vehicles. This resulted in increased volume of locally assembled and manufactured vehicles in the country and most of the local companies have seen developments in their manufacturing process and capacity. For instance,
Innoson Vehicles Manufacturing Limited (IVM) opened a new automated plant for manufacturing bus at Nnewi, Anambra State, in 2019. The automated plant reduced the cost of new 15-17-seater Hummer bus from NGN 16 million to NGN 9 million.
Key Market Trends
GROWING IMPORTED USED CAR SALES IN GHANA HINDERING THE MARKET
Due to low disposable income and very high cost associated with new vehicles, used vehicles dominate Ghana’s automotive retail sector. These vehicles are mainly imported from regions with low resale or residual values of used vehicles like Europe, Japan, and the United States.
According to the Ghana Revenue Authority, during 2005-16, over 1 million vehicles of all types were imported into the country, and of this 80% are used vehicles.
Majority of these used cars in Ghana have been imported from the United States. Most of the used car sellers in the country provide up to 70% or 80% on the value of used cars. Additionally, most of these used cars have obsolete technology whose carbon dioxide emissions (CO2) and fuel consumption might no longer be compliant with the manufacturer’s standards imposed in developed countries, and therefore, is a threat to Ghana’s environment.
A common trend that can be seen is that only a few percentages of new vehicles sold in the country compete against the features of the used vehicles imported to Ghana. Vehicles tend to appreciate in value due to limited supply of vehicles and import duties.
The most popular imported brand is Toyota, which accounts for more than half of the imported vehicles. These are primarily imported from the United States and the Gulf States.
However, the government of Ghana announced that it is likely to reduce the imports by 50% percent from April 2019. This measure is expected to slightly boost the demand for new vehicles sales in the country.
INCREASED PRESENCE OF FINANCIAL INSTITUTIONS AND DECREASED INTEREST RATES DRIVING THE SUB-SAHARAN AFRICA AUTOMOTIVE INDUSTRY
The vehicle interest rates have been fluctuating across the Sub-Saharan African countries annually and it is highly dependent on the economic growth of the individual country.
In South Africa, the current interest rate for vehicle financing is around 9.25% plus 2% for bank profits.
Under the new Nigerian automotive development policies, National Automotive Design and Development Council (NADDC) plans to develop auto finance institutions, where Nigerians will be able to put in 10% or less and pay over a number of years at just 6-8% when compared to that of 28% average interest rate in 2019.
As of 2019, the country has seen interest rate reaching as high as in the range of 34-36%.
Kenya has seen a sudden fall in the sales since 2016. This was partly due to the political uncertainty began in 2017 presidential election and partly due to the lowering of commercial bank lending rate limiting from 17% to 14% and the credit crunch it caused (banks no longer lend to car buyers because profit margin has been too small).
The current lending rate reached 12.46% and interest rate continued to be around 9% in 2019.
The Ethiopian banks demand interest rates of up to 20% and physical collateral of up to three times the value of the loan. Ethiopia lacks credit cards, a stock market, and foreign banks, and thus the lending rate is limited to 12.9%.
The customers in the country mostly prefer financial support from the rotating savings-and-credit association (ROSCA) firms compared to bank firms as the former firms provide low interest rates. The interest rate from ROSCA is generally 5-6% lesser than compared to that of banks.
The automotive industry in the region is dominated by leading manufacturers such as Volkswagen, Toyota, Nissan, Hyundai, and Suzuki. Few of the recent developments include:
- In July 2019, Groupe Renault announced that Groupe Renault and Coscharis Group had begun strong cooperation, including the production and distribution of vehicles, in Nigeria.
- Renault Logan and Renault Duster have been assembled in the existing Coscharis Assembly facility in Lagos, since October 2019. While Renault Kwid and Renault Oroch have been imported from Brazil, these four vehicles have been distributed through the Coscharis Motors sales network throughout Nigeria.
- In August 2018, Volkswagen announced that it signed the Memorandum of Understanding (MoU) with the Government of Nigeria.
- In the MoU signed in Nigeria, Volkswagen has committed itself to expand manufacturing/production operations on a step-by-step basis and to turn Nigeria into an automotive hub on the western coast of Africa, over the long term.
- In the above process, it includes developing a training academy in conjunction with the German government, which may provide broader technical training for the community in automotive skills.
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Table of Contents
1.2 Scope of the Study
4.2 Market Restraints
4.3 Industry Attractiveness - Porter's Five Force Analysis
4.3.1 Threat of New Entrants
4.3.2 Bargaining Power of Buyers/Consumers
4.3.3 Bargaining Power of Suppliers
4.3.4 Threat of Substitute Products
4.3.5 Intensity of Competitive Rivalry
5.1.1 Passenger Cars
184.108.40.206 Sports Utility Vehicles
220.127.116.11 Others (Mini-vans, MPV, etc.)
5.1.2 Commercial Vehicles
18.104.22.168 Picku-up Trucks
22.214.171.124 Others (Heavy-duty Trucks, Buses & Coaches)
5.2 By Fuel Type
5.2.3 Other Alternative Fuels
5.3.1 Sub-Saharan Africa
126.96.36.199 South Africa
188.8.131.52 Other Countries (Tanzania, Angola, and Zambia)
6.2 Company Profiles*
6.2.1 Toyota Motor Corporation
6.2.2 Volkswagen AG
6.2.3 Hyundai Motor Company
6.2.4 Groupe Renault
6.2.5 Nissan Motor Co., Ltd.
6.2.6 Isuzu Motors Ltd
6.2.7 Ford Motor Company
6.2.8 Honda Motor Company, Ltd.
6.2.9 Subaru Corporation
6.2.10 Suzuki Motor Corporation
A selection of companies mentioned in this report includes:
- Toyota Motor Corporation
- Volkswagen AG
- Hyundai Motor Company
- Groupe Renault
- Nissan Motor Co., Ltd.
- Isuzu Motors Ltd
- Ford Motor Company
- Honda Motor Company, Ltd.
- Subaru Corporation
- Suzuki Motor Corporation