MARKET REVIEW
IN AND OUT
OF AFRICA
In the first of a triple-header collaboration T&FME and Glasgow Consulting Group look at the African market
A
frica has more than a billion people, 17% of the world’s population, but accounts for only 1% of cars sold worldwide. After the European car industry moved much of its production into Eastern Europe, some believe the next step is Africa, both for production and a growing consumer market. However, due to limited disposable income and the high cost of new vehicles, second-hand vehicles dominate the continent’s automotive retail sector. These are mainly imported. In 2020 (the latest complete set of sales data), the market was dominated by one brand Toyota. The car-maker enjoys a 43% share of new car sales but the continent is a happy hunting ground for its other Japanese competitors, even if they are some-way behind. Indeed, the next ranking auto-company is Nissan at 13%, just narrowly ahead of its Tokyo-headquartered counterpart Isuzu at 12%. So popular are the Japanese brands that 28 FEBRUARY 2022
you have to get past Mitsubishi’s 7% to get to a non-Japan-based manufacturer with Ford (6%) placed at the fifth in the ranking of new car sales. A large geographical area and a diverse set of cultures and economies makes the African car market difficult to assess but there are clear trends that can be applied to much of the continent. It remains a market where challenges and opportunities are in plentiful supply, even if high import duties continue to hinder the imports of new vehicles. This is a market where the used car market is consequently a major force in sales. The high tariff placed on new car imports has seen aging second-hand vehicles appreciate in value but there are further constraints. The price of importing new cars is exasperated by poor availability of vehicle finance in a territory where household budgets are under pressure and unemployment is high. With government priorities often elsewhere and currencies in flux, the regulatory landscape and scattershot approaches to funding makes
In the majority of African countries, car buyers would rather buy a five- to six-year-old imported car than buy a new car”
both the import and opportunities for local assembly challenging for manufacturers and the automotive channel alike. “In most African countries, the market for vehicle manufacturing is non-existent but poses an opportunity for new investment as the sector is dominated by retail of grey inputs including pre-owned vehicles,” explains Glasgow Consulting Group’s Vishal Pandey. He adds that 85-90% of passenger vehicles are imported into Africa to cater for the used passenger vehicles market. Annually, approximately 800,000 used passenger vehicles are imported by the leading importers in sub-Saharan Africa from Japan, EU and the United States. Germany holds over 50% of EU passenger vehicles exports to Africa. West African countries import 70% of overall used passenger vehicles into Africa. “In the majority of African countries, car buyers would rather buy a five- to sixyear-old imported car than buy a new car at a price premium of 15-20%,” says Pandey. meconstructionnews.com
