Low-cost is prime market
Indian and Chinese auto firms offering low-cost models are expanding their African reach. India’s Tata Motors, which is currently focusing particularly on the South African market, aims to quadruple its sales in the country by 2018 – both in terms of combined passenger vehicles and light commercial vehicles. It sold 6,500 units in 2012 but wants to bring this up to 30,000 by 2018, reaching at least 12,000 by 2014.
In order to achieve this, Tata plans to more than double its number of Associated Motor Holdings outlets from 48 to 100 in 2018. The company is due to diversify its product range in South Africa, introducing new models such as Tata Aria, Tata Prima and Tata Ultra Trucks.
At the same time, the Chinese automobile firm, Foton, has become the dominant Chinese car exporter to Africa. In 2012, Foton delivered 20,000 vehicles to the region – from cars to pick-up tricks.
Although interest in Africa is rising, the current market figures are mixed. In Nigeria, Africa’s most populous country, where 50,000 new vehicles enter the country every year, according to the Oxford Business Group, sales dipped by 5.5% in 2012, claims the market research organisation BMI. The negative trend was attributed to sectarian violence, flooding and a floundering economy. Analysts predict that Nigeria’s auto market will recover strongly in 2014, with sales rising by 7.8%. BMI predicts that 59,598 units will be sold in 2014.
Major players have been keen to tap into the generally rising demand. In the first six months of 2013, Ford’s sales in Nigeria jumped by a third. In July 2013, the company had shifted 2,156 units compared with 1,616 the previous year.
In September 2013, Ford announced its intention to launch four new models in Nigeria – the Focus, Fusion, Escape and Ranger. Honda, which until recently has focused on the motorcycle market in Nigeria, announced last year that it plans to sell cars in the country.
In countries reaping the benefits of new-found mineral and resource wealth, demand for vehicles is robust. In Zambia, with its flourishing copper mining industry, the sale of new vehicles is predicted to double between 2012 and 2018 from 2,639 to 6,800 units. With the infrastructure sector in the country also growing, due to a $6.5bn investment programme, the demand for commercial vehicles is also set to grow. A similar trend marks the auto sector in Mozambique. The southern African country is thriving on the back of a coal boom and set to enjoy a new wave of investment due to the discovery of considerable natural gas reserves. An infrastructure boom in Mozambique will similarly drive up demand for commercial vehicles.
Trends are positive in stable African economies as well. The Kenya Motor Industry Association recorded an increase in new vehicle sales in August 2013 – from 8,117 units the previous year to 9,135. In Uganda, the number of newly registered vehicles spiked over 30% year on year in the first 11 months of last year. Commercial vehicles were at the centre of this positive growth, while new vehicles sales are predicted to increase by 16% between 2013 and 2018.
On a continent where disposable income, although rising, remains constrained, the used car market will continue to exert considerable pressure on the new vehicles market. Nigeria imports around 300,000 second-hand vehicles annually. According to the Japan Used Motor Vehicle Exporters Association, Japan alone exported 23,000 ‘pre-loved’ cars to the country in 2012.
However, the auto market has been spluttering in several African countries recently. In South Africa, sales are predicted to be flat at best or even decline this year. In December 2013, the sales of new vehicles barely grew by 0.2% to 46,501 units. In terms of year-on-year volume, sales dropped 0.9%. Economic difficulties, blunted growth and industrial strikes are all important contributing factors to the slowdown in market activity. In other African countries wracked by violence and instability, car sales are also disappointing. For example, in Sudan, car sales projection figures have had to be revised downwards following the outbreak of conflict. BMI now predicts a very modest 6,890 new car sales in 2018, from 4,000 in 2013.