At the edge of Nairobi’s Ngong Forest, thousands of used cars glitter in the hot sun on a dusty field, waiting for buyers. Imported from Japan or the Middle East, they offer an affordable route to vehicle ownership in Kenya and have dominated the market for decades.
That is an obstacle big carmakers must overcome if they are to crack Africa, a market promising rapid growth as trade tensions threaten sales elsewhere. African consumers also still need conventional engines just as demand in more traditional markets is curbed by restrictions on carbon emissions.
Volkswagen, BMW, Toyota, Nissan and others have joined forces to lobby governments for steps that would reduce the imports that have made sub-Saharan Africa notoriously difficult terrain and allow local production to flourish.
“The question on Africa isn’t, ‘Is it a market of the future?’” Mike Whitfield, Nissan’s top executive for Africa, told Reuters. “It’s a case of when.”
Four years after forming the Association of African Automotive Manufacturers (AAAM) their efforts are starting to bear fruit. Carmakers that set up local assembly plants could get tax holidays of up to 10 years and duty exemptions in Nigeria, Kenya and Ghana, according to government plans seen by Reuters.
Thomas Schaefer, who heads Volkswagen’s Africa business, said there is a potential market in sub-Saharan Africa for three to four million new cars, up from just 420,000 in 2017.
But that will require addressing the well-entrenched interests of second-hand car dealers, smugglers and lowering the price of new cars.
“It will largely depend on how successful the African governments are in limiting the amounts of second-hand imports and how price-competitive new vehicles can be with their tariffs,” said Craig Parker, Africa research director at Frost & Sullivan, a US-based market research firm.
Africa’s population and household incomes are rising rapidly. But its 1 billion inhabitants account for only 1 percent of the world’s new passenger car sales, industry data shows. South Africans bought over 85 percent of those vehicles.
The AAAM identified Kenya, Nigeria and Ghana as potential manufacturing hubs and helped draft legislation setting up standards and incentives. Details of governments’ plans provided to Reuters demonstrate that African nations are keen to secure a spot as a beachhead for the industry.
Nigeria and Ghana are preparing to offer automakers tax holidays of up to 10 years and duty-free imports of parts and components used in local assembly. Nigeria also plans to double the levy on new, fully-built imported vehicles to 70 percent to boost demand for locally produced cars, though the policy’s approval has been delayed.In Kenya, automakers will pay no import or excise duties and get a 50-per cent corporate tax break. –REUTERS