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African auto market unviable without policy support

If African governments do not develop sustainable, long-term automotive industry policies including policy measures that address the issue of the sale of used vehicles they will fail to develop automotive sectors within their economies.
This was the submission of Mike Whitfield, vice chairman, African Association of Automotive Manufacturers (AAAM), and also the managing director of Nissan Group of Africa while speaking at a Deloitte Africa Automotive Insights conference in Johannesburg, South Africa recently. He said Nigeria sold 7,000 new vehicles last year. The used car market far exceeds this number.
One study estimates that in 2014, around 410,000 cars were imported into Nigeria, with around 74 percent of this number used cars. An analysis of the age of these cars show that 10% were less than three years old, with about 63 percent more than 11 years old.
It is not only Nigeria’s automotive market that is dominated by used car sales. A number of African vehicle markets witness large-scale used imports, rather than the assembly and sale of new vehicles.
Whitfield noted that Nigeria’s new-vehicle market can grow to between 200,000 and 300, 000 units a year should the country manage to implement its fledging automotive policy, which included regulations regarding imported vehicles.
It was a good policy, he added, but it appeared as if there was insufficient support to execute it. Nissan established a semi-knockdown plant in Nigeria, in 2014.
Volkswagen Group South Africa (VWSA) corporate and government affairs director Nonkqubela Maliza emphasised that the development of all global auto industries had been preceded by government policy intervention.
“You need to limit imports. It is not possible to grow the sector through assembly or any type of manufacturing if your policy does not limit imports,” she added.
Standard Bank Group vehicle and asset finance head Simphiwe Nghona concurred, noting that “everything depends on policy”, including recovering assets where the client stopped vehicle payments. “You need policy that governs that.”
The absence of such policy provided challenges to establishing vehicle finance houses within many African countries, which further hindered the sale of new vehicles, as it affected affordability. Most vehicle purchases in East and West Africa were cash transactions.
Whitfield said AAAM was not suggesting a complete ban on imported vehicles should any African country attempt to develop an automotive industry, but rather a focus on banning vehicles with limited, adding that five-year-old used vehicles are okay.
Whitfield added that establishing African automotive assembly operations outside the manufacturing hubs of South Africa and Morocco were “not about today, but about the future”, as the continent continued to struggle economically since the collapse of the oil price in 2014.
Martyn Davies, automotive leader at Deloitte Africa Emerging Markets & Africa and Africa noted that countries with high manufacturing value-add had the lowest levels of inequality in the world, providing motivation to pursue a manufacturing agenda on the continent. “I’m personally frustrated that Africa is viewed as a dumping ground for substandard products. That needs to change.” He lamented.
Nissan was interested in Kenya and Ghana as new potential vehicle assembly sites, with Volkswagen, already present in Kenya, mulling the potential in Ghana, the Ivory Coast and Ethiopia.
The post African auto market unviable without policy support appeared first on BusinessDay : News you can trust .

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