Africa on wheels: the continent’s auto market

 What exactly is the state of the auto market in Africa? Which brands rule the roost? And how is Africa’s own local manufacturing and assembly industry faring? Sherelle Jacobs has been assiduously researching the subject; here is her report.

Africa has all the ingredients for the development and growth of a robust auto market. Its middle class is expanding. The African Development Bank (AfDB) puts the size of the continent’s middle class at almost 350m people, or 34% of the region’s population.

That is around double the figure in 1980 – when it was around 126m, representing just over a quarter of the African population. Consumer spending is rising to reflect this trend. According to the World Bank, consumer spending generates over 60% of Africa’s economic growth and new vehicles are among the most coveted purchases for Africans with rising disposable incomes.

The explosion of construction and infrastructure projects in African countries enjoying resource booms, such as Zambia and Mozambique, is also fueling healthy demand for commercial vehicles. This is creating unprecedented market opportunities for auto firms and the continent is attracting more interest from the leading players of the industry than ever before. Yearly vehicle sales in Africa will rise by a fifth over the next two years to 2m, according to one projection.

Of the major brands active in Africa, Toyota is the clear market leader. It holds a 14% market share, selling 237,000 vehicles in the region in 2012. Toyota’s dominant position in the African market comes as little surprise, given its massive global presence.

In January 2012, the Japanese auto firm, with its headquarters in Aichi, Japan, became the biggest manufacturer of autos in terms of units produced. In July 2012, Toyota produced its 200-millionth vehicle. In January 2014, Toyota was the fourth largest in the world in terms of revenue. It is also a record breaker in terms of annual automobile production: Toyota is the first company to churn out over 10m vehicles each year. The company employs over 333,000 people.

Having entered South Sudan recently, Toyota now has a presence in all 54 African countries. Last year, the Japanese auto firm said it anticipated that the African market would swell by as much as 5%. Its sales were highly concentrated in South Africa, where it sold 70,000 units, and North Africa, where it sold 100,000 units. The rest of Africa represented just 10,000 unit sales.

Meanwhile, in 2013 General Motors sold 167,000 vehicles across Africa, a growth in sales volume of 9.5% compared with the year before. Its two most important markets were Egypt and South Africa. In Egypt in 2013, General Motors managed to capture almost a quarter of the market. In South Africa the auto firm sold slightly shy of 63,000 vehicles in 2013, giving it a market share of almost 10%.

Nissan is also eager to make stronger forays into Africa. The Japanese company, founded in 1934, is headquartered in Yokahama, Japan. Nissan Motor Company sells its vehicles under the Nissan, Datsun, Infiniti and NISMO marques.

It is the sixth-biggest auto maker globally, after Toyota, General Motors, Volkswagen, Hyundai and Ford. Nissan dominates the market in terms of Japanese brands in some of the world’s biggest car markets – Russia, China and Mexico. The company’s total production output reached almost 4.9m units in 2012. In the same year, revenue also reached 9.63 trillion yen ($93.3bn) and profit climbed to 342.4bn yen ($3.3bn). The company’s total assets reached 12.8 trillion yen ($124bn) and total equity reached 4.51 trillion yen ($43.7bn). In 2013, the company had over 160,000 employees worldwide.

The corporate vice-president of Nissan for Africa, the Middle East and India, Toru Hasegawa, has suggested that it is very possible Nissan will use India as a production base for cars aimed at the African market; the auto firm’s plant in Chennai already churns out vehicles to be shipped to 10 countries across the world.

The Datsun brand is also likely to be key to the company’s penetration of the African market. Associated with longevity, sturdiness and value for money, Datsun has all the qualities demanded by African customers. As production costs in India are competitively lean for Nissan vehicles, it is likely that those produced there for Africa can be priced appropriately for the African market.

The Datsun Go, in particular, could be central to Nissan’s expansion plans in Africa. It is the first car that Nissan is introducing under the Datsun marque since Datsun was discontinued in 1986. The Datsun Go takes its name after the Dat-Go, Datsun’s first ever car, which was first driven on the roads in the early 20th century. The Go is being targeted at emerging markets such as India, Indonesia, South Africa and Russia, where the rising middle classes are looking for modern, quality wheels but also for value for money.

Production of the model is anticipated to start this year. The price range in India is expected to be around 400,000 rupees ($6,500). The year 2014–2015 should be a watershed as this is when the Datsun Go is likely to start being shipped from India to South Africa.

The firm has also set its sights on Africa’s biggest potential car market, Nigeria. Renault-Nissan CEO Carlos Ghosn told the Nigerian President, Goodluck Jonathan, at the World Economic Forum in Switzerland: “We are interested in producing popular cars, totally adapted to the needs of Nigerians.”

Ghosn also told the President that Nigeria has the potential capacity to churn out as many as 2m to 3m cars every year, adding that the auto maker plans to set up a production base in Nigeria and further boost its investment in the emerging country.