Is a luxury car in Africa an oxymoron?

Although being able to offer competitively priced, affordable models will be key to the success of automobile firms in Africa, the continent has become a promising market for luxury cars.

In 2012, Africa’s population of high-net-worth individuals (HNWI) rose by 9.9%, which represented the second-highest growth rate globally after North America, according to the consulting firm Capgemini’s latest World Wealth Report. It was also more than the global average growth rate of 9.2%. Over the same period, the growth rate for HNWI wealth jumped 11.5% to $1.3 trillion, 1.5% more than the global average.

The number of millionaires in Africa is exploding. Data from the Oxford-based consultancy, New World Wealth, reveals that in Ethiopia, the number of millionaires has grown 108% over a six-year period. South Africa is now home to 48,700 millionaires – the biggest number in the region – followed by Nigeria with 15,700. The number of billionaires in Africa could also burgeon by 117% over the next 10 years. Furthermore, South Africa in particular has a disproportionate number of rich citizens – with 10% of the population accounting for over half of the country’s wealth.

Among the items topping the shopping lists of Africa’s millionaires and billionaires are luxury cars. Porsche sold 2,000 units in sub-Saharan Africa in the first three quarters of 2013. It is looking for local partnerships for dealerships in a range of countries, including Democratic Republic of Congo, Côte d’Ivoire, Ethiopia, Zambia, Tanzania, Gabon and Cameroon.

In the spring of 2012, German auto firm Porsche opened the doors of a brand-new luxury showroom in Nigeria’s most coveted neighbourhood, Victoria Island. Porsche’s target is roughly 300 units every year. The premium car manufacturer has also launched a dealership in the capital of Angola, Luanda, a country which is enjoying new wealth generated from a resource boom.

Audi’s sales for the region have also doubled over the last three years to 22,000 units. Mercedes-Benz South Africa has been making good progress in Africa, including in big markets like South Africa and Nigeria, but also smaller markets such as Namibia and Botswana.

An extra incentive likely to lure premium automobile firms to the African market is the fact that demand for spare parts for luxury cars is high. It is common to hear stories of Africans having to keep their luxury cars off the road for months or even years on end due to shortages of new parts.

In terms of models, big 4x4s continue to dominate – due to their practicality in the context of the difficult road conditions in Africa. For example, the Gabonese Federation of Car Importers estimates that around 60% of new vehicles sold in Gabon every year are large 4x4s. The vast majority are Japanese models.

In South Africa, BMW is the market leader in terms of luxury cars. According to Naamsa, car owners registered 27,671 BMW Group vehicles in 2013, representing a 0.5% growth compared to 2012, when the figure was 27,539. As a result, BMW takes a 35.5% slice of the luxury segment and a 7.3% share of the total car market in the country. Audi, meanwhile sold 19, 335 vehicles in 2013, claiming 22.7% of the premium segment.

Bodo Donauer, Managing Director of BMW South Africa, says: “We are delighted to remain South Africa’s number-one manufacturer and seller of premium vehicles once again for the fourth consecutive year. We can attribute our overall performance in 2013 to the strong demand for the BMW 3 Series – produced in Rosslyn for export markets around the world – as well as considerable sales success for the BMW 1 Series, the BMW 5 Series and the BMW X1 as well as the outgoing BMW X5.”

“Significantly, 2013 was another record year for the Mini brand, which continues to grow from strength to strength in the small premium car segment. The Mini hatch continues to be our best-seller, followed by the Mini Countryman, which has only been on the market for two years,” Donauer says.

The Mini Hatch was the first model that BMW launched under the Mini label after the discontinuation of the original Mini in 2000.