Old vehicles offer new opportunities for Cars45

Digital startups like Nigeria's Cars45 are revolutionizing Africa's used-car market, by making it fast, transparent and hassle-free.


The used-car market is driving car ownership in Africa, and digital firms such as Nigeria’s Cars45 are helping to make the retail market organised, fast, transparent and hassle-free, as Linus Unah reports.

On a recent sunny afternoon in Lagos, law student Promise Okwuchukwu saw a black Honda Accord sedan parked at an auto mechanic shop in the Ebute-Metta neighbourhood. Tacked to the windscreen and scrawled over a piece of white paper was the phrase “BUY ME” and a phone number.

Okwuchukwu immediately phoned the seller, assured him of getting him a buyer within a few hours and then proceeded to log onto Cars45.com, where he booked an appointment for inspection.

“Everything was completed within two hours,” he says happily, referring to Cars45’s entire process of inspecting the car, agreeing a price and transferring the electronic payment to the car owner’s bank account. Okwuchukwu received a commission from the grateful car owner for his effort.

This is how Cars45, a Nigerian automotive trading startup which launched operations in 2016, wants the used-car-buying market to be: organised, fast, transparent and hassle-free.

The traditional purchase process – where a seller would wait for weeks to find a buyer and contend with haggling – can be exhausting. Sellers of used cars have to drop their vehicles with an auto repair shop to find a buyer, or list their cars on online trading websites and social media.

Started in 2016 by Etop Ikpe, the former commercial director of Nigerian e-commerce firm Konga, and other entrepreneurs, Cars45 uses its digital platform to improve the buying, selling and swapping of used cars. A prospective seller visits the website, fills out an evaluation form with details of the brand, model, gear type, and year of manufacture, and receives a quote based on current market value. The seller takes the vehicle to Cars45’s inspection centres, where auto experts examine its condition. A price is agreed and payment made within an hour.

Buyers then visit the retailer’s sites to purchase the new and pre-owned cars or trade in their vehicles.

Second-hand market expands

The second-hand car market is believed to have reached about $60-$70bn in global sales, according to a United Nations Environment Programme 2018 report. The market is driving vehicle ownership in Africa, where demand for used cars remains popular, primarily due to affordability.

A 2016 report by Deloitte found that the relatively well-developed markets of South Africa, Egypt, Algeria and Morocco accounted for 80% of the continent’s new car sales. In Nigeria, where the motorisation rate is approximately one third of the global rate, representing huge possibilities for growth in a population of over 200m, the report found that about 90% of demand was met by used cars, the majority of which come via the Port of Cotonou in neighbouring Benin. Imported second-hand cars – locally known as Tokunbos – rule the roost due to an underdeveloped automotive assembly and manufacturing sector coupled with limited vehicle finance options and the higher cost of new vehicles. 

For Cars45, the demand for used autos represents an opportunity. It has expanded its operations across several cities in Nigeria with about 60 retail inspection centres, and attracted a Series A funding of $5m from Berlin-headquartered Frontier Cars Group in 2017 to expand its revenue model into vehicle financing, insurance, after-sales support and vehicle inspection services. Cars45 said it inspected about 40,000 vehicles in 2019.

In December 2019, the firm expanded to Kenya and Ghana, two other African countries where used vehicles dominate the automotive industry. The Deloitte report estimated that eight out of 10 imported vehicles in Ethiopia, Kenya, and Nigeria are used vehicles mainly from the US, Europe and Japan. In Ghana, 70% of passenger vehicles sold in 2017 were second-hand. 

CEO Ikpe believes the firm is positioned for future growth. “On the unmatched strength of our comprehensive service offerings, especially the documentation and background checks on all cars in our inventory,” he wrote on LinkedIn last December, “we want to become the go-to platform for every car transaction in Africa.”

Threats to import model

But the used-car industry faces threats. Policymakers see the import of used cars as an impediment to the growth of local manufacturing industries. The Deloitte report found that in 2014 Africa imported four times as many automotive products as it exported, with imports valued at $48bn versus exports of $11bn. Even in South Africa, where auto manufacturing accounted for 4.3% of GDP in 2018, imports accounted for 72.6% of sales, according to the US export.gov website.

According to the UN Environment Programme, four African countries (Egypt, South Africa, Sudan and Morocco) have a total ban on used vehicle imports, 10 ban used vehicles over five years old and six ban used vehicles over 10 years old.

Some nations are pursuing policies to boost local assembly and manufacturing. Policies and fiscal incentives to develop the automotive industry have led to a wave of homegrown carmakers springing across the continent, including Kenya’s Mobius Motors, Nigeria’s Innoson Vehicle Manufacturing Company, Uganda’s state-owned Kiira Motors, and Ghana’s Kantanka Automobile Company.

Global auto giants like Volkswagen and Nissan are among those setting up plants in the region as wealthier customers seek state-of-the-art cars. But improving vehicle financing and cutting back on high interest rates and short loan repayment plans remain challenges that the new car industry must address if it is to expand its customer base.

For digital firms like Cars45 who are aiming to revolutionise used-car retailing, continuing innovation, new finance options and high customer service are necessary to retain customers. African-manufactured cars will offer another source of used vehicles in the years ahead as foreign-made imports are gradually phased out. 

Want to continue reading? Subscribe today.

You've read all your free articles for this month! Subscribe now to enjoy full access to our content.

Digital Monthly

£8.00 / month

Receive full unlimited access to our articles, opinions, podcasts and more.

Digital Yearly

£70.00 / year

Our best value offer - save £26 and gain access to all of our digital content for an entire year!