Nissan confident on African manufacturing but cautious on EVs

As Nissan Africa boosts its manufacturing capacity in Ghana, its MD talks to us about the prospects for the automotive market in Africa.

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In July, at its Rosslyn plant northwest of Pretoria, Nissan’s Navara pickup truck began to roll off the assembly line, the first model of its type by the company to be assembled in Africa for the African market.

Its appearance is part of a strategy by the Japanese motor company, first articulated in 2020, to roll out several new models in Africa with a focus on SUV and cross-overs.

The strategy, which will also focus on developing Africa’s manufacturing capacity, was backed by the 2020 establishment of Nissan’s Africa Regional Business Unit, led by managing director Mike Whitfield, current president of the African Association of Automotive Manufacturers (AAAM).

A growing market with many challenges

“It’s been a very active year despite the pandemic, which requires a high degree of agility, and we’re very much on track with the introduction of our new models,” says Whitfield. 

“Why are we so focused on Africa, resulting in us creating the Nissan Africa Regional Business Unit? It’s really simple – we see the importance of Africa as our last automotive frontier.” 

Yet while that frontier has undoubted promise – Africa currently accounts for just 1.3% of world vehicles but is home to 17% of the world’s population, while Africa’s motorisation rate is 42 per 1000 compared to a global average of 182 – the industry faces significant challenges. 

Local manufacturing capacity and supply chains remain weak, resulting in an auto market dominated by “grey” imports – used vehicles shipped between countries, often in poor condition. South Africa accounts for 85% of new car purchases on the continent.

Catering for the new middle class

Meanwhile, the global auto sector is managing a generational shift from the internal combustion engine to battery-powered electric vehicles as it addresses its pivotal role in the climate crisis under policymakers’ pressure. Nevertheless, Whitfield says that  fundamentals support a robust future market. 

“We’re seeing a significant shift. Buying trends are changing as road conditions improve, so traditionally what was very much an LCV [light commercial vehicle] type of market is moving a lot more towards SUVs, crossovers. There’s a strong trend towards automatic vehicles, and fuel quality is improving, so generally we’re seeing a trend to the same offering we have in other parts of the world.

“You have this vast growing middle-class, working population that needs access to mobility that is increasingly getting better access to asset-based financing, and that’s opening up a whole new world.”

Made in Africa

With its long-established plants in South Africa and Egypt, the Yokohama-headquartered automaker – part of the Renault-Nissan-Mitsubishi Alliance – is no stranger to African manufacturing. Yet the projected African demand for new vehicles is encouraging a shift to  local assembly. The company is focusing efforts on Ghana, where it first entered into an MoU with the government in 2018 and accounts for over 30% of annual vehicle sales.

“In 2021 we started the establishment and building of the plant in Ghana and our full start of production in Ghana will be in the first quarter of 2022. So we’re very much on track… We’re very optimistic with Ghana, where an auto strategy and policy is being developed by all stakeholders, the government, the AAAM, and the auto industry. We believe there is a very robust visionary policy and strategy going forward.”

The Navara production facility in Accra will be operated by Nissan partner Japan Motors Trading Company, which invested $3m into its construction following the drafting of the Ghana Automotive Development Policy to encourage investment in the sector. 

In June 2021, 12 Ghanaian technicians “graduated” from Nissan’s South African Rosslyn plant, after 12 weeks of learning to assemble the Navara model. The company said that the training would prepare the staff to “spearhead the launch of Nissan’s assembly plant in their own country”.

Yet even well-laid plans backed by ambitious government policy can amount to little.

In 2013 Nissan were among the first movers in Nigeria, setting up assembly operations with a partner on the basis of a long-term national vision on automotives. But in November 2021, an expert who worked on the initial policy said that there was “very little new investment and a worrying level of ongoing divestment” due to a “policy somersault’ by government which led to decreased tariffs on fully-built imported vehicles.

“Nigeria was set up and started on the basis of a long-term vision on automotives. Unfortunately for very many reasons that never materialised so production levels are very low there,” admits Whitfield.

Building value chains, working with AfCFTA

Several factors give hope that Ghana can succeed where Nigeria has failed. The establishment of the African Continental Free Trade Area has concentrated minds on ways to improve manufacturing capacity and component supply lines within the continent. Whitfield says that the AfCFTA Secretariat’s “excellent” work is helping to drive the automotive industry agenda.

“For anyone who has tried to move new automotive products through Africa, it is challenging. It is a slow process and a very expensive process. So yes, it is one of the core elements of the overall trade agreement. AAAM has been working very closely with the AfCFTA Secretariat and government to define the way forward. At the core of that is Africa originating content.

“The finalisation of that is hopefully very close, and once that’s in place I believe we can move forward and see how we can create a value chain for auto markets. It’s not only building vehicles, it’s a whole value chain, components and supplies, throughout Africa.”

The Covid-19 pandemic, which has severely disrupted global supply chains, has also underlined the importance of local manufacturing: “We’ve seen not only the reliability of supply chains but the costs of it have significantly changed over the last 18 months. The one aspect it’s highlighted is the need maybe for more regionalisation as opposed to globalisation. And maybe we shouldn’t be relying on one or two sources to support our supply chains.”

Outlook for EVs

The global shift to electric vehicles (EVs) offers new opportunities in manufacturing and components and new challenges on a continent where energy supplies and EV charging stations are patchy. While Whitfield “guarantees” that Africa will eventually embrace electric vehicles, he says it will lag behind other regions. South Africa sold only 92 battery electric vehicles in 2020, down from 154 in 2019, representing 0.02% of domestic vehicle sales.

“Every OEM [original equipment manufacturer], us included, is very much focused on new model introduction and new technologies, with electric at the core of it. However, the important thing is that we must realise that the adoption of electric vehicles will happen at different paces in different parts of the world. 

“So maybe Europe by 2030 is at 50% plus, the US may be 30%. Will Africa move towards new energy vehicles? Definitely. Certainly it’s not going to be a leader. It will follow, because we have other issues to be addressed and that includes access, affordability, charging infrastructure. From a global automotive perspective, the focus is on those markets that are well-advanced and will move fast.”

That may prove disappointing news to campaigners who would like Africa to “leapfrog” directly to EV technology and believe manufacturers should lead the charge. 

“In Africa, it’s not a case of if, rather a case of when, but I think there’s a lot of opportunities  in the current automotive industry and value chain before we will see the economies of scale for Africa to be mass manufacturers of electric vehicles.”

Growing the new car market

Still, Whitfield believes that ending “grey” imports will have a positive impact on phasing out outdated vehicles, a move very much in the interests of manufacturers, who are targeting a new vehicle market on the continent of between four and five million units per year by 2035. 

“If we look at those markets that are well established, South Africa, Morocco, and Egypt, it’s been done very successfully where used vehicles are banned. It’s also along the lines of safety and standards, because we’re seeing a lot of vehicles coming in that aren’t for Africa and our conditions. It requires strong political will to put those barriers in place.”

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