Automakers are developing assembly facilities to tap into growth opportunities, finds Frost & Sullivan's Mobility team
CAPE TOWN, South Africa, May 9, 2017 /PRNewswire/ -- The untapped African market is one of the fastest growing vehicle markets globally due to the presence of a large consumer base. If new car sales on the continent increase to seven units per 1,000 inhabitants, total new vehicle sales will reach approximately 7.7 million units annually, making Africa the fourth-largest new car regional market after China, the United States and Europe. In response to this potential, governments in the region have begun to roll out automotive sector-specific policies to industrialise their respective economies.
"The new government policies for the African automotive industry follow international best practices and incentivise export-driven assembly and affordable manufacturing through financial and non-financial means," said Frost & Sullivan Mobility Senior Industry Analyst Ryan Bax. "South Africa has been the biggest African participant, with production investments and output expanding strongly since the 1990s. Following in its footsteps, Morocco, Kenya and, most recently, Nigeria are attracting investments from various automakers."
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While several countries have enforced the new policies, the combination of high initial investments and low feasibility of operating in the small new-car market casts a cloud over the success of these policies. Many vehicles assembled in Africa's smaller markets are mostly entry-level vehicles that do not always enjoy high demand in export markets beyond Africa.
To dispel investor apprehensions, the management of the South African divisions of BMW, Ford, General Motors, Nissan, Toyota and Volkswagen combined to form the African Association of Automobile Manufacturers (AAAM) to assist countries wishing to participate in the automotive value chain. It engages with African governments and automotive bodies to improve the sustainability and working environment of the automotive industry.
"Each African country has its own strategic location benefits or political and economic positions with regard to automotive assembly production," noted Bax. "New policies will seek to make the most of these advantages and, eventually, attract the attention of original equipment manufacturers looking to tap the industry's potential."
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Game-changing Automotive Policy Developments in Africa, 2016
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