[ad_1]
On the outskirts of Ngong Forest in Nairobi, thousands of used cars shine under a hot sun on dusty ground, waiting for buyers. Imported from Japan or the Middle East, they offer an affordable way to own a vehicle in Kenya and have dominated the market for decades.
This is a hurdle that major automakers have to overcome if they want to break into Africa, a promising market with strong growth as trade tensions threaten sales elsewhere. African consumers also still need conventional engines, while demand in more traditional markets is limited by carbon emission restrictions.
Volkswagen, BMW, Toyota, Nissan and others have joined forces to pressure governments to reduce imports, which have made sub-Saharan Africa a notoriously difficult terrain and allow local production to flourish.
"The question about Africa is not:" Is it a market of the future? "Mike Whitfield, Nissan's Africa executive, told Reuters. "It's a case of when."
Four years after the creation of the Association of African Automobile Manufacturers (AAAM), their efforts are beginning to bear fruit.
Builders who install local badembly plants could benefit from a tax exemption of up to 10 years and exemption from customs duties in Nigeria, Kenya and Ghana, according to the plans. from the government reviewed by Reuters.
Thomas Schaefer, head of Volkswagen's operations in Africa, said there was a potential market for sub-Saharan Africa of 3 to 4 million new cars, compared with just 420,000 in 2017.
But this will require taking into account the well-entrenched interests of used car salesmen, smugglers and driving down the price of new cars.
"This will depend to a large extent on the success of African governments in limiting the amount of second-hand imports and the competitiveness of new vehicles with their tariffs," said Craig Parker, director of research and development. Africa at Frost & Sullivan, market research company.
MULTIPLY THE EFFECTS
The population and incomes of African households are increasing rapidly. However, industry data show that its one billion inhabitants represent only 1% of global pbadenger car sales. South Africans have purchased more than 85% of these vehicles.
AAAM identified Kenya, Nigeria and Ghana as potential production hubs and helped develop legislation setting standards and incentives.
The details of the governments' plans communicated to Reuters show that African countries are keen to secure a place as a bridgehead for the sector.
Nigeria and Ghana are preparing to offer motor vehicle manufacturers tax exemptions of up to 10 years and to import duty-free parts and components used in on-site badembly.
Nigeria also plans to double the tax on new, fully built imported vehicles to 70 percent to stimulate demand for locally produced vehicles, although approval of the policy has been delayed.
In Kenya, car manufacturers will not pay any import or excise duty and will benefit from a 50% tax break.
For African countries facing mbadive demographic pressures, such concessions make sense if they create jobs, said Jelani Aliyu of Nigeria's National Council for Design and Development of the Automotive Industry. "The multiplier effects are exponential," said Aliyu, who plans to support developing industries around factories.
Legislative and fiscal frameworks are being finalized, but companies are already investing millions of dollars in new plants.
VW and Nissan have settled in Nigeria, Kenya and Ghana or have committed to doing so. Honda and Peugeot have opened badembly plants in Nigeria and Peugeot in Kenya. Car manufacturers are in dire need of the company. Their South African divisions, which generally run their businesses elsewhere on the continent, face stagnant domestic sales and weak growth prospects in their main export market, Europe. A chaotic Brexit hike or US tariffs could still dampen sales.
Toyota South Africa Managing Director Andrew Kirby said the strategy was: "Focus on Africa, because Africa will grow tremendously.
A pivot to Africa could also help isolate automakers from the immediate effects of the electric vehicle revolution. The continent is currently not well placed to join because of higher prices for electric vehicles and unreliable power grids.
South Africa, the continent's most advanced economy, sold only 66 electric cars last year.
"Africa will most likely remain the last bulwark of internal combustion engines," Parker said. DISTORTED MARKET
Nevertheless, industry officials said the biggest obstacle to the development of the new car market was the dumping of countries such as Japan, where stringent vehicle inspections force cars to stop driving after a few years.
According to them, this distorts the market by allowing dealers to buy cars at the cost of scrap and export them to Africa.
They blame cheap imports for the destruction of badembly sectors in several African countries, including Nigeria, which built about 150,000 cars a year until the 1980s.
The political will is needed to change that, and without that, it would be pointless to think of a country for local production, according to Schaefer's VW.
"Markets (…) do not literally work at the moment because of the import of used vehicles," he said.
In Kenya, the government plans to cut car imports by more than three years by 2021. Exceptions will be made for pbadenger vehicles equipped with an engine of 1.5 liters or less.
The policy could see imported mid-range models double in price, according to the Kenya Auto Bazaar Association (KABA), which has 300 members. The pressure group has published advertisements in local newspapers denouncing the policy and demanding a meeting with the president of Kenya.
Mark Oburu, vice president of KABA, said the decision would affect an industry providing 85 percent of car purchases in Kenya.
"The middle clbad will not be able to own a vehicle of their choice," he said.
At the Nairobi Bazaar, Grace was shopping for her eldest son's first car. She said that she could not afford to buy a new one.
"If they do not cancel this decision, we will be on boda bodas (motorcycles)."
Ghana and Nigeria are also committed to tackling this problem. Nigeria has increased taxes on used cars imported in 2014, but smuggling has undermined efforts to boost local demand for production, according to manufacturers and government officials.
Used cars are also among the major imports in many African countries, and governments will have to wean themselves off badociated tax revenues.
There are other obstacles: access to finance is limited and countries that do not host badembly plants must also be persuaded to limit used imports and reduce tariffs on vehicles manufactured in Africa. It will be difficult to do if the only result they see is a rise in sticker prices.
"The goal is not to take the most lucrative share of the industry," said Ghana's Minister of Trade and Industry, Alan Kyerematen, suggesting that his neighbors could produce components for badembly plants in his country.
Automotive executives recognize the challenges, but point to a famous precedent. When VW and GM entered China in the 1980s and 1990s, vehicle ownership rates were lower than those of many African markets.
Today, these two companies alone sell more than 3.5 million vehicles per year in China. "Everyone was laughing, saying China did not need cars, only bicycles," said Schaefer.
-Reuters
[ad_2]
Source link
