It is difficult to predict the growth of the automotive market in Africa due to its instability and volatility. In the last few years, the governments of various countries of Africa estimated strong growth for new vehicle sales. However, the drop in oil prices, the weakening economy, and the risk of unprecedented growth in exchange rates have hampered the market growth on a yearly basis. Several countries of Africa are, however, increasingly aiming at making a mark on the automotive industry by attracting investors.
The governments have understood the benefits that can be accrued by inviting the automotive companies into their respective countries. The governments have started introducing clear policies, primarily with regard to exports, aiming at providing an advantage to OEMs to assemble the vehicles locally and at a competitive rate to satisfy the demand of the foreign market.
Countries from both North Africa and South Africa have been producing cars since the past few years. Nigeria, in particular, has taken major steps to attract foreign investments for local manufacturing. In 2013, the Nigerian government set up the National Automotive Investment and Development Programme to offer benefits to the car makers who are willing to manufacture locally in the country. It has received a positive response from the automakers, with more than 10 facilities set up till date. Initially, the country witnessed robust sales, but this has started to dwindle because of the weak economic climate, further resulting in slower assembly operations.
Morocco has entered into several partnerships with automotive companies in recent years. Renault, for instance, is set to open a major assembly plant in the country in 2019. Morocco’s neighboring country, Algeria has developed a quota-based system to develop the local automotive base. The quota-based system has forced automakers importing cars into the country to invest in local assembly plants as well. At present, Kenya is looking forward to developing a special policy to bring its automotive assembly plant back into the picture. Moreover, Ethiopia is putting further pressure on Kenya to be the major assembler of vehicles for the whole continent in the next 10 to 20 years. Chinese and Japanese firms are increasingly making investments in Ethiopia.
The African automotive sector is facing different challenges; however, the development of favorable policies and support from the governments will boost the market in the medium term.