Car market in Africa before growth spurt

25 January 2021

The President of the Association of African Automobile Manufacturers speaks in an interview about the growth market Africa and the cooperation with the VDA.

Most of the new cars sold in Africa are imported vehicles. However, production on the African continent is to be increased significantly in the future. Morocco already exports more cars than it imports. Rising incomes and high growth rates in gross domestic product will further increase demand. With Mobius Motors, an African manufacturer has been producing off-road vehicles (SUV) in Kenya since 2010. Politicians also support the trend towards buying new vehicles, after Africa had practically become the final resting place and place of use for used vehicles for decades. A number of governments have made the import of new vehicles easier in terms of tax and made it difficult or even banned the import of old cars.

In December 2020, the President of the African Association of Automobile Manufacturers (AAAM) signed a cooperation agreement with the German Association of the Automobile Industry (VDA). The AAAM is the first automobile association with a pan-African approach and was founded in 2015 by global car manufacturers and original parts manufacturers (OEMs). About the cooperation of the CEO of AAAM, Dave Coffey, in an interview.

Mr. Coffey, what does the AAAM want to achieve with the cooperation agreement with the VDA?

The VDA brings a lot of specialist knowledge, resources and a strong network to support the development of automotive policy and ecosystems. They are necessary for effective industrialization and the growth of the automotive sector on the African continent. That is why it is an ideal partnership in which we complement each other. This is a strong alliance.

How can African markets and companies benefit from closer cooperation with the VDA?

We believe the new vehicle market in Africa will grow from 1.1 million units in 2019 to 5 million cars per year by 2035. This growth requires the implementation of an advanced auto policy and ecosystem across the continent. In some countries, vehicles are assembled, supported by the surrounding economies, which participate in the value chain in the manufacture and delivery of components. Ultimately, the vehicles and components are traded in regional markets, within the largest free trade bloc in the world, the AfCFTA. Country and regional partnerships are not new to the development of the automotive industry around the world.

What trends do you see in the African markets?

In Africa there will be a transition on the way to electromobility through alternative drives such as CNG (compressed natural gas), hydrogen, hybrids, e-fuels. Africa is not yet ready for all-electric vehicles and alternative drives will enable African governments to reduce fuel imports and improve the balance of payments. Electric vehicles will be manufactured on a large scale in Africa if local demand supports production.

In the interests of safety, great attention will be paid to ensuring that imported used cars are roadworthy and that their age is limited in order to reduce pollutant emissions. More than 80 percent of all vehicles sold in Africa are imported used cars. While there will be a transition with the industrialization of the automotive sector in Africa, the used cars will ultimately come from vehicles that have been assembled in Africa. This “Made in Africa” ​​trend will have a significant positive impact on the balance of payments, job creation and economic growth.

Much emphasis will be placed on offering affordable mobility. This will include vehicle financing for new and used vehicles along with alternative mobility solutions.

The competition with Chinese automobile manufacturers is getting tougher worldwide. What does that mean for the African markets?

The manufacture of vehicles in Africa must be globally competitive. We have the roadmap to achieve this on the scale that will result from trade between regional markets within the AfCFTA. The newly formed AfCFTA Secretariat has the unique opportunity to shape and advance the necessary continental automotive policy with those countries that are willing to participate. We support that. The development of the automotive industry in Africa will not happen by chance. It requires courageous and conscious leadership in both the public and private sectors. That is exactly what is developing right now.

A key element of the cooperation agreement is vocational training – what needs to be done here?

The VDA will share its expertise from its European experience with employees and players in the automotive value chain in the various African priority countries. The demand for certain technologies or specialist knowledge will flow into the training, for example in the case of alternative drive technologies. If qualification measures are required that go beyond the offerings of the VDA and AAAM, for example in the area of ​​vocational training, expert advisors, including non-profit organizations, are called in.