As expansion opportunities on other markets are being increasingly limited, Africa could be the last frontier for carmakers to conquer.

The Russian market was until recently an important one for automakers who wanted to grow their profits, but the country’s economic downfall in the past two years caused a plunger in demand for new cars. China is still the biggest auto market in the world, but projections are indicating a slower pace in the future. Forecasts for Brazil are showing a steady increase for the next three years, but with no spectacular figures for companies to register big profits. Therefore, there is not much room for expanding for the auto industry. Except for Africa. “Africa really is the last automotive frontier,” Mike Whitfield, Nissan’s head of sub-Saharan Africa, said in an interview. “You still have a very un-motorized population.” One of the first steps was made by the Nigerian government when it first unveiled incentives for carmakers to set up plants in the country. There are now at least 36 automakers with production licenses in the continent’s biggest economy, with Volkswagen, Nissan and Ford already making vehicles with local partners. The country is seeking to join South Africa as the only manufacturing base for the car industry in sub-Saharan Africa, with countries from Ethiopia to Uganda hoping to follow.

Estimates are showing that in Africa less than 50 per 1,000 people own a vehicle, compared with about 800 in the US. The improving infrastructure and a better fuel quality are leading to an increase in demand for passenger cars, but figures are still low as almost all cars purchased outside South Africa are imports, many of them second hand. Developing a large-scale automotive industry will require reducing the flood of used cars into the region and developing local manufacturing and supply of components, said Anthony Black, an economics professor at the University of Cape Town. Ford projects that the automotive industry in Africa will grow by at least 40 percent by 2020. “The opportunities are massive,” Jeff Nemeth, the chief executive officer of Ford in sub-Saharan Africa, said.

Via Bloomberg


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