The African Association of Automotive Manufacturers, which also includes Toyota Motor Corp., General Motors, BMW AG and Volkswagen AG, has formed to take advantage of a new surge of interest from African governments in building vehicles locally. In August, the group urged Nigerian President Muhammadu Buhari and senior officials to limit the inflow of barely used second-hand cars and firm up policy for prospective carmakers and parts suppliers.

 

“What we talked to them about in all the meetings is that, if you are really interested in this, then it can’t just be about bringing assemblers in,” Ford sub-Saharan Africa CEO Jeff Nemeth, who chairs the group, said in an interview at the company’s Pretoria, South Africa plant. “It’s got to be about bringing in the whole value chain, the whole ecosystem.”

 

The interest in developing auto industries in sub-Saharan Africa has grown as oil- and commodity-dependent countries seek to diversify their economies amid weaker prices. Vehicle ownership per thousand people is about a quarter of the global average and there’s barely any automotive manufacturing between South Africa and the countries in the north of the continent. Challenges include the volume of imported used cars, a lack of vehicle-financing options and poor road and ports infrastructure.

 

The association has advised Nigeria to ban imported used cars that are one year old or less, and place higher tariffs on 1- to 5-year-old vehicles. The group didn’t suggest immediate measures against imported vehicles older than that, simply because there’s no affordable alternative for many Nigerians, according to Nemeth. In time, older second-hand cars would come from vehicles built in the country, he said.

 

While automakers have started the assembly of light vehicles in Nigeria from imported kits, they are still a long way from full-scale manufacturing. Nigeria’s economy and vehicle demand have been hurt by lower oil prices, prompting Ford to halt assembly of its Ranger pickup truck in the country earlier this year, Nemeth said. Nissan’s assembly of Patrol SUVs continues, although at lower levels than the automaker would have liked amid a shortage of foreign currency, according to the Yokohama, Japan-based company’s South Africa managing director, Mike Whitfield.

 

Another obstacle for automakers in African markets including Nigeria and Kenya is the absence of accessible vehicle financing, said Whitfield, who is also the vice chairman of the AAAM.

 

The Nigerian government is working with Johannesburg-based FirstRand Ltd.’s Wesbank unit to identify solutions, including plans for a 23 billion naira ($73 million) assistance fund. An application for a Nigerian banking operating license will be submitted to the central bank this week for Wesbank, sub-Saharan Africa’s largest provider of auto loans, said Luqman Mamudu, the director of policy and planning for the National Automotive Council. Government will contribute an initial 7.5 billion naira to the fund, to be managed by Wesbank, and additional funds are being sought from development finance institutions and Nigerian banks.

 

The council is also in talks with auto component manufacturers including Robert Bosch GmbH of Germany, China’s Miracle Automation Engineering Co. and industry groups in India and South Africa, Mamudu said.

 

While a number of other African countries, including Angola, Algeria and Egypt, have expressed interest in developing local automotive industries, the AAAM settled on Nigeria as a first port of call, given the size of its economy and a population that’s the largest on the continent, Nemeth said.

 

“Nigeria was one that some of us were already very interested in,” he said. “We’re thinking about east Africa as kind of the next focus.”

 

Volkswagen Kenya

 

In Kenya, Volkswagen will start producing Vivo cars on Dec. 21 and move to full assembly of 1,000 cars a year from January, Thomas Schaefer, chairman of the German carmaker’s South Africa division, told reporters in Johannesburg last week.

 

Kenya “would love to have a big automotive industry, they would love to beat South Africa, Egypt,” Schaefer said. “They want fully fledged production.”

 

Still, even when the right policies and incentives are in place, it takes several years for carmakers and their suppliers to plan for, approve and make the necessary investments, said Ford’s Nemeth.

 

“Obviously until we can see a conclusion we can’t say if it’s successful but it’s moving in the right direction” in Nigeria, Whitfield said. “The fact that we are looking at how we can contribute to the development of an industry in what is essentially an undeveloped industry, it is probably unique in that respect.”

Source : www.autonews.com