Deloitte Africa Automotive Insights
Deloitte Africa Automotive Insights
Navigating the African Automotive Sector: Ethiopia, Kenya and Nigeria
"Due to the rise of income levels in many African countries and the emergence of a middle class, Deloitte regards the continent as the final frontier for the global automotive industry. Given Africa's population size and its positive economic outlook, automotive companies will be able to gain a competitive advantage by adopting a medium- to long-term view towards the continent."
Dr. Thomas Schiller
Europe, Middle East & Africa Automotive Leader Deloitte
Karthi Pillay
Africa Automotive Leader Deloitte Africa
Contents
Foreword
3
A Snapshot of the Automotive Sector in Africa
4
The Automotive Sector in Ethiopia, Kenya and Nigeria
6
Ethiopia
9
Kenya
21
Nigeria
31
A Comparative Look at Ethiopia, Kenya and Nigeria
44
Our Take on Navigating the African Automotive Sector
46
Methodology
50
Bibliography
52
Contacts
54
Research Team
55
Foreword
The Deloitte Global Automotive Team has a leading presence in the automotive industry across the world, providing services to 80% of the Fortune 500 automotive companies. With global capabilities and expertise, Deloitte supports clients across the automotive industry, including original equipment manufacturers (OEMs), suppliers, dealers, vehicle finance providers and the aftermarket -- to navigate the rapidly evolving automotive landscape globally.
While Africa's automotive market is still underdeveloped, Deloitte recognises the potential of the automotive industry in Africa and foresees room for growth across the automotive value chain including vehicle sales, aftersales, vehicle assembly and production. Deloitte regards the continent as the final frontier for the global automotive industry. This is as per capita income levels continue to rise, financial markets develop and cars become more accessible for a greater share of the population. Entering these largely uncharted automotive territories in Africa requires a mix of market insights, patience and a medium- to long-term strategy.
Deloitte undertook in-market research to shed light on the status quo of the automotive sector with the question in mind of which market(s), barring South Africa ? an already relatively well-developed autos market in the region ? will be the next frontier for growth for the automotive industry, with a lens on three countries, namely Ethiopia, Kenya and Nigeria. The automotive industry in each of these countries is at a different level of development but in each holds substantial potential in the long term.
In a series of reports, Deloitte will monitor the development of the automotive industry on the continent and will provide insights into the industry. Deloitte is excited to leverage its global automotive expertise and to collaborate with automotive industry stakeholders to develop solutions for what is the final frontier for automotive's growth.
Karthi PillayDr Martyn Davies
Director: Africa Automotive Leader
Managing Director: Emerging Markets & Africa
Deloitte AfricaDeloitte Africa
Deloitte Africa Automotive Insights Navigating the African Automotive Sector: E thiopia, Kenya and Nigeria 3
A Snapshot of the Automotive Sector in Africa
Africa's automotive market1 is relatively small. In 2014, there were just over 42.5 million registered vehicles in use in Africa ? a continent of approximately one billion people. As a result, the motorisation rate on the continent is only 44 vehicles per 1 000 inhabitants. This is far below the global average of 180 vehicles per 1 000 inhabitants, and lower than other developing regions such as Latin America (176) and Developing Asia, Oceania and the Middle East (79).2
In 2015, approximately 1.55 million new vehicles were sold or registered across Africa.3 South Africa, Egypt, Algeria and Morocco ? all countries with established and rapidly developing automotive industries ? together accounted for more than 80% of total new vehicle sales in 2015. Based on recent sales trends, some sources estimate that Africa's passenger vehicle sales could reach up to 10 million units per annum within the next 15 years.4
Between 2005 and 2015, registrations and sales of new vehicles (passenger and commercial combined) increased by a compound annual growth rateCAGR of 3.6% on the continent. While coming from a low base and although slightly higher than the global average of 3.5%, total sales growth in Africa was significantly slower than other emerging regions such as Asia and the Middle East (8.9%), and Latin America (4.2%).
Both the lower motorisation rate to date and new vehicle sales and registrations reflect the still relatively low purchasing power of African consumers relative to their emerging market peers. More importantly, the sizeable latent potential of the continent's automotive market in the long term.5
Due to limited disposable income and the high cost of new vehicles, second-hand vehicles dominate the continent's automotive retail sector. These are mainly imported. Based on in-market research, Deloitte estimates that in the three African countries under review (Ethiopia, Kenya, Nigeria) at least 8 out of 10 imported vehicles are used vehicles.
This is a common trend across the region given that Africa imports four times more automotive products than it exports, with automotive imports worth US$48 billion in 2014 and exports worth only US$11 billion that year. Key sources of used vehicles are the United States (US), Europe and Japan. The Middle East for example serves as a notable transit route for vehicles into East Africa.
Imports of vehicles grew rapidly from 2003 onwards, coinciding with GDP per capita growth and a growing middle class on the continent. This was supported by high commodity prices at the time. South Africa dominates automotive trade on the continent, accounting for three-quarters of Africa's automotive exports and 15% of imports in 2014.6
1This is inclusive of commercial and passenger vehicles, and excludes motorbikes. 2OICA, 2016 3OICA, 2016 4Black & McLennan, 2015 5OICA, 2016 6UNCTAD, 2016
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