Countries such as South Africa, Egypt and Morocco do not allow used-vehicle imports, which has led to higher new vehicle sales in these countries.
Addressing delegates at the recent Manufacturing Indaba held in Sandton, Justin Barnes, Associate Professor, Gordon Institute of Business Science, University of Pretoria and ambassador for the Toyota Wessels Institute for Manufacturing Studies, has called on African countries to take a policy decision to ban imports of pre-owned vehicles, which he says could result in an additional two million new vehicles being manufactured and sold on the continent. However, he emphasised that this strategy would require sizeable investment into manufacturing capacity.
During his address he presented research findings that shows that those living on the African continent and earning R176 000.00 (US $10 000) and more a year are those that are able to afford to purchase a new vehicle. Currently there are 78.9 million Africans that earn this amount but this amount is likely to rise to 203 million by the year 2050.
Barnes said that about 1.2 million new vehicles were sold on the continent in 2022, while 983 000 used vehicles were imported. He said that should this trend continue with African consumers buying used imported vehicles, 3.4 million new vehicles per year are predicted to be sold in Africa in 2050. This figure could change to 5.3 million units should a policy of no-used-vehicle imports be adopted.
“This would mean there is the potential for further 2.2 million new vehicles to be manufactured and sold on the continent every year. This would stimulate local manufacturing demand and it would justify the investment into 100 completely new manufacturing facilities with each facility producing up to 60 000 units a year. I estimate that the investment for this would be in the region of about R14 billion (US $800 million).”
“For this level of stimulated demand, serious industrial policy decisions will need to be taken, similar to the steps taken by China to expand its manufacturing capacity. To ensure affordability of the new-vehicle purchases as opposed to used-vehicle imports, innovative financing approaches should be considered by manufacturers. However, the sheer scale of manufacturing could ensure economies of scale and ultimately lower costs for consumers as China had achieved with its affordable ranges of vehicles flooding global markets.”
Barnes said: “The termination of used-vehicle imports could spark the development of a continental automotive industry and opens the possibility for 1.2 million new jobs to be created as well as for Africa to become part of the global supply network, backed by component localisation.”
“Most new vehicles are bought by corporates and governments in Africa, not private individuals, with market demand being influenced by taxes, vehicle use fees and the availability of vehicle finance. Historically, grey imports and pre-owned vehicle imports have significantly impacted on the demand for new vehicles. Countries such as South Africa, Egypt and Morocco do not allow used-vehicle imports, which has led to higher new vehicle sales in these countries.”
“A positive scenario with asset-based vehicle finance and stimulated economic activity could lead to a 6 million new vehicle market by 2050, supported by a viable automotive ecosystem with depth of capability and market potential,” said Barnes.
