9 July 2018

Africa: VW Optimistic About Africa's New Car Market

German carmaker Volkswagen says it will produce a combined 24,300 new units in its plants in Kenya and South Africa as it seeks to diversify sales on the continent, whose auto market has seen slow growth in the past three years.

The market forecast is for modest recovery in 2018, thanks to rebounding economies and new assembly plants.

Thomas Schaefer, chief executive of Volkswagen Group South Africa, said they plan to double assembly at the Thika plant in Kenya from the 300 vehicles produced last year.

VW expects car sales to pick up, unlike last year when businesses recorded reduced purchases.

This was attributed to political uncertainty over the general election and a slowdown in economic activity.

Sales in Kenya fell to an estimated 67,000 vehicles, both used and new.

The tough business environment in 2017 resulted in a sharp drop in passenger vehicle sales in Africa.

It is estimated that sales dropped by 9 per cent, down from about 1.32 million in 2016 to just above 1.19 million in 2017, the third year of decline in a row.

Egypt, Algeria, Tunisia, Nigeria and Libya took the biggest sales hits.

"The drop was more pronounced in the passenger car segment, which is estimated to have declined by 12 per cent in the same period -- down from 979,014 in 2016, to 862,907 in 2017," said the International Organisation of Motor Vehicle Manufacturers.

However, with the positive prospects in coming years, Volkswagen is boosting its assembling capacity in South Africa to serve export markets.

In South Africa, the continent's biggest vehicle market, VW plans to increase production from 111,000 in 2017 to 135,000 this year.

Last year, South Africa topped the light vehicle sales chart, reaching 356,000 units, ahead of Morocco with 155,000 and Egypt and Nigeria, with 100,000 each.

Opportunities

While Africa offers many opportunities after launching its largest trading bloc, Africa Continental Free Trade Area (AfCTA), and even with the growing middle class and booming economies, vehicle manufactures says the market is still bogged down by a number of challenges.

African governments have been criticised for not introducing policies banning used cars, reducing the continent to a dumping ground, adding to environmental concerns and suppressing job creation.

Rwandan President Paul Kagame's tough stance on used cars and his push for regional integration to create a bigger African market has endeared him to the assemblers.

The president, who has also shut out second-hand clothes and leather products, which put him on collision course with the US government, has now turned his sights on used cars.

"Africa does not need to be a dumping ground for second-hand cars or second-hand anything," President Kagame said at the unveiling ceremony of the Volkswagen Polo model when it was rolled out from its new assembly plant in Kigali's Special Economic Zone.

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