Automobile production has been increasing over the recent years in Africa. Investments from both multinational and domestic producers have also increased, which suggests that the continent could become a global leader in car manufacturing.
As with all industries, there was a decline in output in 2020 due to Covid-19. However, vehicle production is now back to where it was and continues to increase. This growth and development have had a ripple effect for stakeholders in the automotive industry, including suppliers and dealerships.
Africa as a car manufacturing hub
Africa’s automotive market is estimated to be worth around $28.5-billion. As some manufacturers have caught up with a backlog of orders, the industry has already recovered from the initial economic effects of Covid-19. By 2026, the African automotive market is expected to be worth nearly $40-billion.
Free Trade Area in Africa is good for the automobile industry
Having free trade agreements, such as the African Continental Free Trade Area (AfCFTA), is a good way to increase business competitiveness by lowering production costs. The goal of the AfCFTA is for the 55 member countries to become a single market with standardised tariffs and regulations. AfCFTA addresses policy gaps and infrastructure issues that have hampered African car manufacturers. The agreement makes African investment and trade more appealing to international businesses.
Growth in domestic automobile markets in Africa
Africa accounts for 20% of the global population, however, only 1% of cars are sold on the continent. Compare this to Europe, which holds 22% of the global car market. There are 44 vehicles per 1000 people in Africa, which is significantly low compared to the global average of 180 vehicles per 1000 people. South Africa has the highest per capita in Africa, with one in five people owning a car.
Africa still has a long way to go. Fortunately, it is also the fastest-growing consumer market. Growing domestic demand for new cars has resulted in more affordable mobility in Africa. AfCFTA, combined with improved regional market access, is fueling massive growth in the automobile industry across the continent.
Africa as a top destination for car manufacturing
Africa offers an enticing business environment for large conglomerate car manufacturers. There has been massive growth in domestic markets, which has ensured that both multinational and domestic manufacturers increase production output. In the near future, we are likely to see the continent becoming a major player in the global automotive manufacturing sector.
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