Local content imperative drives auto makers into Africa

Truck manufacturers are
increasingly seeing the
value of investing in African
operations, according to
analysts at Frost & Sullivan.
While the sector continues
to face capital, labour and
infrastructure challenges,
these are likely to become
less burdensome with
improved government
policy, private sector
investment and better
business environments in
the long term.
According to Byron
Messaris, a senior
industry analyst at Frost
& Sullivan, the automotive
manufacturing and
assembly sector in Africa is
showing great promise.
“Automotive
manufacturers are moving
closer to African markets
to produce vehicles,”
said Messaris. “This is
regarded as a practice
that has primarily been
adopted due to the local
content promotion policies
instituted by countries such
as Nigeria and Kenya. These
policies have resulted in
restrictions on imports of
second hand vehicles as well
as tariffs on new vehicles.”
According to Messaris,
Nigeria has become
a real hub for global
manufacturers with the
like of Nissan, Ford and
Volkswagen teaming up
with local partners to
assemble vehicles.
Nissan currently operates
at its semi-knocked down
plant in Lagos – a facility
that has been operational
since 2014.
Messaris told FTW
that the developments
in Nigeria were being
attributed to the adoption
and implementation of
the National Automotive
Industry Development
Plan in the country, driving
the growth of automotive
manufacturing.
“This plan aims to limit
the amount of secondhand
imports through
steeper tariffs and push
local content promotion by
government.”
He said Mitsubishi
was also eyeing Nigeria
while there was increased
interest in Eastern Africa
as well, with at least
three manufacturers
looking at the region for
possible manufacturing
and assembly hubs.
Mercedes Benz was already
operational in Kenya
while Daimler had also
established a regional centre
in the country.
Messaris said that major
manufacturers like Toyota,
General Motors, Mercedes
Benz and Tata Motors
were all on record as saying
Africa was the new frontier
of growth and were looking
for opportunities on the
continent.
With the local South
African market showing
little growth, he said, export
from South African facilities
was also taking precedent.
“The export of vehicles
from South Africa is
on the increase as more
automakers are seeing the
benefit of using South Africa
as a base for their vehicle
manufacturing,” he said.
In this regard Mahinda
& Mahindra have indicated
they are set to manufacture
in South Africa while
companies such as Toyota,
BMW, Volkswagen and
Mercedes Benz have
invested significantly in
their local operations.