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Customer LoginsNamibia, Algeria, Egypt, Kenya, Ghana, South Africa post vehicle sales declines in H1, Morocco sees growth
Governments across Africa want to encourage local vehicle production and so are increasing tariffs to counter imports.
IHS Automotive perspective
- Significance: Markets in Africa are generally faced with high volume of used vehicle imports which are significantly cheaper than new vehicles.
- Implications: Governments across a number of countries in Africa are therefore introducing tariffs to reduce used car imports, as well as taxes on older models with the aim of boosting local production and reducing heavy polluting vehicles.
- Outlook: Increases in tariffs and declining economic conditions are generally reasons for decreases in sales across a number of African markets in 2016.
Markets in Africa are generally faced with a high volume of used vehicle imports, which are significantly cheaper than new vehicles. Consequently, governments across a number of countries in Africa are introducing tariffs to reduce used-car imports, as well as taxes on older models with the aim of boosting local production and reducing heavy polluting vehicles.
Kenya H1 sales decline 30.2%
Data from the Kenyan Manufacturers' Association indicate a double-digit decline in sales of new passenger cars and light commercial vehicles in the first six months of 2016. The data show a total of 6,946 units sold in the first half of 2016 in Kenya, marking a decline of 30.2% year on year (y/y) from the 9,953 units sold in the same six-month period a year before. Meanwhile, production of new vehicles in Kenya hit 2,258 units in January−April, marking a 31.3% y/y decline from 3,285 units in the same period a year earlier. Total vehicle registrations in January−April, which include used and new vehicles, hit 22,862 units, down 23.2% y/y based on data from the Kenyan Revenue Authority.
IHS Automotive forecasts that the Kenyan new light-vehicle market will witness total new registrations of 24,556 units in 2016, down from 24,853 units in 2015. Production is expected to drop at least 31% y/y this year in Kenya.
In the first half of the year, IHS Automotive data show that a total of 12,278 new vehicles were registered in Kenya, marking a decline of 12,427 units from the same period last year. The difference between IHS calculated registrations and the figures from the Kenyan Manufacturers' Association stems from inclusion of certain automakers not included in the authority's data.
Namibia sales drop 19.4% in H1
Total new vehicle sales in Namibia hit 8,867 units in the first six months, marking a 19.4% y/y decline from 11,003 units in the same period last year. The Namibian data comprise passenger vehicles (PVs), of which a total of 3,872 units were sold in the first half, down 22.3% y/y. Light commercial vehicle (LCV) sales hit 4,612 units, down 15% y/y, while medium commercial vehicle (MCV) sales hit 150 units, down 21.9% y/y, and heavy commercial vehicle (HCV) sales hit 233 units, down 41.5% y/y.
For full-year 2016, IHS Automotive forecasts that Namibia will witness total vehicle sales of 17,349 units, marking a decline of 18.25% y/y, including PVs, LCVs, MCVs, and HCVs.
Morocco PV sales jump 39% in H1
New vehicle sales in Morocco were 83,583 units in the first half of the year, marking an increase of 34.29% y/y. This includes 39% y/y growth in sales of PVs to 78,458 units and a 12.14% y/y decline in sales of commercial vehicles to 5,125 units.
IHS Automotive forecasts total new vehicle sales in Morocco of 160,721 units in 2016, a 21.82% y/y increase.
Egypt to witness 27% y/y new vehicle sales decline in 2016
Sales of new vehicles in Egypt reached 85,300 units in January−May, marking a decline of 25.2% y/y.
Based on the current situation in the country, IHS Automotive forecasts total new vehicle sales in Egypt of 202,760 units this year, marking a decline of 26.69% y/y.
South Africa PV sales drop 10.3% in H1
A total of 272,417 new vehicles were sold in South Africa in the first six months of the year, a 10% y/y decline. Of these, PV sales dropped 10.3% y/y to 180,894 units, while LCV sales hit 78,491 units, down 9.2% y/y. MCV sales were 3,934 units, down 19.3% y/y, while HCV sales hit 2,605 units, down just 0.8% y/y. Bus sales rose 4.6% y/y to 595 units in the first six months.
IHS Automotive forecasts that South Africa will witness total sales this year of 506,167 new vehicles; however, despite this volume being over the half-a-million mark, it still represents an annual decline of around 15.69% y/y.
Ghana to witness 6.5% y/y decline in 2016
Total new vehicle sales in Ghana reached 4,225 units in the first six months, marking a decline of 10.7% y/y.
IHS Automotive forecasts that new vehicle sales in Ghana will hit around 8,849 units in 2016, a drop of around 6.48% y/y.
Algeria imports drop 64% y/y in H1
Sales of imported vehicles in Algeria hit 47,484 units in the first half of the year, down 64.2% y/y, according to data from the National Centre for Customs Statistics.
In 2016, we forecast full-year vehicle sales in Algeria will reach 114,740 units, down 58.78% y/y.
Elsewhere, Tanzanian new vehicle sales in the first half were 6,572 units, down 3.8% y/y. IHS Automotive forecasts full-year 2016 sales will decline to 13,145 units.
Uganda witnessed total sales of 3,795 new vehicles in the first half, down 5.1% y/y. IHS Automotive forecasts annual new vehicle sales of 7,591 units in Uganda.
Outlook and implications
Kenya: In recent years, Kenya has witnessed a boom in new passenger vehicle and light commercial vehicle sales, with a total of 24,500 PV and LCVs being registered in 2014, a 6.6% y/y increase. In 2015, the market continued to grow but by a significantly slower 1.5% y/y, says Emmanuel Darku, IHS Automotive's African vehicle sales forecast analyst.
Low demand this year stems from the weaker Kenyan shilling and rising interest rates, as a large part of new car sales is financed by credit schemes in the country, says Darku. Additionally, excise duties have been retrospectively rising from the beginning of this year, reducing demand for new vehicles further. Therefore, we estimate an annual decline in demand in Kenya this year, with a revised sales forecast down 1.2% y/y.
However, Kenya is now a magnet for automakers planning production bases, with a number of players from China and India announcing plans to set up assembly plants, as well as expanding dealerships across the country. However, the Kenyan government this year has begun to introduce a 20% duty for CKD units which are to be assembled in Kenya, thereby further threatening the growth of the market.
Tanzania: The past decades have been positive for Tanzania's market, with sales of both new and used cars in rising significantly. For example, the vehicle fleet of LCVs grew from 113,138 units in 2005 to 279,120 units in 2010 and that of HCVs from 76,610 units in 2005 to 163,289 units in 2010, says Darku. With a high proportion of vehicles being used models imported from Japan, the United Kingdom, and the Middle East, far cheaper than brand new vehicles, these used vehicle models are likely to continue to dominate the market. However, with economic growth projected for the country, IHS Automotive forecasts an increase in the vehicle parc data in Tanzania. "With the relatively low vehicle ownership and the projected high growth in economic performance, the increase in the parc is expected to continue rapidly over the next several years. Nevertheless, since the country still allows the import of used vehicles without tighter age restrictions like in neighbouring Kenya, IHS still forecasts low new car sales volumes for the region," said Darku.
In 2015, the market in Tanzania grew by 6.3% to approximately 13,700 new vehicle sales − this result was partly caused by favourable economic development but, to a smaller extent, also by the phenomenon that many Kenyans purchase and register their cars in neighbouring countries like Tanzania and Uganda to avoid high import duties in their own country. It remains to be seen when the Kenyan government will close this loophole through stricter laws.
For this year, due to decreasing GDP growth, we expect a market decline of 3.8%, which equates to 13,150 units, but the situation should improve in 2017.
Uganda: Most vehicles in Uganda are imported used vehicles, with Japanese models the most common. Of the total number of vehicles imported into the country, 80% are used vehicles and 20% new vehicles. In 2015, to counter the growth of used vehicles, the Ugandan Revenue Authority introduced an increased tax on used cars imported into the country. In addition, the government is to further raise other taxes in a bid to push cleaner vehicles. For example, the environmental tax on imports of cars aged between five and eight years will be raised from the current rate of 20% to a new rate of 35%. Additionally, any vehicle that is older than eight years will be levied with a tax of 50%. The increase in the rate of the environmental tax will further lead to a hike in the price of transporting cars and in the final retail price faced by consumers in Uganda.
As a result of all the above dynamics, the demand for new vehicles is forecast to rise in the near term, says Darku.
Algeria: The implementation of the licensing system and import quotas of new vehicles has significantly affected the Algerian automobile market, says Darku. The difference between the volume of imported vehicles in the first half of 2016 compared with the same period last year indicates the dramatic effect the quota system is having. In fact, the system has given rise to a host of automakers pushing local production facilities in Algeria and with plans to commence production shortly. It is for this reason the government is pushing strong systems to counter imports.
Due the introduction of policies against imports, the short-term forecast is that total new vehicle sales will drop. However, once local production volumes rise, these new models are likely to fuel growth in Algeria.
Markets such as Namibia and South Africa are faced with economic issues forcing new vehicle sales to drop. Meanwhile, an increase in production in other markets may hinder exports and production from countries such as South Africa.
South Africa: The current environment of economic slowdown was not conducive to strong sales growth in the first half of the year, mainly because of high inflation, new vehicle price hikes, low levels of consumer confidence, and lower finance approvals by banks. "We expect this slowdown to continue in the second half of the year due the current global crises, such as the Brexit situation, commodity prices, and so on, which will affect the South African rand," said Darku.
Morocco: This market is poised for growth following major boosts to the industry from French automakers. Groupe PSA, for example, in 2015 announced a USD632-million investment in the market, thereby strengthening local supplier business prospects and overall production prospects for Morocco. Meanwhile, Renault has recently appointed a new CEO to its Moroccan business.
The first half of this year has indeed been a major growth platform for automakers in Morocco such as Renault and increasingly Ford. Compared with a number of other markets in Africa, consumers in Morocco have a higher income level and therefore their buying power for new vehicles is higher, as is access to new vehicles produced as well as imported into the market. Overall, we forecast growth for Morocco based on the market being more stable and stronger purchasing power of consumers.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.