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Customer LoginsSame-Day Analysis: Cairo Motor Show 2016: Chinese automakers flock to expo, accelerate growth plans in region
The Cairo Motor Show has a strong presence of Chinese automakers keen to further penetrate the regional market. With Chinese brands' growing momentum in the region, their sales growth and market share in Africa are forecast to rise.
IHS Automotive Perspective
- Significance: Chinese automakers have strengthened the number of SUVs on display at the motor show in Egypt as they aim to gain market share among the ambitious young executive consumer base.
- Implications: The growing middle classes and the increased investment in infrastructure across Africa pave the way for stronger sales in the region, with IHS Automotive's latest forecasts estimating light-vehicle sales of over 2.6 million units by 2026.
- Outlook: As Chinese light- and heavy-vehicle producers strengthen their products using better technology, designs, and engines, their consumer base in Africa is expected to expand.
The 23rd Cairo International Motor Show (16−21 March) taking place in Egypt's capital city has a strong presence from Chinese automakers keen to further penetrate the market. Chinese automakers participating in the show include Beijing Automotive Industry Corp (BAIC), Chery Automobile Company, Changan Automobile, Anhui Jianghuai Automobile Co (JAC), and Brilliance Automobile.
Brilliance is showing four models at the show: the H330 sedan, the V3 sport utility vehicle (SUV), the V5 SUV, and an adapted V5 SUV. The new SUV model − the V3 − from Brilliance targets the younger generation of consumers in Egypt, while the V5, which was released earlier to the market, is considered more of a 'family SUV', reports the local Daily News Egypt. The director-general of Brilliance Bavarian Auto Group in Egypt, Khaled Saad, reportedly said that the launch of the V3 SUV in Egypt is part of the company's policy to introduce outstanding products at competitive prices and attract new customers to increase sales in 2016. The car is fitted with a 1.5-litre DOHC engine, paired with a 5-speed automatic transmission. The car also has ABS and ESC systems.
"We carefully study the Egyptian auto market and observe what the customer really needs, then we build our strategies on this basis... We provide our customers with the best cars with very competitive prices," said Saad, reports Xinhua news agency. Brilliance plans to invest USD120 million in Egypt, of which USD30 million dollars has already been invested, according to Saad.
BAIC is showcasing the Senova A1 (A115), the Senova A3 (A315), and the X25 and X55 SUVs at the Cairo Motor Show. Chery is showcasing a range of sedans, the A113, A156, A620, the Envy sedan, the M12 hatchback, and the Tiggo SUV. Meanwhile, Changan is showcasing the Benni Mini small car and the CS35 SUV, and JAC has the S2 and S3 SUVs on display.
The overriding trend is that Chinese automakers are significantly improving their line-ups to reflect growing demand for SUVs. The majority of the SUVs on display in Cairo are the better products from the Chinese automakers, which now have international design teams and centres based outside of China. Changan, for example, has a styling centre in Turin, Italy, as well as a powertrain development facility in Yokohama, Japan, while Chery has a team of international automotive designers outside of China.
Chery has also announced the removal of its Speranza brand from use in Egypt in an attempt to further strengthen market penetration under its Chery brand, a strategy the automaker has already begun to use in its domestic market.
Chery has sold more than 30,000 Speranza models in Egypt since 2004 and has become the most popular Chinese car brand in the country, reports Xinhua news agency. Chery cars are to be assembled in Egypt in partnership with two leading local automobile corporations, Ghabbour Auto (GB) and Aboul Fotouh Automotive (AFA). With the new trilateral partnership, Chery has decided to relaunch its assembled cars in Egypt under the company's name. The Xinhua report states GB is funding the relaunch, which is worth hundreds of millions of Egyptian pounds to Chery and AFA, and the automaker expects to sell 1,500 Chery vehicles a month, targeting an annual sales goal of 40,000 cars each year.
Meanwhile, heavy-truck manufacturer China National Heavy Duty Truck Company (CNHTC) has announced a major expansion plan across Africa. The international arm of CNHTC, Sinotruk, aims to build five service centres and parts warehouses in South Africa and the Democratic Republic of Congo in 2016, and will use its assembly base in Nigeria to ship heavy-duty trucks to Ghana. The company already has regional service centres in Lagos, Nigeria, in Accra, Ghana, and in Dar es Salaam, Tanzania.
Sinotruk exported 12,470 trucks to Africa in 2015, up 13 % year on year (y/y), thanks to growing demand in markets such as Senegal, Angola, Benin, Mali, Niger, Ethiopia, and South Africa, reports the China Daily, citing the company. Cai Dong, general manager of Sinotruk, is quoted as saying that the company aims to build an assembly line for its vehicles in East Africa. Cai Dong said, "Government procurement is another important growth channel for Chinese automobile companies. In Africa, the biggest consumer is often the local government. If Chinese automakers get included in government procurements in Africa, they would stand to gain a lot. The majority of African nations are still in the early stages of economic development and the strategic sectors of infrastructure services, transportation and logistics companies are under state control, which means, when it comes to buying trucks, the government is one of the biggest customers."
State-owned company Sinotruk exported 27,000 trucks in 2015, up 8 % y/y, and the forecast for this year is 28,000. The company's vehicles are shipped to more than 100 countries and regions, mostly developing economies, but the company aims to develop further in the United States and Europe over the next five years.
"Our aim is to build our international brand and ultimately hit revenue of more than CNY100 billion [USD15.3 billion]," said chairman Ma Chunji, reports the China Daily. "Only by going global can Sinotruk achieve sustainable development," he added.
Outlook and implications
As sections of consumers in Africa see their per-capita incomes rise, along with stronger GDP growth forecasts, vehicle demand is increasing across countries in Africa. Meanwhile, investment in infrastructure is also rapidly increasing the available road areas for vehicles. Paved roads as a percentage of total roads is increasing as new infrastructure projects grow in Africa with foreign investment, according to Walt Madeira, head of IHS Automotive's light-vehicle sales forecast for Africa.
South Africa continues to strengthen its base as a production hub for the supply of models to other African countries and markets beyond. Meanwhile, the North African region is witnessing an increase in regional automotive production to meet domestic demand as well as to grow as an export base for supplying European markets. Various new agreements have been established to strengthen local regional production, abolish EU import tariffs, and strengthen penetration in the region, including countries such as Egypt, Libya, Algeria, Morocco, Tunisia, and Mauritania. Automakers have also begun investing in the region significantly.
Overall growth in Africa, including Sub-Saharan Africa and North Africa, is forecasted to witness new light-vehicle sales of more than 2 million units per annum (upa) by 2020, rising to over 2.6 million upa by 2026. If the current push to reduce sales of used cars strengthens in the region, this could mean stronger growth in light-vehicle sales across Africa, which would lead us to revise our forecasts. Meanwhile, the expansion of Chinese OEMs across Africa is strengthening as they begin to produce models that meet the look-and-feel demands of younger, aspiring middle-class consumers in Africa's growing economies.
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.