Anew report commissioned by Messe Frankfurt Middle East, organiser of Automechanicka Dubai – the largest international trade show for the Middle East and Africa’s (MEA) automotive aftermarket and service industry – signposts huge aftermarket potential in the African continent.
Produced by German consultants Africon GmbH, which supports international companies looking to expand their automotive businesses in Africa, the report identifies Nigeria and Kenya as key to unlocking the continent’s automotive aftermarket potential and the individual characteristics needed to succeed in each national marketplace.
The report points to a resurgence of international interest in the African market, which boasts one of the world’s fastest-growing populations, with the United Nation’s 2021 population estimates putting Africa at 1.374 billion.
“Every year, more people are entering the labour force,” says the report. “Though this development poses significant risks in terms of the need for job creation, it also drives the growth of an emerging middle class.”
And while motorisation rates across the continent remain comparatively low though expanding, Africa could prove a survival bastion for the conventional aftermarket market. “As the sector is under pressure in many parts of the world due to peaking vehicle fleets and technological disruptions, Africa is one of the last regions with ample room for growth of the ‘traditional’ automotive aftermarket,” says the report.
With an ageing fleet requiring larger maintenance efforts and electric vehicles unlikely to gain significant short to medium-term market shares due to the continent’s infrastructure constraints, the aftermarket remains buoyant.
The report singles out Nigeria, where 12 million vehicles are on the road, and Kenya, with a national fleet of two million (almost two-thirds of which are more than 15 years old) as nations with the highest promise in “the last underexplored market”. Both countries have the largest automotive aftermarkets in West and East Africa but require different approaches to access the potential.
“Though precise numbers are difficult to come by, the Nigerian parts market overall might stand at approximately US$4 billion per year. In Kenya, the total might stand at around US$500 million,” says the report.
Though there is a fledging parts manufacturing sector in Kenya, Africa remains largely reliant on imports to keep its fleets moving. Kenya is also emerging as a trans-shipment base to neighboring countries including Uganda and Rwanda.
“This makes Kenya an interesting regional hub for the aftermarket,” says the report – citing
Dubai-based trading companies as key suppliers making the emirate the second most important parts supplier to Kenya after China. Nigeria, which does not have a home-grown manufacturing sector, is import reliant, with many turning to Middle Eastern suppliers and leading both countries to develop e-commerce capabilities.
“Both countries certainly do offer opportunities,” says the report. “For many global players in the aftermarket, the key first step to realising these is to decide to start engaging with these markets more actively.”
Messe Frankfurt Middle East believes its Automechanika Dubai exhibition, the 18th edition of which will run at the Dubai World Trade Centre from 14-16 December 2021, will serve as an aftermarket supply superhighway to African growth potential.
“To help facilitate this continental trade, the exhibition features a dedicated AfriConnections platform which connects African buyers with global suppliers,” explained Mahmut Gazi Bilikozen, Automechanika Dubai’s Show Director.
“Engaging with the market means meeting the key African importers and future business partners who attend Automechanika Dubai to seek out business opportunities and stay ahead of the latest market trends. The show is a gateway to a market ripe for exploration via Dubai and the Middle East.”
In terms of northern Africa, Egypt’s automotive aftermarket is accelerating and has been dubbed “one of Africa’s most exciting markets” as its motoring population and vehicle sales grow, its economy expands, FDI floods in, and the government moves to combat automotive emissions.
It’s a powerful combination which africon’s new white paper contends has resulted in an aftermarket now worth between US$1-2 billion. And africon should know, having worked on more than 30 automotive market projects across Africa in the last few years.
A country with the third largest population within Africa – with more than 100 million people – its economic advancement has overtaken South Africa as the continent’s second-largest economy with a GDP of US$360 billion and sturdy growth forecasts.
“The IMF predicts that growth will slow to around 2.5% this year but recover to more than 5% from 2022 forward,” africon’s white paper reports. “After economically difficult years in 2016/17, inflation has come down to around 6%. Unemployment has been reducing, and GDP per capita in US$ terms has increased by almost 50% since 2017. Consequently, Egypt has been the largest recipient of FDI in Africa for several years in a row, receiving more than US$9 billion worth of investments in 2019 and almost US$6 billion in 2020.
“This growth is driven, among other things, by continuous economic and fiscal reforms. For instance, on the Ease of Doing Business Index, Egypt has improved by 14 places since 2018.”
Egypt is now in growth mode, even despite the rigors of the COVID-19 pandemic and was among the few countries to report full year GDP growth in 2020.
The growth has fed into the aftermarket, with the country now being home to one of Africa’s largest vehicle fleets with around six million vehicles on the country’s roads, with the majority – approximately 4.6 million – being passenger cars.
This is followed by almost a million trucks and about 470,000 buses. Most passenger cars are petrol-powered, while many commercial vehicles rely on diesel engines but that could soon change.
“The government is increasing the share of dual-fuel cars, which can use both petrol and compressed natural gas (CNG). Around 300,000 vehicles in Egypt already use CNG. This number will likely increase further over the next years,” the paper reports.
Egypt is also taking bold steps to replace internal combustion engines with more environmentally friendly alternatives. Last year the government announced an initiative to encourage consumers to replace old vehicles for new ones operating on CNG engines with extended credit facilities among its green program incentives.
This has led to China’s Dongfeng Motors planning to assemble up to 25,000 electric vehicles a year in an Egyptian assemble plant. Even the brand make-up of the country’s vehicle fleet is changing. The significant market shares held by Chevrolet/Isuzu, Hyundai, Toyota, and Nissan could be eroded by the entry of European and Chinese brands fueled by preferential import duties.
“New vehicle sales in Egypt have recently grown, currently standing at more than 200,000 units per year. Around half of this figure is assembled locally. Egypt is home to notable local vehicle assemblers like GB Auto, General Motors Egypt / Mansour Automotive, and Nissan.
While most passenger vehicles are produced for the domestic market, many buses are exported to regional markets,” explains the whitepaper.
Change is also coming to Egypt’s heavily import-driven aftermarket, which is dominated by
Asian suppliers, namely China, Korea, and Japan. However, Germany and the US now rank among the country’s top ten suppliers of parts and components and globally leading brands enjoy relatively high market shares for crucial parts.
But the local component manufacturing market is gaining ground and supplying local vehicle assemblers, the aftermarket and export markets with a range of batteries, brake parts, wiring and filters.
Egypt’s importer/distributor landscape is a mix of small and large companies, most of which are based in Cairo. The independent aftermarket is fragmented. The importers/distributors sell directly to end-users, workshops, and a network of wholesalers and retailers across the country.
As is the case in other African markets, a significant share of Egyptians, having taken the advice of trusted mechanics, buy their parts from retailers instead of from workshops. However, most do follow the advice of their trusted mechanics.
E-commerce is fast emerging as a significant aftermarket force through highly visible platforms such as Odiggo, Tawfiqia, Egyparts and Amazon Egypt. The Egyptian aftermarket is ripe for growth and to offer up great opportunities for parts producers, distributors, and service providers, but increasing competition from local producers may mean overseas suppliers will need to invest in their own on-the-ground structures or seek out ways to add value locally to increase market shares.
GB Auto, a leading Egyptian automotive supplier, sums up the expected scenario: “We currently see three factors strongly influencing the future of our market in Egypt: firstly, we are expecting a period of robust growth across various industry segments. Secondly, online sales will likely gain significant importance. Thirdly, the share of CNG-powered vehicles increasing further, which will open up new industry segments and growth opportunities,” explained Mohamed Yahia, Managing Director of Ready Parts (GB Auto Group).
Others looking for indicators of the growth potential can track the Egyptian visitor presence at Automechanika Dubai which has risen by 20% since 2015.
“We anticipate a surge in visitors from Egypt when the show returns from December 14th-16th December,” commented Mahmut Gazi Bilikozen, Automechanika Dubai’s Show Director. “And for the future, an Egyptian industry pavilion might not be too much of a far stretch.”