Ford, Nissan view Nigeria ...

Report coming in from Johannesburg, South Africa states that a group of carmakers led by executives from Ford and Nissan will seek to work with Kenyan authorities to develop an auto-manufacturing industry in the east African country, building on talks with Nigerian lawmakers about their own market.

The African Association of Automotive Manufacturers, which also includes Toyota, General Motors, BMW and Volkswagen, has formed to take advantage of a new surge of interest from African governments in building vehicles locally. In August, the group urged Nigerian President, Muhammadu Buhari, and senior officials to limit the inflow of barely used second-hand cars and firm up policy for prospective carmakers and parts suppliers.

“What we talked to them about in all the meetings is that, if you are really interested in this, then it can’t just be about bringing assemblers in,” Ford sub-Saharan Africa CEO Jeff Nemeth, who chairs the group, said in an interview at the company’s Pretoria, South Africa plant. “It’s got to be about bringing in the whole value chain, the whole ecosystem.”

The interest in developing auto industries in sub-Saharan Africa has grown as oil- and commodity-dependent countries seek to diversify their economies amid weaker prices. Vehicle ownership per thousand people is about a quarter of the global average and there’s barely any automotive manufacturing between South Africa and the countries in the north of the continent. Challenges include the volume of imported used cars, a lack of vehicle-financing options and poor road and ports infrastructure.

Import measures

The association has advised Nigeria to ban imported used cars that are one year old or less, and place higher tariffs on one- to five-year-old vehicles. The group didn’t suggest immediate measures against imported vehicles older than that, simply because there’s no affordable alternative for many Nigerians, according to Nemeth. In time, older second-hand cars would come from vehicles built in the country, he said.

While automakers have started the assembly of light vehicles in Nigeria from imported kits, they are still a long way from full-scale manufacturing. Nigeria’s economy and vehicle demand have been hurt by lower oil prices, prompting Ford to halt assembly of its Ranger pickup truck in the country earlier this year, Nemeth said. Nissan’s assembly of Patrol sport utility models continues, although at lower levels than the automaker would have liked amid a shortage of foreign currency, according to the Yokohama, Japan-based company’s South Africa MD, Mike Whitfield.

Another obstacle for automakers in African markets including Nigeria and Kenya is the absence of accessible vehicle financing, said Whitfield, who is also the vice chairman of the AAAM.

The Nigerian government is working with Johannesburg-based FirstRand’s Wesbank unit to identify solutions, including plans for a 23 billion-naira ($73 million) assistance fund. An application for a Nigerian banking operating license will be submitted to the central bank this week for Wesbank, sub-Saharan Africa’s largest provider of auto loans, said Luqman Mamudu, the director of policy and planning for the National Automotive Council. Government will contribute an initial 7.5 billion naira to the fund, to be managed by Wesbank, and additional funds are being sought from development finance institutions and Nigerian banks.

The council is also in talks with auto component manufacturers including Robert Bosch of Germany, China’s Miracle Automation Engineering and industry groups in India and South Africa, Mamudu said.