South African automotive industry expected to be largest on the continent

 South African automotive industry expected to be largest on the continent

South African automotive industry expected to be largest on the continent.

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South Africa is expected to be the largest automotive industry in the continent however, increased competition from the used vehicle market and weak domestic demand – which is further compounded by constrained household finances and high unemployment remains the major concerns for the automotive industry in the country.

The South African automotive industry is the largest in the region and the country is a hub for exports of passenger cars in several other parts of the world, especially Europe.

A Research and Markets report titled: Africa Automotive Market – Growth, Trends, COVID-19 Impact, and Forecasts (2021 – 2026) shows that South Africa’s export sales, recorded a second consecutive month of solid growth in January 2021 at 22,771 units reflecting an increase of 6,468 units, or 39,7%, compared to the 16,303 vehicles exported in January 2020.

However, the market had earlier in 2019 taken a  slight  slump in sales figures with the declining 355,378 units compared to 365,242 units in the year 2018, which is a fall of around 2,7%.

Similarly, the commercial vehicle segment in the country also witnessed a downfall of around 3,07% and registered sales of 181,233 units of commercial vehicles sales in the year 2019.

In 2020, according to the National Association of Automobile manufacturers of South Africa, the vehicle sales in the country declined by 29,1%, which is because of the pandemic COVID-19.

But Research and Markets say several major OEMs, from all over the world are investing in the country.

“For instance, in April 2019, Ford announced that Ford Motor Company of Southern Africa (FMCSA) is expanding its vehicle export operations by adopting a multi-port strategy with the first shipment of 1,000 locally assembled Ford Rangers from Port Elizabeth to markets in Europe. In April 2019, Nissan announced that it is investing a ZAR 3 billion in its facility in Rosslyn, Pretoria to produce the next generation Nissan Navara pickup. However, increased competition from the used vehicle market and weak domestic demand – which is further compounded by constrained household finances (even with low-interest rates) and high unemployment are major concerns for the automotive industry in the country. Yet, with aforementioned trends and developments it is expected that the market studied will experience growth during the forecast period,” R& M .

In general, the Africa Automotive Market is dominated by manufacturers such as Volkswagen AG, Toyota Motor Corporation, Groupe Renault (including Dacia Sales), Daimler AG, Ford Motor Company, Hyundai Motor Company, and Isuzu Motors, among others.

Manufacturers are focusing on strategies to improve their business across the region.

In June 2020, Nissan Africa, Middle East and India (AMI) presented a comprehensive four-year strategy for the region under the company’s Global Transformation Plan which aligns with the global direction of rationalisation, prioritisation and focus to bring core models and technologies to a region that accounts for around 10% of the world automotive market.

The African automotive market is valued at USD 28,45 billion in 2020, and it is expected to reach USD 39.87 billion by 2026, registering a CAGR of 5.55% over the forecast period.

“However, the outbreak of pandemic COVID-19, impacted the market very badly and majority of markets in the region have not recovered and the demand is still lagging behind the pre-COVID levels.” R& M noted

The demand for new vehicles across the African region has increased until 2018.

Due to a slowdown in economy, in 2019 the sales of new vehicles decreased by 4% to 1, 17 million units, as compared to 1,22 million units in 2018.

Passenger cars accounted for 73,81%, while commercial vehicles accounted for 26,18%.

Louis Schoeman

Louis is a freelance writer that has been featured on investing.com, entrepreneur.com, marketwatch.com, benzinga, seekingaplha. Louis focusses on helpful news and tips on cfd’s, forex trading and crypto. When he is not writing world class articles, he is an avid trader in crypto.

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