Vehicle manufacturers see Africa as an untapped market, but cost and lack of access to financing means second-hand is still the way to go for many
Accra — Volkswagen and Nissan are among carmakers planning new plants in Ghana to target West Africa’s 382-million people. Their challenge: finding banks that will offer loans to make new cars affordable.
Less than 5% of new-car sales are financed by banks, according to the Ghana Automobile Dealers Association. In some cases, lenders demand employers agree to redirect part of the purchaser’s salary towards the debt, or that the owner take out insurance to cover a default. Interest rates of 22%-30% also make loans “largely” unaffordable, said Koketso Tsoai, an automotive-industry analyst at Fitch Solutions.
About 10% of West Africa’s population are able to spend more than $11 a day, according to data compiled by World Data Lab. It is this group that the industry is targeting on a continent that adds some 10-million new consumers annually. By 2030, Africa’s middle- and upper-income class is expected to exceed 300-million of the world’s 4-billion consumer market, the data shows.
While the government has said its automotive-incentives programme will include the creation of an asset-based vehicle financing component, a trade ministry spokesperson couldn’t provide details on how it would work. VW plans to start a ride-hailing service in Accra, modeled after a similar one in the Rwandan capital, Kigali, to ensure its output is absorbed.“The assumption is that in Africa, out of the more than 1-billion people, there are only about 100-million people who can afford a new car, but you may have a couple hundred million people who need to go from A to B and a bit of money in their pocket,” said Schaefer. “You need to tap into this market.
“Ivory Coast has already taken some steps in the right direction, which aim to limit the import of used vehicles,” said Léonce Yace, MD of Ivorian lender NSIA Banque. The company, one of the key players in vehicle finance in the country, saw a 41% year-on-year increase in vehicle loans in 2019.
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