VW and Nissan plan car plants in Ghana to tap West African market

Volkswagen and Nissan are planning new car manufacturing plants in Ghana. AFP

Volkswagen and Nissan are among automakers planning new plants in Ghana to target West Africa’s 382 million people. Their challenge is finding banks that will offer loans to make new cars affordable.

In a country where about 70 per cent of imports are second-hand, new car ownership is rare, said Believe Alorbu, who sells older models shipped from the US at half the price of a new one.

“People will sometimes leave the plastic wrapping on their seats," when they buy new cars, she said at her dealership in the capital, Accra. “Even if the government increases tariffs on used cars, people will still not be able to afford new ones if they don’t get access to financing.”

Less than 5 per cent 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 toward the debt, or that the owner take out insurance to cover a default. Interest rates of 22 per cent to 30 per cent also make loans “largely” unaffordable, said Koketso Tsoai, an auto-industry analyst at Fitch Solutions.

Once their facilities are running, VW, Toyota Motor Corp, Nissan, and possibly Renault will need to contend with second-hand cars like those sold by Alorbu. Ghana’s government is trying to make it more attractive with planned import duties on second-hand cars of 35 per cent, from 5 per cent to 20 per cent, and tax breaks that improve as the companies move from assembly to local production. It has also pledged to promote regional exports.

“We don’t look at it only for today,” Nissan Africa chairman Mike Whitfield said by phone from Cairo. “We continue to see Africa as the last frontier left in the automotive market, West Africa being a key part of it.”

About 10 per cent of West Africa’s population are able to spend more than $11 (Dh40.39) 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 10m new consumers annually. By 2030, Africa’s middle- and upper-income class is expected to exceed 300m of the world’s 4 billion consumer market, the data shows.

Standard Bank Group, Africa’s largest lender, is also preparing for future growth by replicating its South African car-financing business in other parts of the continent, including Ghana.

About three quarters of auto loans still go to companies, Patrick Koduah, head of vehicle and asset finance at the company’s Stanbic Ghana unit, said in an interview. “There’s a huge opportunity to grow personal demand.”

About 30,000 passenger vehicles were imported into Ghana in 2018, according to estimates from Fitch Solutions. Ghana had 7,073 new vehicle registrations in 2018, of which 4,268 were passenger cars, according to the International Organisation of Motor Vehicle Manufacturers.While the government has said its auto-incentives program would include the creation of an asset-based vehicle financing component, a trade ministry spokesman couldn’t provide details on how it would work.

Pan-African lender Ecobank Transnational said in an email that the average car loan in Ghana amounts to $30,000. Banks typically demand a high down payment and limit loans to no longer than five years if they do grant credit, while dealers sometimes allow buyers to spread repayments over six months.

More than 90 per cent of new vehicle sales in South Africa, the continent’s biggest market, are probably financed, Thomas Schaefer, the head of Volkswagen’s local unit, estimated. The country had a penetration rate of 132 passenger cars per 1,000 people in 2019, compared with 22 per 1,000 people in Ghana, according to Fitch Solutions.

“If I would take out the financing options in South Africa, our market would disappear,” Mr Schaefer said.

The Wolfsburg-based carmaker 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 1bn people, there are only about 100m people who can afford a new car, but you may have a couple 100m people who need to go from A to B and a bit of money in their pocket,” said Mr Schaefer. “You need to tap into this market.”

Nissan sees its assembly plant starting by the end of the year, depending on when Ghana’s auto-policy is signed into law. Volkswagen plans to start by April. Toyota, which described Ghana as “an extremely important market in West Africa,” declined to share details about its strategy.

Ghana won’t be the first country to position itself as a gateway to West Africa. Nigeria announced a very similar policy in 2013. However, after a change in government and years in the legislative system, President Muhammadu Buhari rejected the bill in July last year. Automakers have also signed agreements with Ivory Coast’s government.

“It is not about who should be the hub, it’s about who offers the best deal,” said Chris Ndala, managing director of CICA Motors Liberia, a subsidiary of the French group CFAO.

The car companies are beginning small in Ghana, with 5,000 units a year or less, and are expected to partner with local firms.

“We’ll all go as the business and the market goes,” Nissan’s Mr Whitfield said. “The critical thing is that it’s starting.”

Alorbu, the second-hand dealer, doesn’t see the used-car business getting displaced anytime soon.

“They make it sound like used-car dealers are the enemy, but we are helping the consumer,” she said. “If the government is not ready or willing to provide financing, selling new cars will be a problem.”

Source:The National

About Binnabook

Binnabook Magazine Believes in Free Speech,Social Journalism with newsgathering and verification of Data.

19 Comments:

  1. Wow, great article! Great work man i would like to congratulate you on this effort https://justpaste.it/4t3cn

    ReplyDelete
  2. This type of message always inspiring and I prefer to read quality content, so happy to find good place to many here in the post, the writing is just great, thanks for the post.car leasing

    ReplyDelete
  3. rent a brand new Corvette C8 stingray from mphclub today, Book your exotic car rental in Miami, Find the best Corvette rental in Miami Florida.
    Corvette rental

    ReplyDelete
  4. The information in the post you posted here is useful because it contains some of the best information available. Thanks for sharing it. Keep up the good work car dealer marketing.

    ReplyDelete
  5. Your blog contains lots of valuable data. It is a factual and beneficial article for us. underbody car wash Thankful to you for sharing an article like this.

    ReplyDelete
  6. Wow, What a Excellent post. I really found this to much informatics. It is what i was searching for.I would like to suggest you that please keep sharing such type of info.Thanks Indické-lekárske-vízum

    ReplyDelete
  7. Wow, What a Excellent post. I really found this to much informatics. It is what i was searching for.I would like to suggest you that please keep sharing such type of info.Thanks Víza do USA online

    ReplyDelete
  8. Wow, What a Excellent post. I really found this to much informatics. It is what i was searching for.I would like to suggest you that please keep sharing such type of info.Thanks indické vízum online

    ReplyDelete
  9. Wow, What a Excellent post. I really found this to much informatics. It is what i was searching for.I would like to suggest you that please keep sharing such type of info.Thanks Žiadosť o kanadské vízum

    ReplyDelete
  10. Great job, this is good information which is shared by you. This information is very meaningful and factual for us to increase our knowledge about it. Always keep sharing this type of information. Thanks. Read more info about Accessori auto online

    ReplyDelete
  11. Amazing articles and the way you explain is very easy. Turkey visa USA is a special type of offer for USA people. With the help of this, they can easily apply for a Turkey visa .

    ReplyDelete
  12. Outsider protection, which might be known as TPI, PDW (Partial Damage Waiver), SLI (Supplementary Liability Insurance) and different abbreviations, is a legitimate prerequisite. private car companies

    ReplyDelete
  13. It's good to be back! I thought I've been to this site before, but after reading some of the posts, I realized it's new to me. In any case, I'm glad I found it and will definitely bookmark it and check back often. The India business visa is one kind of the Indian e-Visa issued online by the Government of India. Can apply for Indian business visa application or e business visa India through online visa application system.

    ReplyDelete
  14. This is good news, I believe that this plant will be useful for the development of the country. Then we will be able car rental under 25 more often to travel around our country.

    ReplyDelete
  15. Nice article thank you for this. Check the Kenya visa requirements before you apply for the Kenya visa through online visa application. The e visa application offers the fast visa services. Thank you

    ReplyDelete
  16. Good afternoon readers,Your blog is a great one, thank you for sharing it with us. I am so excited to inform travelers that the Burma visa is now available online. You can generate the tourist & business visa request at your leisure and get evisa on your email.

    ReplyDelete
  17. Hello! Just wanted to give you an enormous thumbs up for your good information you have here. Now that the process is available online, visa India USA citizens can easily track and get their visas.

    ReplyDelete

Your Views are needed.Thanks!

Morocco knock Spain out of World Cup on penalties (penalty 3-0)

 Achraf Hakimi struck the decisive penalty to send Spain crashing out and Morocco into the World Cup quarterfinals for the first time, winni...

TRENDING News Feed