Car manufacturing in Africa: Blue sky thinking needed

Recently, I listened to a webinar on opportunities for the automotive industry in Africa. I learned that Africa currently accounts for only 1% of the global car market and that roughly 85% of new cars sold in Africa are sold in South Africa; 85% of the cars sold in sub–Saharan Africa are second hand; and there will be a doubling of the population in Africa, which currently stands at 1.3 billion, over the next decade. All this adds up to a huge market opportunity for car manufacturers.

The response of African policymakers has been to incentivise the automotive industries to build vehicle assembly and component manufacturing plants locally to feed this new market. The main attraction is foreign investment capital and the jobs, skills transfer and broader economic development this brings. Local manufacturing also helps create shorter, cleaner supply chains and will help to raise standards, including used car quality and banishing dangerous fake spare parts. It seems like a no brainer, and what a great opportunity to leapfrog the internal combustion engine (ICE) in favour of electric vehicles (EV).

Apparently not. The feeling from one long-standing global car manufacturer on the panel was that Africa should not rush to adopt the EV agenda. EVs needed affordable electricity sources, infrastructure, the right policy and incentives for investment and therefore couldn’t reach scale any time soon in Africa. I find that quite disingenuous, given the drive for EVs as part of the climate change agenda in the developed world and other emerging markets.

This McKinsey article highlights the criticality of reducing carbon emissions from vehicles for the world to reach its climate change targets. It also talks about the major permanent shifts in personal car use and buying habits that need to accompany the targets. It predicts changes to the standard skillsets needed to assemble and fix ICE vehicles — with the emerging focus on electrification, autonomous driving, connected cars, and digitisation.

My concern? As the Western world moves away from its old polluting ways, will Africa once again become a graveyard for products that have/will become obsolete elsewhere? Where does the eventual shift to EVs in the rest of the world leave the ICE automotive workers and mechanics of Africa in years to come? Why is Africa expected to feel the effect of climate change daily yet do nothing about it?

I know there is a lot to be done to get African countries EV ready, but I firmly believe that any investment should be for that purpose — ensuring there is the proper infrastructure, including reliable power and good roads (in quality and quantity). The alternative is worse traffic jams, contributing to even more pollution and unproductivity.

Of course, a local automotive industry, supported by a strong regional supply chain of raw materials, is another great opportunity for African governments. It could also help make vehicles more affordable, say the car manufacturers (if only to those who can afford them). Meanwhile, the young Africans I know with disposable income — and who are concerned about their future world — seem more interested in spending their money on experiences that create memories than on a car that loses 40% of its value in its first year. Short term car rentals — you use them when you need them — and Ride-hailing services such as Uber mean they can get around easily without a vast and ongoing outlay on a depreciating asset. This is a live example of the shifts in habits that must come with the world’s efforts to reach its climate targets. In 3 years, 75% of the global workforce will be made up of Millennials and Generation Z. Does the forecast for demand for cars in Africa take into account their changing mindsets?

No matter, because whatever big international car manufacturers think about Africa’s need for polluting ICE vehicles, African entrepreneurs are taking things into their own hands. Take the example of Ampersand in Rwanda, which has just secured Sub-Saharan Africa’s largest-ever private investment in electric mobility. It’s a business model built on supplying cheaper, cleaner, better performing vehicles for motorcycle taxi drivers. They are just setting up in Kenya, continuing their work to double taxi driver incomes and “leapfrog Africa towards a zero-carbon future”.

Africa is suited to develop EV infrastructure and a carbon-neutral energy sector. The potential for solar and other forms of renewable energy infrastructure is huge. Africa is renowned for technological ‘leapfrogging’, from mobile telephony without installing fixed lines to fintech banking solutions without visiting the bank. The problem is that this requires national leaders to stand back, set ambitious long-term plans for their countries that are greater than their elected terms and visualise the aggregated effect of their decisions.

I agree that the automotive sector is critical for sustainable economic growth across Africa. But suggesting that Africa needs to grow an ICE infrastructure first, as a sort of stepping stone to EV technology (that somehow, we have to ‘earn’ our right to EV infrastructure), is pure arrogance. If we’re going to incentivise vehicle manufacturing in Africa from a low base, at a time when EVs are the future, let’s go EV-first and invest in whatever is necessary to make it a reality, rather than wait to play catch up — again!