The first signs of BMI's view that the Ghanaian economy will enjoy stellar economic growth over the medium term, propelled by the nascent oil & gas sector, were visible in data released for 2011, which showed GDP growth of 16.8% in Q311 and 16.0% in Q411. For the autos sector, this translated into light vehicle sales of 9,177 units, according to data reported by Renault. This year-on-year (y-o-y) growth of 43% surpassed even our own upbeat projection of 30% growth, based on the sector's impressive expansion to date. Despite the country's small size, Ghana's autos market has grown rapidly in recent years owing to economic growth and a developing middle class.
We expect this momentum to be sustained in 2012, when our Africa team's forecast for GDP growth of 7.9% should contribute to 28% growth in vehicle sales, to 11,774 units. In addition to increasing personal spending power, we believe government-led schemes, such as re-equipping the police force with new vehicles, will also bolster sales. However, there are risks of macroeconomic instability stemming from burgeoning oil revenues and the December 2012 election. With annual growth in GDP per capita unlikely to fall below double-digits over the next five years, taking the figure from US$1,565 in 2011 to US$2,876 by the end of our forecast period in 2016, we expect vehicle sales to be a beneficiary.
There are other signs of development elsewhere in the industry. Hyundai Motor announced in February 2012 it would open a technical training centre aimed at preparing young students for jobs in the automotive repair business. The company will invest US$700,000, in conjunction with KOICA and PLAN Korea, with completion of the centre slated for July 2012.
The training centre will take 300 students in its first year, with successful trainees being offered jobs in Hyundai repair centres. The Ghana facility will be the first of several in Africa and Asia, which Hyundai is planning to build in a continuous cycle, according to press reports. Although Ghana does not have a vehicle production industry as yet, the centre is aimed at giving local people a grounding in the industry and making the sector more localised.
Côte d'Ivoire has suffered from chronic underinvestment following years of conflict and civil war. Its poor transport infrastructure, deteriorating road networks and high number of military checkpoints have had a negative impact on foreign investment.
However, we forecast that Côte d'Ivoire will enjoy GDP growth of 8.1% in 2012, revised upwards from our previous projection of 7.4%, as it recovers from post-election violence that caused an economic contraction we estimate at 5.0% in 2011. Long-term economic expansion should be boosted by a 'unification dividend'.
This will have a positive impact on autos sales, as we expect strong private consumption to be a key feature of the country's sustained growth over the five-year forecast period. We expect annual vehicle sales growth to average 5.95% to the end of our forecast period, in 2016.
As in much of Africa, Chinese brands are becoming more popular and Great Wall Motors has quickly become one of the top 10 brands in the country. It has been supplying vehicles for the police force since local distributor First Auto Company won the tender in 2008.
Two key trends (for SUVs to tackle the underdeveloped terrain and a shift toward low-cost emerging market brands) combined, mean that low-cost SUVs are now among the most popular new vehicles available in the country. Great Wall has tapped into SUV demand with its Hover and Dacia, the Romanian subsidiary of France's Renault, exports its Duster model.
However, there are also signs of new models from leading international brands, as Ford Motor began exports of the Figo small car in December 2011.
A 23% year-on-year (y-o-y) increase in new vehicle sales in Gabon during 2011 falls closely in line with BMI's expectations of a 25% growth in sales during the year and marks a strong recovery after three consecutive years of contraction between 2008 and 2010. In addition to the strength of the economy, the robust growth partly came on the back of increased demand from government agencies and businesses ahead of the Africa Cup of Nations football tournament 2012.
However, with much of the vehicle demand being met during 2011 and 2012, we believe that vehicle sales growth will moderate at an average of 9% y-o-y between 2013 and 2016, taking 2016 market sales to 7,800 units.
We warn that there could be downside risks to our outlook if demand gets dampened by the slowing economic growth in the country. Our Macroeconomic team is currently forecasting Gabon's real GDP growth to slow down to 3.0% in 2012 and just 1.7% in 2013 - after growth of 5.6% each year between 2010 and 2011 - as oil production declines.
One of Gabon's key strengths is that the participation of the household sector in the new vehicle market is very low. While this could be an impediment for vehicle sales growth in the short and medium term, it positions Gabon as a market with strong long term potential. For the short term, we believe the scene is set for good growth in commercial vehicle sales on the back of infrastructure projects in the country.
Meanwhile, the Emerging Gabon diversification strategy announced by President Ali Bongo Odimba will also bring good demand potential for the commercial vehicles segment. BMI currently tips manganese mining, timber and tourism as three areas that could benefit from the diversification push.
All of these factors rank Gabon fourth in BMI's Risk/Reward Ratings for the autos industry in Africa, lagging behind its bigger regional rivals South Africa, Nigeria and Botswana. As of now, we do not see any scope for Gabon to overtake its rivals, as Gabon will remain constrained by the relatively small size of its new vehicles market and the uncertainties surrounding the progress of its economic diversification strategy.
The competitive landscape is largely dominated by Japanese brands which together occupy almost 80% of the market. Estimates from the Union of Automotive Industry Representatives (Urai) revealed that Toyota Motor remained the dominant player in the market with sales of 1,945 vehicles and a market share of 32% during 2011. The Japanese carmaker was followed by Mitsubishi (which sold 1,012 units), Hyundai (544 units), Nissan Motor (359 units) and Mazda (331 units).
BMI's estimate for new vehicle sales in 2011 has been revised upward after the National Association of Automobile Manufacturers of South Africa released data showing that Cameroon was the country's fourth-largest export market during the year. Imports of South African-built vehicles have risen from just 50 units in 2009 to 3,330 units in 2011. This has had a knock-on effect for our volume forecasts for the remainder of the five-year period to 2016.
BMI's forecast for an acceleration of GDP growth, from an estimated 3.7% in 2011 to 4.3% in 2012 and 5.0% in 2013 is positive for the future of consumption-led industries such as autos. We expect annual real GDP growth to average 4.2% between 2011 and 2016, with the peak of growth coming in 2013, when we expect growth of 5.5%, up from our previous projection of 5.0%. This will be fuelled by new oil production boosting exports. However, the lingering downside risk is the rife income inequality, as the non-oil sector has not grown sufficiently to tackle poverty for the majority of average consumers. Investment in the mining sector looks set to be one of the best-generators of vehicle demand in the near future. Foreign investment, particularly from the mining sector, has prompted the government to invest in road development, including a new highway linking the country with Nigeria.
However, BMI's Infrastructure team points out that even where public financing has not been forthcoming, miners have invested in infrastructure development themselves. This is most evident with the example of the Mbalam Iron Ore project Freight Railway and Deep Sea Port in Cameroon. This is a project developed by Sundance Resources, the largest foreign investor in Cameroon's mines, who need infrastructure to export their output from the eastern mines to the port.
A marked uptick in infrastructure spending (with the government increasingly turning to China in its development efforts), and construction projects in particular, shows potential not just for commercial vehicles demand, which often correlates with infrastructure investment, but also for the improvement of the country's roads to accommodate increased vehicle use. Road transport accounts for around 70% of the country's transport network but is severely constrained by the poor state of the roads.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
Click for Report details:West & Central Africa Autos Report Q3 2012