Now is the time to kickstart an auto manufacturing revolution in Africa

Nissan’s manufacturing plant in Rosslyn, outside Pretoria, South Africa
Nissan’s manufacturing plant in Rosslyn, outside Pretoria, South Africa
Image: Reuters/Siphiwe Sibeko
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Astrophysicist and director of New York’s Hayden Planetarium, Dr. Neil deGrasse Tyson is a strong advocate for humans traveling to the planet Mars. His rationale is due to what has become known as the “NASA Effect,” for the United States National Aeronautics and Space Administration. In Dr. Tyson’s view, funding NASA to execute a project as big as going to Mars “will stoke a pipeline of scientists and engineers as never before, and stimulate and entire nation to dream about tomorrow.”

I believe that sustainably industrializing automobile production on the African continent is a similarly ambitious and audacious goal, a goal that can have a similar motivating effect for African nations as going to Mars can have for Americans.

African nations can leapfrog other basic and light manufacturing sectors and stretch themselves to build industrial capabilities and capacity in the auto manufacturing sector, which will result in a similar level of motivation, innovation, discovery, and transformation. Few products are as complex as the motor vehicle. No other consumer product is as complex. It is a big idea, and it is a big deal! On the road to automotive industrialization, many off ramps, rest stops and scenic views will be created.

By shooting for the skills and capacity to manufacture motor vehicles, African nations and regions will gain the abilities to manufacture other products such as furniture, medical devices, renewable energy systems, consumer durables and electronics, toys, musical instruments, office equipment, tools, farming and construction equipment, household goods, fast-moving consumer goods, and many others. More and more products will be locally manufactured instead of being “brought in” as imports.

What do people want?

As income levels rise, personal consumption rises. The desire for the freedom of personal mobility also rises. This results in increased demand for personal use vehicles: cars, trucks, motorcycles, and scooters. According to the Encyclopedia of Global Population and Demographics, vehicle sales in a region start to rise when local annual incomes reach half of the price of a new vehicle. In the mature US auto market with its broad spectrum of product offerings, the average price of a new car or truck in 2016 was approximately $34,000. The average price for an entry-level subcompact car was approximately $17,000. This guideline suggests that vehicle sales in a region will rise as local incomes reach $8,500 per year.

According to the IMF, the ten “poorest” African countries have per capita income levels of approximately $500, or 1,000 per year. However, the ten “richest” African countries have per capita GDPs ranging from $12,000 to $39,000 per person. In the remaining 34 African countries, with per capita incomes ranging from $1,000-$7,000, there are major cities and local areas with average income levels that far exceed the $8,500 average.

According to the Paris-based Organisation Internationale des Constructeurs d’Automobiles (OICA) or International Association of Motor Vehicle Manufacturers, in Africa there are on average 44 vehicles per 1,000 people. This compares to the global average of 180 vehicles per 1,000 people, and 800 vehicles per 1,000 people in the United States, where per capita income is approximately $50,000. According to McKinsey, the number of vehicles on the African continent has doubled between 2006 and 2016 to a total of 32 million vehicles on the road. By comparison, there are approximately 260 million vehicles on the road in the US alone.

There are lots of opportunities for Africans to purchase their first vehicle. As economies, incomes, and personal consumption grow, there is clearly significant opportunity for growth in vehicle purchases. If African nations and regions take the necessary steps to locally industrialize automobile production, this impending growth can be satisfied with locally produced products, which will result in economic growth, the creation of skilled local jobs, and advancements in local technical capabilities.

Circular and Sustainable

Lower continent-wide or countrywide per capita income levels should no longer be a barrier to investing in automobile production in Africa. In advance of per capita incomes in Africa growing to the $8,500 per year take-off point for personal vehicle purchases, recent trends now make vehicles and personal mobility more accessible to consumers in the middle and at the base of the economic pyramid. Advancements in mobile technology and software have enabled the expansion of the sharing economy. Application of these technologies to personal mobility can allow rides or vehicles to be hailed or shared with a few clicks on a smartphone. This means that rides or vehicle usage can easily be scheduled and purchased on an as-needed basis. This per-use pricing makes vehicles accessible to individuals at significantly lower income levels.

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The average vehicle in the US sits parked for 95% of its lifetime and is only used for 5%. Given the cost to purchase, insure, maintain, store, and eventually dispose of the vehicle, this is incredibly wasteful. The development and application of business models that utilize this 95% “parked time” could allow a vehicle owner to offset the purchase price and ownership cost of a vehicle, and convert them from a future consumer to an immediate consumer.

In addition to making vehicle ownership more accessible, these ride and vehicle sharing mobile apps and business models will enable the mobility market to be satisfied with a significantly lower concentration of vehicles, i.e., fewer cars on the road. It is unlikely that Africa will reach the 800 vehicles per 1,000 people concentration of the US market, even in regions of high local wealth concentration, but the people on the continent would still have their personal mobility needs met. This lower concentration will also benefit the environment, as producing fewer vehicles will save both materials, energy, and waste from end-of-vehicle life disposal. In addition, ride sharing will reduce per person / per mile energy consumption.

Ride sharing and vehicle sharing are elements of what has come to be known as the “circular economy.” According to the global consulting firm Accenture, the circular economy uses digital technology to change the way products are produced and consumed. It is a series of strategies to reduce waste and promote efficient utilization of re- sources in the production and use of a given product. Instead of a linear approach of producing a product, using the product, and discarding the product in a landfill, circular economy strategies attempt to add more usage (cycles, loops, or circles) to the product’s use phase to extract more productivity during its lifetime. According to the US Environmental Protection Agency (EPA), circular economy strategies drive efficiency and sustainability in:

  • Selecting and using the raw materials to produce the product
  • Designing the product to facilitate sharing and extended lifecycles
  • Producing the product and the remanufacturing (reusing) of its components
  • Distributing the product
  • Consuming, reusing, maintaining, and repairing the product
  • Collecting, recycling, and disposing of the product at the end of its life

These additional usage loops fundamentally lower the numbers of vehicles that need to be produced for a given market, thereby conserving material and energy resources. Integrating circular economy strategies as part of the sustainable industrialization of automobile production is a compelling approach to meeting the personal mobility needs of Africa’s emerging middle class, while building profitable companies, creating jobs, and being responsible to the environment.

*This an excerpt from Motoring Africa: Sustainable Automotive Industrialization, by Edward T Hightower