Auto exports to Africa in top gear

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Saroj Mohanty | 12 Aug, 2013
Indian automakers are making deep inroads into the African markets where the demand for new vehicles is expanding fast. New, dynamic manufacturers have joined the historically engaged Tata Motors and Mahindra & Mahindra in this venture.

"India's ascent has been most pronounced...growth in Indian vehicle exports to Africa has been weighty: since 2003 total Indian vehicle exports to Africa have swelled by over 1,000 percent (and by 160 percent since 2008)- by far the fastest rate for this product group amongst Africa's traditional and BRICS trading partners," says a report by South Africa's Standard Bank.

The report, titled "The Africa Macro: India leads in unlocking new vehicle demand in Africa" released last week, says all the world's major vehicle exporting economies, except China, have seen exports to Africa grow at a more profound rate than exports to the rest of the world.

Of particular interest, however, is the growth of Indian exports to Africa.

"Whereas in 2003, India was Africa's 12th largest source of total vehicle imports, by 2012, it had shifted to sixth - ahead of both France, which was third in 2003, and the UK, ranked sixth in 2003," says Bank analyst Simon Freemantle in the report co-authored with economist Jeremy Stevens.

For India, the softening of domestic demand has no doubt played a part to secure the African markets. After expanding in 2009-2011, India's domestic vehicle market dipped 6.7 percent to 1.89 million units in 2012-2013.

But Freemantle says India's strength in Africa has consistently been the ability of its home-grown multinationals to leverage domestic success and adapt to challenging emerging African economies.

Of India's $3 billion income in vehicle exports to Africa last year, 46 percent consisted of passenger cars and 14 percent of motorcycles, which have become a key ingredient for both urban and rural transport across some of Africa's fast growing but still lacking in physical infrastructure economies.

Last year, Nigeria imported the largest number of Indian motorcycles of any African country, accounting for 48 per cent of total Indian motorcycle exports to the continent. Angola was second, followed by Uganda.

Indian motorcycle exports have increased by 175 per cent to Africa since 2008. Bajaj Boxer is the largest-selling single motorcycle brand in Africa.

However, it is passenger cars driving India's export growth. Since 2003, Indian car exports to Africa have grown by a staggering 2,400 per cent.

Last year, India exported almost three times more cars to Africa than China, half as many as South Korea. Indian car exports have also grown at a significantly faster pace since 2008 (155 percent) than China's (65 percent) and Korea's (55 percent).

South Africa took the larges' share of Indian car exports to Africa in 2012, importing 41 percent of total car exports to the continent, followed by Algeria and Egypt.

Total Indian car exports to Africa have increased by 160 per cent since 2008, compared to a 90 percent lift in exports to the world.

During this time, exports to South Africa expanded by 560 percent, to Angola by 550 percent, to Libya by over 2,500 percent, and to Nigeria by 240 percent.

Meanwhile, Tata Motors and Mahindra & Mahindra are driving market expansion initiatives across Africa. Tata Motors has recently become one of Africa's fastest-growing passenger vehicle manufacturers. From its base in South Africa, where it has invested around $700 million since 1994, it exports a range of vehicles to markets in the Southern African Development Community (SADC).

It also recently announced it would set up an assembly plant in Kenya.

Mahindra & Mahindra, also with a base in South Africa, exports regionally to Zimbabwe, Zambia, Botswana, Swaziland and Namibia. M&M's growth has largely been in the pick-up truck ("bakkie") market -- 150 of which are sold monthly in South Africa.

In March this year, Mahindra Global announced it would commence vehicle assembly operations in South Africa.

Bajaj Auto is present in Kenya, Tanzania, Egypt, Guinea, Nigeria, Angola, Namibia, Sudan, Ethiopia and Uganda.

Hero MotoCorp last December announced starting of motorcycles exports to key markets in Africa. In Kenya, it has set up an assembly plant to manufacture its 100cc Dawn motorcycle.

"Between January and March 2014, we will launch some more additional markets, some in Africa, some in the Caribbean and Central American countries," Managing Director and CEO Pawan Munjal said Thursday.

TVS Motor Company is planning to establish a multi-billion dollar assembling plant in Uganda. In July this year, the company announced plans to launch two new motorcycle models in Kenya, both of which are specifically tuned to local conditions.

The company has also commissioned an assembly line in the Kenyan town of Nakuru.

Besides the Indian firms, the report says, growth in Indian vehicle exports to Africa is also owing to the presence of foreign auto companies like Maruti Suzuki and Hyundai which have assembly and production plants in the South Asian country.