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Japanese automakers eye Africa as next frontier www.asia.nikkei.com
NAGOYA -- Japanese car companies are broadening their footprints in the fledgling African automobile market, which is set to double within the next decade.
Toyota Motor will spend roughly 44 billion yen ($425 million) at a plant in Durban, South Africa. The funds will enhance production lines for the Innovative International Multi-purpose Vehicle project, or IMV project, which strategically targets emerging markets.
Toyota will gradually switch over to new versions of IMV vehicles for the first time in 11 years. The company will boost annual output of the Hilux pickup truck and other vehicles from 120,000 units a year to 140,000. These will be sold in South Africa as well as elsewhere on the continent and in Europe.
The Durban plant has raised annual output capacity for the HiAce van by about 40% to 13,000. The commercial vehicle is in high demand, since it can serve as a minibus. Toyota is fabricating more pressed parts locally because the weak South African currency is driving up costs for importing components.
Nissan Motor is stepping up sales in South Africa under the Datsun brand, which was revived for developing markets. The company has some 90 Datsun dealerships in-country, triple the 2014 figure. By expanding its presence in the continent's largest market, Nissan aims to boost its African share from the roughly 7% of 2014 to 10% in the fiscal year ending March 2017.
Japanese commercial-vehicle manufacturers are also expanding Africa operations, eyeing infrastructure projects made possible by official development assistance and other economic aid from Japan. Hino Motors will start selling trucks in Ivory Coast in 2017. Mitsubishi Fuso Truck and Bus has officially launched a new heavy-duty truck in Kenya. The TV 3340S Tractor cab was developed by German parent Daimler, and plans are to sell it in neighboring countries as well.
Some 1.55 million vehicles were sold in Africa in 2015, shows data from the International Organization of Motor Vehicle Manufacturers. This represents an 8% drop amid factors including softening commodity prices. Africa accounts for only 2% of the global market.
But sales have still grown nearly 40% over a decade. Rising income levels are expected to lift sales even further. U.S. market research firm Frost & Sullivan forecasts sales of up to 3.26 million vehicles in 2025, double the 2016 estimate. This would put the African market roughly on a par with Germany's present scale.
However, "the African economy is swayed sharply by swings in crude oil and mineral prices, which significantly impacts the automobile market," warned Takashi Morimoto, senior consultant at Frost & Sullivan.
Few parts manufacturers are setting up shop in Africa, forcing Japanese automakers there to rely heavily on imports. This exposes them to foreign exchange fluctuations, and weaker developing-country currencies stand to hurt profitability.
Strikes are also frequent in South Africa and other countries with strong unions, making stable labor-management relations a must. Shifting tax codes and competition from used vehicles also pose challenges.
Published Date:2016-09-06
