AFRICA IS NO EXCEPTION

Martin Hendriksen, Strategic Planning & Customer Experience Director, NEXUS Automotive International

Digitalization, Electrification, Sustainability, Consolidation in Africa

The automotive aftermarket industry in Africa does not escape change driven by trends in digitalization, electrification, sustainability, and consolidation.

These trends will also help shape the future of the industry, affecting both consumers and businesses in Africa. How will these trends play out in the region, considering factors such as GDP growth, exchange rate fluctuations, and the difficulty of securing foreign currency? How quickly will the Chinese electric vehicle industry have an impact in Africa and what about education and training as drivers of economic growth?

Digitalization is transforming the automotive aftermarket industry globally, and Africa is no exception. With more vehicles equipped with advanced technologies, the demand for skilled technicians and mechanics has risen, leading to a shortage of qualified personnel. Digital tools and platforms are being developed to help bridge this gap, enabling technicians to diagnose and repair complex vehicles with greater speed and accuracy. In Africa, markets lag their Western counterparts with the skills shortage being one of the major stumbling blocks.

Sustainability is also a trend that is gaining traction in the automotive aftermarket industry. With growing concerns about climate change and the impact of fossil fuels on the environment, there is an increasing demand for greener and more sustainable vehicles. In response, automotive manufacturers are investing in developing and marketing more sustainable vehicles, and businesses in the aftermarket industry are following suit. Sustainability is not the first priority in many African situations and global players have a leadership role in this respect. In terms of energy however, some African markets face electricity shortages due to the failure of traditional generation methods. It is expected the private sector will become more involved in the generation of electricity and much of the new power will be generated in a more sustainable way as a result.

Electrification is another trend that is shaping the future of the automotive aftermarket industry. As electric vehicles gain popularity, there is a growing need for charging infrastructure and repair and maintenance services. However, many African countries are struggling to keep up with the pace of change, and there is a shortage of trained technicians who are capable of servicing these vehicles. In Ethiopia for example, the latest technology vehicles are available but there are no people qualified enough to service and repair them and parts are in short supply. Some owners fly in the necessary skills and parts, whilst others ship their vehicles overseas for the necessary service and repair work to be done.  This highlights again the need for education and training in this field to support the growth of electric vehicles in Africa.

It is most likely that Chinese manufacturers will lead the electrification game in Africa with low-cost models. Potentially one could see a growing electric fleet in Africa powered by sustainable energy sources such as solar and wind.

Consolidation is another trend that is shaping the future of the automotive aftermarket industry in Africa. With the market becoming increasingly competitive, businesses are seeking to merge or acquire other companies to achieve greater scale and efficiency. This trend is expected to continue in the coming years and will have a significant impact on the structure of the industry in Africa. Many African businesses in the automotive aftermarket sector are traditional family run enterprises and these families start to question their futures in a fast-changing industry. 

Furthermore, the Africa Continental Free Trade Agreement (AfCFTA) is a trade pact signed by African countries to boost intra-African trade by eliminating tariffs on goods traded within the continent. The agreement covers a market of 1.3 billion people and a combined GDP of $3 trillion and has been signed by 54 of the 55 African Union member states, with only Eritrea not yet having joined. The signatories represent a diverse group of countries in terms of size, geography, and level of development, including large economies like Nigeria and South Africa, and smaller ones like Rwanda and Senegal.

The AfCFTA officially came into force on January 1, 2021. The agreement aims to create a single market for goods and services, increase investment flows, and enhance economic growth and development across Africa. The full implementation of the AfCFTA is an ongoing process and there is no set deadline for when it will be fully implemented. The implementation will be phased in over time, with certain sensitive sectors and products excluded initially, and tariffs gradually being eliminated. The objective is to create a fully integrated African market, which would provide a major boost to the continent's economic growth and competitiveness.

In conclusion, the automotive aftermarket industry in Africa will undergo major changes, driven by trends in digitalization, electrification, sustainability, and consolidation. The impact of these trends will be shaped by factors such as GDP growth, exchange rate fluctuations, and the difficulty of securing foreign currency. As electric vehicles gain popularity, education and training will play a critical role in driving economic growth and ensuring that the industry is able to keep up with the pace of change.  Change in big steps is no stranger to Africa, for example most Africans never had fixed line telephones but almost everyone has a mobile phone today!

Nexus will focus its African efforts through the IAMaga structure, taking cognisance of the major trends to help build better aftermarket business on the continent.

Martin Hendriksen

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