4 key forecasts for Africa’s auto sales industry; vehicle sales will slow to 5.6% in 2022
It is going to be another slow year for the automobile sales industry in Sub-Saharan Africa, according to Fitch Solutions.
In a lengthy commentary published on its website, the leading credit intelligence provider explained that the demand for and sales of vehicles in Sub-Saharan Africa will suffer headwinds in 2022. And that would be mainly because of the region’s slow economic recovery from the pandemic-induced recession.
“Looking to 2022, we forecast that the SSA regions vehicle sales growth to slow to 5.6% y-o-y with strong upside risk if currencies strengthen and if the supply and the price of used vehicles normalise we could see a strong uptick in sales towards the end of 2022,” said part of the report.
As you may well know, SSA countries have been struggling to record full economic recovery since the pandemic hit in Q1 2020. And this has inevitably affected the people’s spending habits, even as they continue to prioritise essentials.
Meanwhile, the report explained that increased vaccination across the region is expected to accelerate economic recovery in 2022. And this would, in turn, positively impact vehicle sales.
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Sub regional vehicle sales forecasts for 2022
- While vehicle sales in East Africa will out-perform other sub-regions in 2022, it will remain below trend. Specifically, sales will expand by 7.6% in 2022, below 10.0% in 2021.
- In West Africa, vehicle sales will average 5.7% in 2022, below 9.4% in 2021.
- In Southern Africa, vehicle sales will record a 3.6% average expansion in 2022.
Ride hailing services and vehicle sales
The second main forecast is that the growing adoption of ride hailing services in Sub-Saharan Africa will encourage vehicle ownership and ultimately help to drive up sales. Fitch Solutions explained this thus:
“The burgeoning ride hailing sector in the region has the potential to become a key driver of a new vehicle sales market in SSA, as it allows for income earned through rides to contribute towards down-payments for new vehicles. Automakers and car dealers have an opportunity to tap into this sector by partnering with financial intermediaries such as commercial banks and fintech start-ups to offer tailor-made vehicle financing solutions intended for ride hailing services.
“For example, in August 2021, Uber along with Moove raised USD23mn to offer prospective borrowers financing options based on key metrics such as the number of rides performed and income generated from rides completed. Vehicle repayments are then deducted from the borrower and the remainder of the balance is debited to the borrower’s Uber account. We believe this offers a less risky way for the financial sector to extend loans intended to purchase new ride-sharing vehicles in the region.”
SSA’s truck segment boasts room for growth
The third forecast is that heavy duty vehicles will be in high demand come 2022, as they will be needed to facilitate shipments (including shipment of vaccines) across Sub-Saharan Africa’s sub-regions. That said, sales for commercial vehicles is expected to expand by a robust 15.9%.
e-Logistics startups will digitise and formalise SSA’s logistics industry
According to Fitch Solutions, the emergence of new e-Logistics startups such as Sendy, Lori Systems and Kobo360 will not only encourage increased demands/sales of commercial vehicles, but also help to digitise and formalise the region’s logistics industry.
