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Is Africa The Final Frontier For The World’s Auto Manufacturers?

Is Africa The Final Frontier For The World’s Auto Manufacturers?

Nissan has an auto assembly plant in Nigeria.

General Motors, Volkswagen and Toyota, the world’s three largest carmakers by global sales, have plants in South Africa.

Renault is building cars in Morocco.

Peugeot signed a deal to assemble cars in Nigeria.

And Ford has two manufacturing plants in South Africa.

The African market for new vehicles is tiny, according to a report in FinancialTimes. The continent’s 54 countries accounted for 1.5 million new-car sales in 2013, Most of those sales (1.3 million) were in South Africa — by far the continent’s most developed economy — and in North African countries such as Algeria and Egypt, the report said.

But with fears of car sales performing below expectations in China, India, Russia and Brazil, car makers are looking to Africa and the Middle East.

Ford plans to launch 25 new vehicles or model upgrades in Africa and the Middle East over the next two years as the U.S. carmaker looks to tap the region’s growing middle class and expanding economies.

The region is the “final frontier” for the automotive industry, said Jim Benintende, Ford’s president for the Middle East and Africa, in a FinancialTimes interview. The region’s overall vehicle market is expected to grow by 40 percent to 5.5 million by 2020, he said.

Ford wants to expand aggressively across the continent, and cites data that sales could swell to 2.1 million by 2020.

Ford’s interest in Africa is an indication of the continent’s rising consumer demand and fast growth rates that are attracting multinationals. The carmaker forecasts that 840 million Africans will be of driving age by 2024, up about 60 percent from today.

“All the (manufacturers) are interested in Africa,” Benintende said. “You can see that with Renault putting a plant in Morocco and Nissan putting a plant in Nigeria,”

Nissan opened an assembly plant in Lagos this year in a joint venture with Stallion Group, a west African conglomerate, to become the first major auto-manufacturer to produce in the country.

French carmaker PSA Peugeot Citroën said Wednesday it will assemble cars in Nigeria.

Ford has two manufacturing plants in South Africa where it makes engines and its Ranger model. It exports to 148 countries. In 2013, Ford sold 60,000 new vehicles in South Africa, and 15,500 in the rest of sub-Saharan Africa giving it about a 10 percent market share, the company said.

In January, Ford opened a new regional office in Dubai. It has since opened its first sales and marketing office in Saudi Arabia, with plans for one in Morocco.

Ford is still examining how to expand across Africa. Its top-priority countries include Nigeria, the continent’s No. 1 oil producer and most populous nation; oil-rich Angola, Ghana and Kenya, the dominant economy in East Africa.

“We had this kind of disparate view of what we were doing in both Africa and the Middle East [and] the company recognized that this is potentially one of the biggest growth areas in the world,” Benintende said. “Quite frankly we were not set up properly for the future before, and I think now we are heading in the right direction.”

A two-week strike over salaries in South Africa forced Ford to suspend production at its vehicle manufacturing plant. Ford insists it is committed to the country.