Eastern Africa’s Automotive Markets Outlook

As the performance of Africa’s key economic sectors remain suppressed by effects of COVID-19, East Africa’s automotive industry seem to be attracting some business investment, boosting growth opportunities for the region’s automotive paints and coatings market.

Despite the disruptive effects of COVID-19, a few original equipment manufacturers (OEMs) and local investors have unveiled either new production plants or distribution centers that could increase vehicle ownership in East Africa, hence influencing demand trends for automotive paints.

For example, Indian car manufacturer Tata Motors has recently unveiled a brand new car, a compact SUV-Tata Nexon, in the Tanzanian market, with the company describing the country’s automotive market as “a fast-growing vehicle market and an opportunity for users to contribute to the preservation of the environment.”

Statistics show the car market in Tanzania increased by 5.3% last year in the midst of the coronavirus pandemic compared to 2019.

“With the launch of these products (cars), we look forward to increase our market share not only in the UV segment but also in the overall passenger vehicles segment in the Tanzania,” said Sujan Roy, head International Business, Passenger Vehicle Business Unit at Tata Motors.

Tata’s unveiling of the new car in Tanzania coincided with the launch of a new dealership in the country’s capital Dar es Salaam by Isuzu, a market leader in the commercial vehicle segment representing more than 40% of new vehicles sold in EA.

The launch of the dealership, Isuzu said “came at a time when most companies were deferring investments due to the uncertain economic times caused by the COVID-19 pandemic.”

East Africa has more than 30 automotive manufacturing companies, including the American multinational corporations of General Motors, Ford, Chrysler, Europe’s Volkswagen, PSA Peugeot-Citroen, Renault-Nissan, Fiat Group and BMW, Japan’s Toyota, Honda, Suzuki, Mitsubishi, Mazda, Fuji Heavy Industries (Subaru); and South Korea’s Hyundai, KIA, and Daewoo.

“Although the African automotive market is comparatively small today, the sub-Saharan region has the potential to become an automotive growth market of the future,” said Volkswagen in a previous statement. The German carmaker has operations in East Africa, including in Kenya and Rwanda.

Moreover, governments in East Africa have unveiled, though at national level, bits of measures that support growth of the automotive industry that could sustain the growth of the region’s automotive paints market.

East Africa’s automotive paints and coatings market is currently dominated by Basco Paints, Crown Paints, Hempel, Kansai Plascon, Kiboko Paints Ltd, Apex Coating East Africa Limited and Goldstar Paint Tanzania Ltd.

For example, Tanzania, East Africa’s second biggest economy after Kenya, announced in June 2021, the reduction in registration fees for personal cars from US$4300 to US$2150, a small step no doubt, but a major boost in the drive to increase car ownership in the country and likely to escalate consumption of automotive paints.

Despite this positive automotive industry activities, Kansai Group, which operates in East Africa as Kansai Plascon, says COVID-19 led to the company’s auto refinish products’ market being “sluggish due to a decrease in automobile ownership and an increasing shift from car ownership to use.”

“Amid this, our net sales were down on the previous year, despite having expanded sales of highly competitive water-based coatings,” Kansai says in its 2020 annual report.

The company says sales in the African market “were sluggish, down on the previous year.”

Nevertheless, Kansai says although available data shows a decline in automobile production or stagnation in new vehicle demand due to COVID-19, “forecasts suggest that automobile production will recover and expand on a global basis.”

For Nairobi-based Crown Paints, a leading market player in East Africa, it was only the construction industry, particularly residential repairs and improvements, that showed resilience under COVID-19 in 2020 with “performance of many other sectors of the economy decreased due to adverse effects of the lockdown.”

Going forward, the domination of East Africa’s automotive industry by North America and European OEMs is likely to influence how adoption and enactment of the global emissions regulations by Kenya, Tanzania, Uganda, Rwanda, Burundi and South Sudan, all members of the EAC.

The OEMs have to a large extent embraced the best industry norms in their countries of origin in regard to automotive paint additives and refinish coatings products.

For example, the European Union has, through Directive 2004/42/EC of the European Parliament and of the Council of 21 April 2004, safeguarded the environment by regulating emissions of volatile organic compounds (VOCs) arising from the use of among other products, the organic solvents in vehicle refinishing sub-sector.

Some of the EU-based OEMs that have made forays into EA include Europe’s Volkswagen, PSA Peugeot-Citroen, Renault-Nissan, Fiat Group and BMW, and many of them may have shifted focus to the use of waterborne technology in their country of origin in compliance with the VOC emission regulations.

If the international OEMs adopt, enact and comply with VOC emission rules in their East Africa operations, then waterborne paints, which contain nearly 75% of water and approximately 25% of other solvents, would most likely dominate the region’s automotive paints and coatings market.

In East Africa, Kenya, Tanzania, Uganda, Burundi and Rwanda agreed two years ago to move towards Euro 4/IV vehicle emission standards as well as legislate periodic emissions testing for in-use vehicles. Such legislation would also ensure enactment of stringent vehicle regulations to control the importation or assembly of vehicles with no or obsolete emission technologies.

Meanwhile, Kenya and Uganda are currently promoting motor vehicle production by local car makers to support industrial growth and job creation. This initiative is expected to increase the number of affordable vehicles in East Africa that would support growth of the region’s automotive paints market.

For Kenya, Mobius is the dominant local car manufacturer. There are four other five major motor vehicle assemblers with an annual capacity of 46,000 units.

Uganda is also investing in the Kiira Motors project that the government says will produce 5,000 vehicles annually starting with buses and trucks. The project is 78% complete according to Planning Minister Amos Lugoloobi.

As the global automotive industry embraces new business strategies to ensure post COVID-19 recovery, the East Africa market is likely to remain resilient, fueling demand in automotive paints.