Chinese vehicles are gradually finding a vast and fertile new "habitat" in overseas markets.
From September 4 to 6, the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC) was held in Beijing. As early as September 3, the African delegation conducted a series of visits to China's auto industry.
Among them, on September 3, a South Africa media delegation visited BAIC; The Prime Minister of Egypt met with Wei Jianjun, Chairman of Great Wall Motors. On September 6, Egypt's Prime Minister Mustafa · Madbouli held talks with Feng Xingya, general manager of GAC Group, and his party in Beijing; Lei Jun, Founder, Chairman and CEO of Xiaomi Group, delivered a speech as one of the representatives of Chinese entrepreneurs.
Lei Jun said that he hopes to have the opportunity to strengthen cooperation with African companies in various emerging industries, including new energy vehicles.
In addition, on September 6, Gasgoo learned that Morocco Prime Minister Aziz Akhannouch also led a delegation from the Ministry of Investment, the Investment and Export Development Agency and the Private Sector Association to visit Guoxuan Hi-Tech.
To a certain extent, all of the above events show that Africa has shown a strong interest in the continent's new energy vehicle industry in the context of global carbon neutrality. Liu Yuxi, the special representative of the Chinese government for African affairs, said that at present, China and Africa are the two economies with rapid growth and great potential in the world. Africa's population is expected to increase from 14 percent of the world's population to 22 percent by 2050, he said.
At the same time, the report predicts that the African electric vehicle market will reach $21.4 billion by 2027, with an average CAGR of 10.2% from 2022 to 2027.
Obviously, Africa, as an emerging market for the new energy vehicle industry, has huge growth potential.
"Enterprising" Africa, with a pure electric penetration rate of less than 1%
According to the latest United Nations Geography Programme of the Statistics Division of the United Nations Department of Economic and Social Affairs, Africa is divided into 60 countries and regions, including North Africa and sub-Saharan South Africa (sub-Saharan South Africa is divided into Central Africa, East Africa, South Africa and West Africa), for statistical purposes.
In these countries and regions, there is also a slight variation in the production of automobiles.
Relevant industry data shows that only nine countries in Africa will be able to produce or assemble cars in 2023, of which four are located in North Africa. In the same year, Africa produced about 1.2 million vehicles, with South Africa producing the highest number of vehicles at 633,000 units, Morocco second with 535,000 units, Egypt with about 24,000 units, and Algeria with about 2,400 units. The automotive industry in other countries is small.
According to Morocco's The Economist, Morocco will surpass South Africa for the first time in 2024 to become Africa's largest car producer. According to Fitch Solutions, Morocco is expected to produce 614,000 vehicles in 2024 and South Africa is expected to produce 591,000 vehicles.
Source: Ministry of Commerce
Similar to the current automobile market in most countries, the vehicle power type of the African automobile market is still dominated by traditional fuel vehicles. It is reported that the African auto market is dominated by manufacturers such as Volkswagen AG, Toyota Motor Corporation, Renault Group (including Dacia Sales Company), Daimler AG, Ford Motor Company, Hyundai Motor Company, and Isuzu Motors Company.
However, most of them are gasoline-powered vehicles, and traditional automakers such as Volkswagen still have very few EV products. According to statistics from the International Energy Agency (IEA), the penetration rate of pure electric vehicles in Africa is less than 1%.
Nowadays, many African countries are embarking on the new energy transformation of their automotive industry, and have successively introduced a number of encouraging policies and measures.
For example, the Kenya government launched the "Electric Mobility" program in 2023, aiming to vigorously develop vehicles such as electric vehicles. In addition, the Kenya government plans to build more EV charging stations to increase the coverage of charging facilities.
Relevant industry data shows that the number of electric vehicle registrations in Kenya has increased from 475 in 2022 to 2,694 in 2023, which is a very rapid growth. At the same time, the overall proportion of new energy vehicles in the country is also increasing, and as of December 2023, new energy vehicles accounted for 1.62% of the more than 160,000 newly registered motor vehicles in Kenya.
Coincidentally, South Africa released the "Green Policy for New Energy Vehicles" and the "White Paper on Electric Vehicles", proposing a number of incentives. According to data from the National Automobile Manufacturers Association of South Africa (Naamsa), between 2021 and 2023, South Africa's new energy vehicle sales increased significantly, from 896 in 2021 to 4674 in 2022, and then to 7746 in 2023, and the proportion of new energy vehicles in South Africa's new car market continues to rise, reaching 1.45% in 2023.
In the first quarter of this year, South Africa sold 3,042 new energy vehicles, an increase of 82.7% over the same period last year. South Africa plans to have 20% of new cars in its car market electric by 2025.
In addition, the Ethiopian Herald reported that in early February this year, Ethiopia's Minister of Transport and Logistics Alem announced that the country would only allow the sale of electric vehicles in the future.
Encouraging policies are only the basis for a country to support related industries, and whether the industry can "take root" and "thrive" in the regional market depends on whether the region has a suitable "living soil".
Fertile "soil" for new energy vehicles
So, for Africa, what is the "soil" suitable for the survival of the new energy vehicle industry?
The first thing to mention must be Africa's mineral resources.
Relevant studies show that Africa has a large number of lithium and nickel metal mineral resources, which provide sufficient raw materials for the production of batteries and other components for electric vehicles.
Among them, Congo is one of the world's largest producers of cobalt, which is one of the important raw materials for electric vehicle batteries. In April 2023, the African Export-Import Bank and the United Nations Economic Commission for Africa (UNECA) signed a framework agreement with the governments of Congo and Zambia to support the establishment of special economic zones (SEZs) for the production of battery precursors and the improvement of the battery and electric vehicle industry chains.
Morocco has a variety of metal deposits needed to produce automotive power batteries, such as cobalt, phosphate and lithium, of which phosphate reserves rank first in the world, accounting for about 75% of the world's total reserves. With the advantages of huge raw material reserves, geographical location close to the European market and tax incentives, the Morocco government has stepped up efforts to attract foreign investment and put forward the goal of building a manufacturing center for electric vehicle batteries and components.
South Africa is also very rich in mineral resources, it is one of the world's five largest mineral resources countries, and minerals are famous for many types, large reserves and high production, and has a geological structure known as the world's second richest minerals.
At present, South Africa has proven reserves and mined more than 70 minerals, with a total value of about 2.5 trillion US dollars. According to statistics, South Africa's reserves, output, and exports of platinum group metals, manganese ores, chrome ores, aluminosilicates, gold, diamonds, fluorspar, vanadium, vermiculite, zircon group ores, titanium ores, and other minerals rank among the top in the world, and even account for more than 50 percent of the world's total.
This has also attracted Chinese automobile industry chain enterprises, especially power battery manufacturers and battery raw material companies.
At present, Chinese power battery manufacturers such as beiteri new materials group and Guoxuan Hi-Tech are investing in Africa to build factories to provide key component support for the electric vehicle industry. Among them, in August this year, Guoxuan Hi-Tech signed a strategic investment agreement with the Morocco government, planning to build Morocco's first power battery super factory. It is reported that the initial design capacity of the plant is 20 GWh, which will be gradually increased to 100 GWh in the future.
The picture shows Morocco Prime Minister Azi·z Akhannouch (Aziz Akhannouch) inspecting Guoxuan Hi-Tech; Source: Guoxuan Hi-Tech WeChat public account
It is worth mentioning that some African countries also have a deep foundation in the automotive industry. For example, South Africa.
It is reported that South Africa is the largest automobile market and manufacturing center in Africa, which began automobile production and assembly at the beginning of the 20th century, and is one of the major countries in the world for automobile and parts manufacturing and import and export, BMW, DaimlerChrysler, Volkswagen, Toyota, Ford and other multinational companies have established production bases in South Africa. In 2022, South Africa's exports of automotive and transport equipment reached US$11.8 billion.
In addition, the development of the automobile industry in Egypt can also be traced back to the beginning of the 20th century. It is reported that back in the early 1960s, Egypt established a state-owned car manufacturer, Nasr.
According to Egypt's official passenger car registration data, in 2023, car brands in Europe, China, Japan and Korea will account for almost all markets, of which European sales will account for 35%, China will account for 26%, Japan will account for 22%, and Korea will account for 25%.
In terms of car brands, China's Chery won the top spot with a market share of 10%, beating Japan's Nissan and Korea's Hyundai.
The new "wilderness" of Chinese automakers
So, what role do Chinese car companies play in the transformation of Africa's new energy vehicle industry?
According to data from the General Administration of Customs, in 2023, China's exports of new energy vehicles to Africa will increase by 291% year-on-year, and lithium batteries will increase by 109% year-on-year.
In South Africa, Rwanda, Morocco, Kenya, Nigeria and other countries, Chinese brand new energy vehicles have made a lot of contributions to promoting the new energy process of the country's automobile industry.
Hong Kong media "South China Morning Post" reported that in addition to deeply cultivating the ASEAN market and seizing the South American market, Africa, an emerging market, is becoming a new enthusiasm for many Chinese electric vehicle manufacturers.
This is indeed the case. In June this year, Nezha Auto opened its first store in the African market in Kenya, and plans to sell its electric vehicles to 20 African countries, open 100 stores within three years, and achieve the goal of annual sales exceeding 20,000 units.
Source: Nezha Automobile
Nezha Automotive has also signed a memorandum of understanding with Kenya-based United Vehicle Assembler (AVA) to provide training and technology transfer resources for the local production of electric vehicles in Kenya. Zhou Jiang, vice president of Nezha, once said in an interview with industry media that the assembly work is expected to start in the first half of 2025, and 250 electric vehicles will be assembled every month. At that time, Kenya will become a hub for Nezha cars to export to other African countries.
Also in June this year, Xpeng announced that the P7 and G9 vehicles would enter Egypt at the end of June. And earlier, Chinese car companies, including Geely, Dongfeng, Great Wall, etc., have also rushed to enter Morocco, South Africa and other African countries to take the lead.
Taking Great Wall as an example, at the end of last year, Great Wall Motor's Ora Good Cat officially entered the African market, becoming its third overseas market after Europe and South America. It is reported that the ORA 03 provides two battery capacities of 48kWh/63kWh and two motor power options of 105kW/126kW in South Africa.
In July this year, Mosafun Challenge magazine reported that Great Wall Motor signed a strategic partnership with Morocco's Tractafric Motors to officially sell the Great Wall series of new energy vehicles in Mozambique, mainly hybrid and pure electric models such as small SUVs and light pickup trucks, with prices ranging from $23,000 to $36,000 per vehicle.
It is reported that Tractafric is a subsidiary of the Optorg Group, with 50 stores in 25 countries in Africa, mainly acting as an agent for commercial vehicles and passenger cars of major brands such as BMW, Ford, Hyundai, Mercedes-Benz and Renault. By the end of 2025, Tractafric plans to set up 16 new energy vehicle sales stores in nine cities in Morocco.
Based on the analysis and conclusion of all parties in the industry, whether from the current or long-term perspective, China's new energy vehicles going overseas to Africa are showing a positive trend. However, it should be noted that as a foreign-funded car company, Chinese car companies must always think about how their vehicle products can adapt to the local market of other countries if they want to export their vehicles to other countries.
Among them, the balance between price and profit may be the first problem to be solved. Taking the South Africa market as an example, according to Walter · Madeira, chief analyst of EMEA automotive forecasting at S&P Global Mobility, price is an important factor for Chinese car companies to gradually occupy part of the market share in South Africa.
For example, in the family SUV category, both Haval and Chery are priced at less than R500,000 (US$27,000), which is much lower than the price of vehicles from European manufacturers, and most of them are equipped with all-round cameras, navigation and other electronic functions for free.