Favourable demographics point to future potential in Ghana's automotive industry

While the automobile industry is yet to surpass peak sales levels achieved in 2012, the sector is slowly recovering its breath. The market is still largely dominated by second-hand sales, yet as the economic situation in Ghana stabilises over time, the country’s growing middle class and overall young and urban population could spur the development of the car market in the long term, providing room for new actors to begin taking advantage of investment opportunities in-country and around the region.

Go Large

In November 2015 Kantanka Automobiles, a locally owned car manufacturer set up in partnership with Chinese investors, opened a car assembly plant in Gomoa Mpota in the Central Region. For Kantanka, a company which previously assembled cars by hand, this represented a move towards mass production, from two to 480 vehicles per year.

The company is said to have two prototype electric cars, Kantanka Odeneho I and Kantanka Odeneho II, and a series of SUVs, including Kantanka Dassebre, Kantanka Nsoromma and Kantanka Otumfuo, in its catalogue. With the launch of the assembly plant, the local firm inaugurated three flagship car models, the Kantanka Onantefuo, an SUV, the Kantanka Omama, a pickup truck, and the Kantanka K71, a mini SUV.

The company was expected to increase production to 70 cars by January 2016. The cheapest model in the range is priced at around the $20,000 mark, while the most expensive vehicle costs around $35,000. While this price range is still beyond the reach of the average Ghanaian, the company is set to launch a more affordable car, reportedly by the end of 2016.

Market Dynamics

Kantanka has embarked on an ambitious venture, delving into a market still largely dominated by second-hand, international cars.

There is also growing competition from grey market imports, a segment of the automobile industry described by some as vehicles which arrive in Ghana not directly from the manufacturer but from dealers elsewhere. This segment has grown significantly in recent years, and has squeezed some traditional auto houses out of their market shares.

Grey market vehicles are generally not imported through official channels, which makes it difficult to account for their impact on official sales and the industry’s overall performance. However, available data indicates that the Ghanaian car industry is still struggling with the slowdown in economic growth. According to data from the Ghana Automobile Distributors Association (GADA), 8201 cars were sold in the country in 2015, reflecting a 38% decline compared to the 13,231 sold in 2012. The industry attributes this to currency depreciation, high duty charges and the growth of the grey market.

Despite this, the sector’s performance in 2015 was positive compared to a year earlier, when sales stood at 6248 cars. Hilda Peasah, marketing manager of Japan Motors, a GADA car retailer member, spoke to local news outlet Graphic Business of a recovery in sales among GADA members. The government, she explained, is the biggest spender, so when government contracts are not forthcoming, sales go down.

Other Players

Kantanka’s investment in auto assembly is not unprecedented. Drawn in by the industry’s investment potential in Ghana and, more generally, in the West African region, Indian car manufacturer major Mahindra joined efforts with a local partner in August 2013 to set up an assembly plant and service centre on 3.8-ha plot in Accra. The company also partnered with a local financial institution, Fidelity Bank, to provide financial assistance to customers through hire purchase and lease schemes.

Prior to this, Mahindra had sold around 3500 vehicles in Ghana to state institutions, private organisations, industries, UN agencies and individuals, from roughly 2006 to 2013. According to its sole distributor in Ghana, Svani Motors, the company accounted for 20% of the imported vehicle market in 2013.