Why is South Africa an association

New initiative: German automotive industry strengthens ties with Africa

The German automotive industry recognizes the potential in the African markets and is strengthening its connections with the continent. The Association of the Automotive Industry (VDA) has worked with the association African Association of Automotive Manufacturers (African Association of Automobile Manufacturers, AAAM) as part of the “PartnerAfrika” project of the Federal Ministry for Economic Cooperation and Development (BMZ). The AAAM is the first automobile association with a pan-African approach and was founded in 2015 by global original parts manufacturers (OEMs).

The partnership-based cooperation between the associations VDA and AAAM is mutually beneficial: In cooperation with local and regional structures, it makes it easier for the automotive industry to access what are often difficult markets and, moreover, it is in the interests of German development policy to improve economic prospects by integrating the private sector and create sustainable jobs and mobility in partner countries.

The VDA-AAAM partnership sees itself as a motor for dynamic growth, a high rate of innovation and state-of-the-art jobs.

For the VDA, the cooperation with Africa focuses on the following priority goals: expanding the sustainability strategy beyond products and production processes to the development of new energy sources in the form of e-fuels (synthetic fuels) as well as digital mobility solutions, on strengthening the development partnership, expanding the Trade and investment volume as well as the expansion of market access for manufacturers and suppliers. It is also important to promote the development of local supply and value chains. In addition to stakeholder management and partnerships, the extensive program also includes other topics such as the promotion of training and employment.

Hildegard Müller, President of the VDA, explained: “We are very grateful for the partnership with the AAAM, as the VDA intends to expand its commitment in Africa. With the joint project, VDA and AAAM are pursuing the goal of improving the conditions for a flourishing automotive industry on the African continent in order to increase economic growth and prosperity in Africa and to enable both German and African member companies to participate in market growth and win-win situations to promote trade and investment between Europe and Africa. This commitment by the VDA and AAAM is an essential contribution to growth and prosperity in Africa, supported by the investment activities of automobile manufacturers and suppliers on this emerging continent. " An internally formed group for the association partnership at the headquarters of the VDA in Berlin as well as two project offices in South Africa and Ghana are now responsible for the implementation of the project and the support of direct local contacts for members and partners.

On the African continent there are some African countries with rapidly growing economies, a young, growing population and a high rate of urbanization with a very low level of motorization.

In 2035, the continent is expected to have the largest workforce in the world1. Thanks to their sustainable value chains, the automotive and logistics sectors play key roles in supplier networks, assembly plants, distribution structures and pan-African trade relationships. In addition, Africa has great potential for innovation, growth and jobs. The level of motorization for Africa is just 45 vehicles per 1,000 inhabitants, which is considerably below the global average of 203 vehicles per 1,000 inhabitants.

In 2019, the total volume of new vehicles (passenger cars) sold on the African market was 869,000 units. For the German automotive industry, Africa offers great potential, both as a market and as a production location. In 2019, 62,000 cars were exported from Germany to Africa. 49 percent of this went to South Africa, the most important African market.

In 2019, 355,000 cars were sold in South Africa, 119,000 of which were from German manufacturers, which corresponds to 34 percent.

Car production in Africa totaled around 787,000 units in 2019. With 349,000 units, 44 percent of production took place in South Africa. The German automobile manufacturers have steadily expanded their production in South Africa in recent years. Compared to 2010, their production has increased by 44 percent to 317,000 units. This means that 91 percent of the cars in South Africa are produced by German manufacturers.

Africa is becoming increasingly important for the German automotive industry, not only as an export destination, but also for locations for local production: In recent years, German automotive manufacturers and suppliers have not only invested more in the established markets in the Maghreb region and in South Africa, but also in the markets of the future, such as in Ghana and Rwanda.

The German automotive industry is networked around the world. With over 2,500 production facilities abroad, German automobile manufacturers and suppliers contribute to growth and prosperity in over 70 countries around the world. The companies also use their know-how to make a contribution to sustainable mobility by using environmentally friendly technologies on site.

The as yet untapped markets in Africa are coupled with constantly increasing expenditure on consumption. The increase has been 10 percent annually in recent years. The sales forecast for new light vehicles in Africa for 2027 is an estimated 1.8 million units. This is a double compared to the market volume of 2019.

Dave Coffey, CEO of the partner association AAAM: “According to estimates by our industry experts, the African market for new vehicles can grow to an initial volume of 3 million units by 2035, with a potential of 5 million if effective strategies and ecosystems are used. We look forward to the partnership with the VDA and the associated expertise, resources and strong networking that will promote the development of the automotive industry in Africa. "

The associations VDA and AAAM strongly support industrialization on the African continent by sharing industry knowledge, creating exchange platforms and building bridges between countries and public and private institutions. In addition, Africa is likely to play an increasingly important role in the generation and export of renewable energies. As a consequence, not only is there a need for a resilient trade agreement between Africa and Europe, the trade relations between African countries should also be facilitated and intensified.

______

1)Source: World Bank 2017: Creating Jobs for Africa’s Growing Population (worldbank.org)