Experts say the auto industry can leverage the African Continental Free Trade Area (AfCFTA) to rid the continent of the slogan of being a ‘dumpster’ for old used vehicles.
Today, 77% of the 329,000 light vehicles the EAC needs each year are used vehicles, according to Serge Kamuhinda, CEO of Volkswagen Mobility Solutions Rwanda.
The long-term impact is sobering as the EAC has a trade deficit of $2.8 billion a year just for the automotive sector.
“We’ve been inundated with old used vehicles and there’s not a big enough market for local sourcing to be viable…if you want to have good production capacity, you have to have strong demand. local as well as external demand,” Kamuhinda said.
India has the same GDP as sub-Saharan Africa, but the difference between the two, he said, is that India manufactures 3.2 million vehicles per year while in Africa it is 1.1 million vehicles. “The difference is purely on the common external tariff and a concerted market that India has.”
“We need to look at electric and connected vehicles if we want to participate in the continental value chain that is capable of being viable within the global automotive industry value chain,” Kamuhinda noted.
Serge Kamuhinda CEO of Volkswagen Mobility Solutions Rwanda during the interview. Photo by Sam Ngendahimana
The CEO said that they are working closely with the African Automobile Manufacturers Association to build regional hubs, in that one hub in East Africa will produce model vehicles and another hub in West Africa the West for another type of model. The end goal is to have cars sold on the continent with sufficient market size.
He added that there is work underway to have 40% rules of origin under the AfCFTA, which means vehicles produced on the continent will have 40% local added value. “Otherwise, there are not enough incentives for the industry to make investments.”
Asked if Africa has the capacity to manufacture its own vehicles, Andrei Gromyko, owner of an automobile research center in Rwanda, said that unless people invest in acquiring the knowledge and skills necessary skills, currently, “we do not have the capacity and the resources to manufacture vehicles from scratch.
However, he pointed out that what advanced economies in the automotive industry normally do is buy a license from a company to fully own a certain vehicle model and continue production until they reach a point of acquiring the know-how and skills necessary to produce them from scratch. .
“The future is electric”
China, the biggest car market today, shows that 40% of car sales will have to be electric by 2030 and recently the European Union Parliament decided that by 2035 they will phase out cars combustion engine and the same for the United States, where 50% of car sales must be electric by 2030.
“In eight years the industry will change and of course no one will invest in a factory that takes many years to recoup the investment for obsolete technology (i.e. internal combustion engine) “, Kamuhinda said.
With an annual vehicle growth rate of 12%, Rwanda has put in place a number of incentives that will apply to electric vehicles, plug-in hybrid electric vehicles and hybrid electric vehicles to drive adoption of the e-mobility.
These included; exemption from import and excise duties on electric vehicles, spare parts, batteries and charging station equipment.
The incentives also include a zero-rate value added tax for electric vehicles, spare parts, batteries and charging station equipment.
Normally, vehicle imports must settle a bill of 25 percent import duty, 18 percent VAT, 5 to 15 percent excise duty, depending on engine size.
Gromyko said setbacks to e-mobility adoption include the high cost of spare parts and maintenance which he says should not be a big concern given the environmental benefits of e-mobility. mobility and the fact that this is where the world is. headed.
Roopak Gorajia, sales and marketing manager at Akagera Motors Rwanda, said they have both electric and regular combustion hybrid vehicles, however, the demand is higher for hybrid cars.
According to him, there is a lack of infrastructure for electric cars to come up in Rwanda. “For this to take shape, there needs to be more charging stations across the country, in places like malls, banks, restaurants, some office buildings, among others.”
Places where people can easily drive and charge their vehicle without worrying about mileage or only having to charge at home, he explained.
Gorajia said the incentives put in place are not enough, “even with zero percent taxes and duties, electric cars themselves have a high price compared to regular motor vehicles and the cost of electricity is also a challenge.
“For electric cars, we will get there eventually, but once the electric charging infrastructure is in place, and for hybrid vehicles that are coming to market, it will happen very quickly.”
In the long term, the government says the building code and planning rules will include provisions for electric vehicle charging stations. This should reduce the complexity of the process for interested parties.
Kamuhinda believes that the future of cars is going to be connected; basically, the cars that are made today can’t be put on the road without a smart city.
“Rwanda’s focus on ICT will pay off. In the next eight years, when these cars are in the majority, Africa will be stuck if it does not build smart cities, it will not be able to import electric cars and combustion cars will become rare and more expensive.
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