Ghana Automobile Industry Trends: Business implications and opportunities
The Ghanaian automobile industry is still in its early stages of development compared to other developing countries on the African continent.
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The automotive industry experienced significant growth in 2021, which is gradually impacting vehicle demand during the forecast period (2023 – 2028) as projected by the Government of Ghana (Mordor Intelligence, 2021).
The Ghanaian market for automobiles predominantly consists of newly assembled vehicles in Ghana and the importation of new cars, used vehicles and accident cars.
Approximately, 62% of the new vehicle market comprised of passenger vehicles as per new vehicle registrations in the previous year (Mordor Intelligence, 2021).
A common trend is that a small proportion of new vehicles compete against a large influx of much cheaper used imported vehicles.
The automobile market is dominated by imported used cars and this trend is expected to continue, as many Ghanaians prefer to buy salvage cars due to affordability.
Major vehicle manufacturers are expanding their production facilities across the country, indicating that the market will likely grow significantly.
For example, Nissan Motor Co. Ltd opened a state-of-the-art assembly plant in April 2022, with an annual production capacity of 31,000.
Toyota Motor Corporation also opened its second vehicle assembly plant in Ghana in June 2021, investing USD 7 million.
Kantanka Automobile is also a Ghanaian automobile manufacturer that designs, manufactures and sells on and off-road vehicles in Ghana, West Africa.
Products range from high-quality 4x4 vehicles with built-in terrain resistance to the most recent clean energy technologies, such as electric vehicles.
The new assembly plants are expected to reduce used vehicle imports while increasing exports to the sub-region.
The Ghanaian market is also expected to benefit directly from the new vehicles assembled.
The Government of Ghana is taking steps to support the growth of the automobile industry.
In 2019, the Government announced a new policy to ban the importation of cars older than 10 years.
The aim of this policy is to boost local production and create jobs in the sector.
The government has also introduced tax incentives to attract investment in the industry.
The Customs (Amendment) Act, 2020 (Act 1014) was passed by Parliament in 2020 to provide incentives for automotive manufacturers and assemblers registered under the Ghana Automotive Manufacturing Development Programme (GAMDP) and for related matters.
Tax holidays
Further, the Income Tax Act, 2015 (Act 896) provides for corporate income tax holidays for registered automobile manufacturers and assemblers in Ghana as follows:
i. Three years for manufacturers or assemblers of semi-knocked-down vehicles; and
ii. Ten years for manufacturers or assemblers of complete-knocked-down vehicles.
The growth of electric vehicles in Ghana is still in its early stages, with limited adoption and infrastructure.
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However, there are signs of increasing interest in electric vehicles in the country.
In 2020, Ghana's Ministry of Energy announced plans to develop an electric vehicle policy to support the growth of the electric vehicle industry in the country.
The policy aims to increase the adoption of electric vehicles in the country by promoting the development of charging infrastructure, providing incentives for the purchase of electric vehicles, and supporting local manufacturing of electric vehicles.
There are a few electric vehicle models available in Ghana, such as the Nissan Leaf, Tesla Model S, and the BMW i3.
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However, these vehicles are relatively expensive and are mostly imported.
To encourage the growth of the electric vehicle industry in Ghana, the government is exploring partnerships with international companies to establish local manufacturing facilities for electric vehicles and related components.
This could potentially create job opportunities and boost the local economy.
1. Increased Demand for Auto Parts
The growth of the automobile industry in Ghana presents an opportunity for companies that manufacture and supply auto parts.
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As the local production of vehicles increases, the demand for locally produced auto parts will be expected to increase.
This presents a significant opportunity for companies that are looking to expand their operations in Ghana.
The supply of parts, completely knocked-down kits (CKDs), and batteries to indigenous firms presents an opportunity for entrepreneurs as Ghana remains a key importer of CKDs for internal combustion engine automobiles (International Trade Administration, 2023).
2. Investment in Manufacturing or Assembly Plants
Building automobile assembly plants in Ghana could be a promising opportunity for several reasons.
Firstly, Ghana has a growing economy and a stable political environment, which can attract foreign investment.
Additionally, Ghana has a large population and a growing middle class, which may lead to an increase in demand for cars.
By 2050, Ghana's national goal is to have 32%, or 12,027 electric public buses in operation.
In the short term (subject to Ghana's current fiscal restrictions), the government plans on deploying 1,000 electric buses, as well as associated charging and maintenance infrastructure, for intra-city (40%) and intercity (60%) transportation services.
This includes 500 Complete Built Unit (CBU) electric buses and 500 Semi-Knocked-Down (SKD) buses, which it hopes to assemble in Ghana in collaboration with local assemblers (International Trade Administration, 2023).
3. Sustainable Transportation
The world is currently growing to become eco-friendly with the underlining goal of drastically reducing carbon emissions in addressing global conversations about climate change issues (Zhenmin, 2022).
Electric cars, buses, and bicycles are becoming increasingly popular as they emit zero emissions during their use, hence the promotion of sustainable transportation.
This mode of transportation has a lower impact on the environment and are economically and socially viable in the long run.
The growth in electric vehicles presents an opportunity for companies that specialise in the production and distribution of electric vehicles and charging infrastructure.
As the demand for electric vehicles increase, companies that invest in this sector are likely to benefit from the growing market.
Conclusion
Ghana’s production industry has received proper aid from the local authorities, which has enabled it to emerge as one of the 40 quickest-growing commercial productions globally.
Ghana is likely to overtake Nigeria to become the gateway to the rest of West Africa as a market leader in new car sales when the abolishment of the trade barriers under the African Continental Free Trade Area (AfCFTA) takes place.
The future of Ghana in the automobile industry will be the introduction of extensive infrastructural development of electric vehicles, an increase in the supply of locally assembled vehicles, and the development of schemes by the financial sector to provide financing opportunities for Ghanaians to buy these new cars.
It will be challenging to potential investors and the Government as well if all efforts to make the Ghanaian market lucrative for foreign automobile companies to set up assembly plants are met by low patronage.