Despite traffic jams having become a familiar feature of most African cities, many emerging consumers on the continent still aspire to own and drive their own car, presenting both challenges and enormous opportunities for companies seeking to tap into this vast market.
How to avoid the stumbling blocks and capitalise on the upside is the focus of a new report released by Deloitte, titled Africa Automotive Insights: An East African Consumer Perspective.
Dr Martyn Davies, Africa automotive leader at Deloitte Africa explains the rationale behind the report: “Due to lesser purchasing power, the absence of suitable vehicle finance options and fierce competition from lesser cost imported second-hand vehicles, the potential of the African automotive consumer market is yet to be realised. In addition to these well-known challenges, the lack of dedicated research into consumer trends and insights also restrict the understanding of Africa’s emerging automotive market.”
To remedy this lack of information and insight, Deloitte conducted extensive research, gathering consumer insights. Based on this research, the Deloitte team produced the dedicated Africa Automotive Insights report, part of a broader series of global automotive consumer reports.
The report draws insights from surveys conducted among middle-income consumers in major cities in Kenya, Tanzania and Uganda. According to Davies, these countries were chosen to provide a representative regional overview of East Africa.
“Our insights shed light on various aspects of the overall customer journey that includes marketing, financing, purchasing and ownership of vehicles in these countries. They provide a starting block for industry players to better understand what factors influence consumers, their preferences and what their attitudes are towards the concept of mobility.
“Ultimately, our Automotive Insights report aims to inform our clients as to the opportunities arising in the realm of mobility in the East African region where roughly 2.3 million vehicles are currently in use,” Davies adds.
Some of the insights to emerge from the research and contained in the report include the following:
* Kenya – Kenyan consumers have the highest spending power and highest motorisation rate among the three countries surveyed. They are most likely to drive a new vehicle and most likely to access bank finance to acquire it. They are also the most likely to purchase their vehicle from a dealership or trader and have the most developed servicing culture.
* Tanzania – Tanzanian consumers are the most cost-sensitive of the three groups surveyed and have the lowest motorisation rate. They are most likely to purchase their vehicle from family and friends and least likely to purchase it from a dealership or trade. They are also the most likely of the three to purchase their vehicle online. Tanzanian motorists have the least developed servicing culture and are most likely to service their vehicle in the informal sector.
* Uganda – Ugandan consumers have the lowest spending power, are the most likely to drive a used vehicle and the least likely to access a bank loan to finance their vehicle. They are also least likely to purchase a vehicle in the next five years. When it comes to servicing, the Deloitte research found that motorists in Uganda are most likely to do this only when the vehicle breaks down. They are also most likely to service their vehicles at a petrol station or do it themselves.
Common ground
The research also uncovered some key commonalities between Kenyan, Tanzanian and Ugandan consumers.
Family and friends have the greatest influence on purchasing decisions and most consumers buy their vehicles from a dealership or trader. Most vehicles are purchased using cash and a change in income is likely to trigger a switch in brand.
Most vehicles in the three countries surveyed are regularly serviced, although this is most likely done by jua kali (informal sector) mechanics.
Unlocking this market
According to Davies, deep customer insights are the key to unlocking this region’s automotive markets.
“The lack of sufficient purchasing power combined with a massive mobility need and many aspiring consumers means that industry players need to re-examine where and how they position themselves within the customer journey. This will enable them to take full advantage of the nascent East Africa automotive market,” says Davies.
Industry players have to reconsider their value and brand propositioning as well as service offering in these markets, ensuring that what is on offer truly appeals to consumers and supports market development strategies. In this regard, says Davies, one cannot overemphasise the importance of deep customer insights that can be leveraged to shape customer behaviour and attitudes towards formal and certified sales and service channels.
Davies points out that in East Africa, in common with other African regions, public policy is all-important in shaping the automotive mobility environment. Public-private sector coordination is crucial to fully realising these opportunities.
“As in other markets, the success of the industry will depend on how well automotive companies will be aligned to the mobility needs of their customers in future. This might not necessarily mean selling more vehicles but will depend on partnerships and new business models that also consider offerings such as ride sharing and innovative ownership models.
“Any market development efforts must be supported by providing access to vehicle finance products that are tailored to the specific local market conditions,” Davies concludes.