Africa: The new home for luxury SUVs
Posted Thursday, January 16 2014 at 02:00
It may come as a surprise to some foreigners, that some of their expensive luxury cars are a common sight on African streets. From businessmen to sports personalities, there is something about the sports utility vehicles (SUVs) abundance even here in Uganda.
Porsches, Range Rovers and even Maseratis... luxury cars are no strange sight weaving through the old bangers that rumble along Abidjan’s chaotic streets, another indication of the emergence of a wealthy class in Africa.
Each of the vehicles costs at least tens of thousands of euros, representing decades of work for an Ivorian earning the minimum wage, even after it was recently hiked 60 percent to 60,000 CFA francs (around 90 euros, $125) or (Shs315,000) a month.
Yet in wealthy Abidjan neighbourhoods the streets are jammed with more luxury autos than in rich quarters of European capitals.
It’s the same story in Johannesburg, Lagos, or even Libreville. In the Gabonese capital it is common to see SUV after SUV snaking along the oceanside boulevard.
Wealthy Africans love the big, high, 4X4 vehicles
Not only are they better adapted to the roads, regularly in a poor condition, they have also become something of a status symbol. In Gabon, 70 per cent of the 6,000 new vehicles sold each year are big 4x4s, mostly Japanese models, according to the Gabonese Federation of Car Importers.
“Here, its a 4x4 or nothing,” said one car importer who declined to give his name. For the Gabonese, the SUV has become “the symbol of success, much more than a house”. In Ivory Coast, luxury cars make up only three percent of the 8,000 new cars sold each year, said one industry expert who asked to remain anonymous. “However, certain customers are looking for the top of the line -- “bling-bling” cars -- there are people with money like that in the market,” he added.
But the high taxes slapped on new cars have given the second-hand car market a boost. A significant proportion of luxury cars enter the country this way from Europe, the United States and even the Middle East.
And it isn’t just SUVs
Despite the potholes that riddle Abidjan’s streets, there are importers offering low-slung sports cars like Lamborghinis and Ferraris. A former rebel military leader turned security official, Issiaka Ouattara, known as “Wattao”, was recently seen on national television driving a Maserati.
This brash display of luxury cars is an indication of the growing wealth in Africa despite increasing numbers living in extreme poverty. The African Development Bank put the size of the African middle class at 300 million in 2011.
Ventures financial magazine recently put the number of African billionaires at 55 - more than triple the previous count. That figure is likely an underestimate, the Nigerian magazine said, as many are not comfortable disclosing the true extent of their wealth.
Expansion across the continent
Luxury automakers are not letting this bonanza pass them by. Porsche boasts a brand new showroom in Victoria Island, one of Lagos’ most chic neighbourhoods. The German carmaker’s sales have jumped by nearly 40 percent the past two years in South Africa, where it has been present for decades.
It has recently set up shop in Angola and Ghana as well as Nigeria, according to Christer Ekberg, Porsche’s managing director for the Middle East and Africa. With 2,000 Porsche cars sold in sub-Saharan Africa in the first three quarters of this year, which the company described as a “promising” figure, the automaker is committed to expanding further across the continent.
Local partners are being sought for dealerships in Cameroon, the Democratic Republic of Congo, Ethiopia, Gabon, Ivory Coast, Namibia, Senegal, Tanzania and Zambia. Mercedes also views the potential of the African market as “enormous”, a spokeswoman said. The German carmaker has an assembly line in South Africa, where it sells 20,000 vehicles per year.
BMW said it also intends to keep expanding across Africa, where it saw 15 per cent sales growth in 2012 to 34,000 vehicles. As for Audi, the company expects further growth in certain parts of Africa, where its sales have doubled in three years to 22,000 vehicles.
The carmakers are also being pulled in by the need to service their vehicles that have already found their way into African countries. A lack of parts and diagnostic equipment has led to these high-performance vehicles being kept off the road for months in Abidjan, according to an expert on the local car market.
“If Porsche comes to Ivory Coast, customers will be overjoyed to be able to repair their cars in a company garage,” said another expert on the African market. “But they won’t necessarily buy there,” he added.
“Well-heeled clients are no different than others” and will likely plump for a second-hand vehicle in good condition that is much less expensive, he said.
What is Uganda’s take on this?
Audi Q7, Porsche Cayenne, BMW X5 and X6, Mercedes Benz G-Class, GLK and ML, Range Rover Sport among many luxury SUVs dot Kampala streets like they do not cost an and a leg. And never mind that some of them come in as used-they are still expensive luxury SUVs. When our MPs claimed they needed vehicles to tackle hard to reach terrain in their constituencies (never mind that some constituencies have good roads), many visualised acquiring vehicles with a high ground clearance.
Although not all vehicles with such a clearance are SUVs and not all are expensive, when most people talk about tackling bad road terrain, it is usually a four wheel drive vehicle they have in mind. Due to advancement in technology, today, there are small, compact and crossover SUVs that are more affordable than the big luxury SUVs. Armed with their Shs103m windfall, some MPs bought used 4x4s and others settled for small saloon cars. Although some Ugandans who own SUVs, luxury ones or not, usually cite poor terrain as the major reason they end up buying SUVs, the improvement in the economy as is the case with some other African countries cannot altogether be ignored.
Growing economy and emerging markets
Chris Ndala, the managing director at Motorcare Uganda, dealers in Nissan and BMW vehicles says the private sector has helped steer this growth. “For some time, Africa was known for pick-ups because of rough roads. Now for emerging markets, people are talking about Africa. There are so many investments coming to Africa and these are boosting the economies and as result, the middle class is growing,” Ndala notes. He adds, “In the past such vehicles were expensive but they are now becoming affordable.”
Ndala also observes that improving infrastructure such as roads is another big factor. He also notes that government used to do 65 per cent of new car sales, now it is the private sector dominating. “It is a segment together with pick-ups that is doing very well. The private sector has helped improve the economy,” Ndala concludes.
Edson Tumushabe, the technical director at Edie Engineering Company Limited, which after-market auto spare parts agrees with Ndala. “The increase in the middle class has contributed a lot. Vehicle loans, mortgages etc are also helping. The second hand spare parts are also affordable, so this has caused an influx of SUVs in some countries,” he argues.
Chris Ndala, the managing director at Motorcare Uganda, says the go anywhere factor of some 4x4s cannot be ignored. Joseph Semuwemba, the Chief Executive Officer of Motor Centre EA, dealers in Kia vehicles, says SUVs are used by many people because of their versatility. “Sometimes they carry more people than a sedan/saloon car and give good road clearance and have more power. The four wheel drive capability helps some people. Some people need high ground clearance and not necessarily 4WD,” Semuwemba explains.
Young money factor
There is a crop of Ugandans who either by own sweat or trickery have earned themselves good money and among the prized assets on their to-do lists is to own a “dream machine.” Tumushabe these are quite many. “There are some people who get money instantly today and tomorrow they buy their dream car. The new comers don’t buy such cars consistently. The rate of buying and not retaining is high. They may buy such expensive cars but may not retain them so after a while when their pockets are shallow, they go back to small cars,” he argues.
Semuwemba says the bigger and higher the better. “When you are in a high car, you are better off than in a small car in case of an accident,” he notes.
Change in technology
“The fuel consumption is also affordable these days. The manufacturers have helped adjust this. Around Christmas time, some people spent Shs50,000 from Kampala to Mbarara. With a big family and a big car, it was cheaper than using a bus,” Tumushabe argues.
Expensive ones aside, rugged terrains, change in technology for more fuel friendly SUVs and increase in number of affordable used cars are factors that have helped increase SUV’s popularity in Uganda and elsewhere on this continent.