Ghana nascent automotive industry takes on imported used cars

Agnes Akos, Accra, Ghana
May 16, 2024

T he government launched the Ghana Automotive Development Policy (GADP) in 2019. The goal of this new policy is to provide a framework to investors who wish to establish automotive assembly plants and offer manufacturing services in Ghana. The GADP targets passenger cars, utility vehicles and light commercial vehicles which would include pickups, minibuses and cargo vans.

Manufacturing is a pillar of Ghana’s industrialization strategy. The government is seeking collaboration with the private sector to boost the country’s manufacturing capacity. As a part of this strategy, the vision of the GADP is to make Ghana a competitive automotive industry hub in the West Africa. This new law provides tax holidays, exonerations on import duties and on levies to new auto assembly plants.

The automotive industry in Ghana comprises one homegrown car company (Kantanka Automobile Group), seven international assemblers, distributors of new vehicles and 20 spare parts makers. Retailers of imported used vehicles dominate this emerging industry. Ghana imports over 100,000 vehicles per year, of which 90 percent are secondhand cars¹. The automotive industry was worth US$4.6 billion in 2021.

Success

Since 2019, Ghana has inaugurated seven assembly plants, testifying to the attractiveness of the country’s automotive investment policy.

Volkswagen

Volkswagen (Germany) was the first automotive company to be registered under the Ghana Automotive Development Programme (GADP). Volkswagen Ghana is a wholy-owned (100 percent) subsidiary of the global conglomerate. The VW plant, which started operation in August 2020, has a annual capacity of Volkswagen of a 5,000 unit per year. Volkswagen (VW) started the production of Golf, Polo, and Tiguan models in 2022. The company plans to assemble models such as Teramont, Passat, Amarok and T-Cross, using Semi-Knocked Down (SKD) assembly kits imported from it production units in South Africa.

Toyota

Toyota Tsusho Manufacturing Ghana Co Ltd (TTMG) inaugurated a plant in 2021. The US$7 million investment has an annual production capacity of around 1,330 units. It began the assembly of Toyota’s pickup truck “Hilux” in June 2021. Since then, Toyota has added other popular models including Swift, Dzire, and Ertiga. Toyota and the government of Ghana signed a memorandum of understanding (MOU) in Yokohama, Japan in August 2019². The MOU aims to develop an automotive venture in Ghana.

Peugeot

The Peugeot (France) assembly plant based in Tema produces three models: the 3008, 5008, and 2008. This plant started operation on August 25, 2022. It is a joined venture between between Peugeot and Silver Star Auto (owned by Kalmoni Family). The factory operates from Tema (port city near Accra). Its initial production capacity using SKD (Semi-Knock Down) targets 4,500 cars annually.

KIA

KIA offers a diversified portfolio of car models. It produces six Kia models: Kia Cerato, Kia K5, Kia Sonet, Kia Seltos, Kia Sportage, and Kia Sorento. The company plans to expand its offer with additional models, which include K2700, K3000, Carens, and Picanto.

Zonda

Zonda Tec Ghana (China) is a professional heavy duty vehicle trading company. The company imports and distributes cover tipper, trailer head, and cargo trucks. It also supplies semi-trailer, oil and LPG tankers. It is the country's major distributor of flatbed, lowbed, special truck and concrete mixer. Zonda Tech will now assemble Chinese brands in Ghana beginning with a 4x4 pickup truck called Poer.

Outlook

More brands are considering Ghana as their market entry point in Africa. This is the case with French automobile maker Renault. On Monday, January 28, 2019, Ghana President Nana Akufo-Addo met with Fabrice Cambolive, Vice President and chairperson of the Africa-Middle-East-India (AMI) region. After the meeting, the French executive revealed that Renault was analyzing the feasibility of an automobile plant in Ghana³.

Other major automakers that have announced plans to establish assembly plants in Ghana are Chinese Chery Automobile and Great-Wall Motors from China. MG Motor from the UK and Bajaj Auto from India have a similar projects in their pipeline.

Curbing import of used cars

One goal of the GADP is to curb import of used cars. The Ghana Ministry of Trade and Industry (MOTI) argues that a domestic automotive industry will save millions of dollars of foreign reserves. The government wants to channel these financial resources, to other development priorities. As additional disincentives, the GADP applies 35 percent import duty on imported new and used vehicles. The new law also introduced measures to limit the importation of cars that are over 10 years old or damaged.

Ghana authorities plan to establish a domestic supplier development program to boost the assembly supply chains. Ghana has 20 manufacturers of car parts⁴. The GADP also aims to boost the activities of two state-owned aluminum smelters: The Ghana Integrated Aluminum Development Corporation (GIADEC) and The Volta Aluminum Company (VALCO).

Data from the Automotive Assemblers Association of Ghana (AAAG)⁵ show that 4,700 cars came out of assembly lines between 2020 and 2022. On June 30th, 2023, Jeffrey Oppong Peprah, the President of the Association told state-owned media⁶ that this represents 9.7 percent of the new car market in Ghana with a value of US$4.6 billion during the same period.

Official data forecast that assembled vehicles production will reach 12,000 units by 2027, increasing the value to US$10.64 billion. Improved roads and economic growth are fueling demand for cars. Ghana spent imported US$1.406 billion on imported cars in 2021.

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