Ghana’s automotive industry has made considerable progress, placing the country at fifth position, above Nigeria in the SSA region, according to Fitch Solutions Auto Sales Risk/Reward Index (RRI).
The country managed to outperform its regional peers based on Fitch’s short and long-term political risk, scoring a respective 62.9 and 70.2 under these indicators. This reflects an enabling automotive sales environment combined with a “favourable political risk outlook which provides room for policy certainty.”
Although these indicate signs of a booming automotive industry, Ghana’s overall RRI score was 32.3 out of a possible 100, placing the country 98th globally. The countries ahead of Ghana with high RRI score in SSA include South Africa, Mauritius, Botswana and Kenya.
Despite Ghana’s positive results, the country’s underdeveloped road infrastructure remains a deterrent for potential growth in the automotive industry as the country scores 17.7/100 under Fitch’s ‘quality and extent of transport network’ indicator.
The recent upgrade and development of the country’s road infrastructure, for example, the commissioning of a four-tier interchange in Accra indicates progress to improve the country’s road network.
The ‘vehicle ownership per 1,000 inhabitants’ indicator revealed that the country has drastically low levels of vehicle ownership, represented by a score of 11.3. This signals further room for vehicle sales growth going forward as rising incomes lead to first-time buyers entering the market for vehicles, Fitch noted.
Fitch anticipates that the flow of used vehicles will slow, as a consequence of the government’s recent ban on used vehicles beyond 10-years imported into the country. As a result, Fitch expects increased development of a local new vehicle sales market going forward.
Regional Assessment of Auto Sales
Meanwhile, one of the challenges that plagues the automotive industry is high borrowing costs which impede the development of vehicle finance and thus new vehicle sales. This lengthens the dominance of used imported vehicles as they enjoy a large market share.
In the long-term, new vehicle sales outlook remains favourable as reflected in Fitch’s ‘vehicle sales growth’ indicator. This positive outlook is buoyed by the country’s rapid economic growth, resulting in an increase in incomes which will in turn, provide the avenue for more people to afford vehicles.
On a regional level, SSA’s automotive industry continues to underperform all other regions. The region’s average score was 28.9 out of a possible 100. This underperforms the global average score of 50.0 which falls behind the Americas region (44.9/100).
Factors that continue to weigh on the region’s overall score include low incomes, a tough operating environment and dire economic and political outlook for a number of countries in our Autos Sales RRI.
The vast majority of the countries that are covered in the SSA region are characterised by low wage earners, which severely limits the short-term sales potential for automakers looking to enter the region.
Nonetheless, the SSA market has significant growth potential over the long term. This will depend heavily on the region’s ability to develop its consumer base, Fitch indicated