Into Africa: Toyota taps last emerging market

Johan van Zyl, Toyota's CEO for Africa: "It's a growing market, a market with a future."
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TOKYO - Last year, former Toyota Motor Corp. president and founding family patriarch Shoichiro Toyoda called aside his son, Akio Toyoda.

He had a mission for the automaker's current president: Get out of the Asia-Europe-America rut and visit places you have never been.

So that's just what the younger Toyoda did. He visited Kenya for the first time last fall, touring Toyota's knockdown production plant and Toyota Group companies.

The visit was a textbook example of the Toyota maxim of genchi genbutsu, which literally means "actual place, actual things" but is best translated as "go to the source to see for yourself."

His trip highlights a new reality for Toyota and rivals from Europe to China: Africa is the last untapped emerging market. And carmakers are jostling for position there.

The potential is huge because motorization in Africa has yet to take off.

In South Africa, there were roughly 160 vehicles per 1,000 people, according to 2009 data compiled by IHS Automotive. But in Kenya and Nigeria - two of the most populous countries in Africa - there are fewer than 40 per 1,000.

The problem: Cashing in on big sales will take awhile.

Eyes on 2030


IHS predicts sub-Saharan Africa's gross domestic product per capita won't reach $3,000, and its vehicle-ownership rate won't reach 70 cars per 1,000 people, until 2030. That was a critical turning point reached by China in 2012.

For now, the African auto market essentially means South Africa, which accounts for half the continent's 1.3 million new-vehicle sales, according to IHS.

The country is Toyota's staging point. Toyota has been the market leader in South Africa for 34 years and has an assembly plant there with annual capacity to make 220,000 vehicles.

Newly appointed Africa CEO Johan van Zyl, a native South African, brims with confidence about the continent's potential. "It's a growing market, a market with a future," van Zyl said.

He expects Toyota's sales there to climb 8 percent to 271,000 in 2014. Next month, Toyota is launching the Quest, specially tailored to South African demands. It is a tweaked, lower-cost version of the previous generation Corolla.

Aside from its South Africa plant, Toyota also has meager knockdown production sites in Egypt and Kenya, each with capacity for just 3,000 vehicles. Its biggest sellers are the Hilux pickup, Land Cruiser SUV and Corolla small car.

Scouting locations


Van Zyl is scouting other locations in northern Africa possibly to expand Toyota's production footprint.

But first, the company has to fully utilize its South Africa plant, which is operating below full capacity at just 160,000 vehicles. Adding the Africa-oriented Quest should help.

Van Zyl cites Hyundai Motor Co. and Volkswagen AG as Toyota's biggest rivals in Africa. But Chinese brands, such as Geely and Great Wall, increasingly see Africa as a beachhead for overseas expansion. In recent years, the Chinese government has poured millions of dollars in aid into the region, primarily in countries with oil reserves.

African production should hit 1.1 million units in 2020, from just shy of 800,000 last year, IHS predicts. But the main growth will come from South Africa and Morocco. Renault Group is positioning the latter as an export hub to Europe.

To be sure, Africa's huge population and big potential for economic growth are tempting to many manufacturers. But the continent is still the ultimate long game.

New-car sales are still paltry. Angola, which has about 20 million people, buys only around 30,000 new cars a year, according to IHS.

Ghana, with about 25 million people, buys only 10,000 new vehicles a year. And in Cameroon, also a member of the 20-million population club, automakers sell a meager 4,000.

While continentwide production projections of 1.1 million vehicles in six years may sound encouraging, consider this: Toyota produced 1.76 million vehicles last year in North America.

'Ambitious target'


"We have quite an ambitious target," van Zyl said of Toyota's Africa sales goals, while declining to give a specific figure.

"But we must also understand, this is not going to happen overnight," he added. "We have to put the right things in place. And that is what we are busy doing, to ensure that we have the right foundation for the business in the future in Africa."

You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on Twitter

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