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Africa's New Car Dealer: China
When Pape Seck wanted to buy cars for his Senegalese construction company, he first looked at used models from Europe. Then, a few months ago, he walked into Espace Auto, a dealership in the heart of this grimy city of 2.5 million. Mr. Seck shelled out $145,000 for six new Chinese cars, including two four-wheel-drive black Hover II SUVs, made by the Great Wall Motor Co. that sell for $32,000 each. "Why would you want used when you can buy new for cheaper?" says Mr. Seck. He would have paid $40,000 for a 2003 Toyota Land Cruiser in good condition imported from Europe. Mr. Seck is on the buying end of a trend that is denting Europe's considerable used-car exports to the developing world and sending out early warning signals to established makers of new cars. Still unable to compete for the rich markets of the U.S. and Europe because of tough regulatory and marketing hurdles, China's young car companies are moving aggressively into Africa. Africa is too poor to be a big market for the world's major automobile brands, but the industry is watching closely. Developing markets like Africa offer benchmarks of the progress Chinese firms like Great Wall, Chery Automobile Co. and Geely Group Ltd. make toward challenging European, Japanese, Korean and American auto makers among price-sensitive buyers, industry analysts say -- a first step toward becoming the next Hyundai Motor Co. or Toyota Motor Corp. "At the appointed time, Great Wall will compete with world well known brands on one stage," says a statement on the company's Web site. Until then, Chinese car companies are selling to the developing world: 61,000 vehicles in the first five months of 2007, more than double the number shipped abroad in the same period in 2006. "The performance-price ratio of our products is high so African people like our brand," says Zheng Guoqing, who handles Africa sales for Great Wall. "The emissions standard is not particularly high there. The requirement for safety is also not high." In Africa's richer economies, such as South Africa, Chinese car makers already are going head-to-head with global brands for low volumes of new car sales. In South Africa, Great Wall has set up 20 dealerships since the beginning of 2007 and is planning to extend to 30 by 2008. But most Africans, especially in poorer economies such as Senegal in West Africa, don't have the means to buy a new Toyota, Ford or Volkswagen. Africans buy hundreds of thousands of used vehicles a year from developed nations. West Africa favors nearby Europe. Annual car imports, new and used, range from around $10 billion for a rich country like South Africa to $162 million for a poorer nation like Senegal. Those figures compare with hundreds of billions of dollars worth of cars that are imported each year into the U.S. and Europe. For years, Espace Auto in Dakar struggled to sell new Volkswagens. To compete with the used market, the company decided to go Chinese 18 months ago. "We needed to offer something new that could really compete on price," says director Jean-Paul Coquerel, ho manages the dealership on behalf of a Senegalese holding company. Last year, Espace Auto sold 103 cars imported from China, compared with 116 Volkswagens. Mr. Coquerel dismisses fears about the safety and reliability of Chinese-made cars. "Thirty years ago, people were afraid of Japanese cars," he says. "Now Toyota rules the world." Since 2003, Chinese car exports to Senegal have risen 18-fold to $7.9 million from $434,000. The number of cars shipped from the port of Antwerp to the country has fallen over two thirds to 2,727, from 9,446. China is getting some help from the Senegalese government. Two years ago, the country stopped imports of cars over five years old, cutting off the supply of truly cheap second-hand cars. Other African countries have taken similar steps, improving the market for low-cost new cars. Car companies from rich countries watch second-hand-car statistics as a yardstick of possible sales of new vehicles. "Developing markets are a useful barometer of how the Chinese companies are doing," says Jean-Pierre Mercier, spokesman for the French confederation of car makers. "So far, they're going much faster than expected." India's Tata Motors Ltd. is also developing a $2,500 car and setting up showrooms across Africa. In addition to exporting, China's car companies are developing manufacturing hubs outside the country. Chery finished building a plant in Iran in 2003. Last year it started making cars in a former Daewoo factory in Egypt. Reacting to the price pressures, some European and American manufacturers are scrambling to develop bargain models of their own. Japan's Nissan Motor Co. and Renault SA of France are in talks with another Indian company, Mahindra & Mahindra Ltd., on developing a car that would cost under $3,000. Renault already produces a budget car, the Logan, which it makes in Romania and sells to Africa, among other markets. Last month, Chrysler LLC and Chery announced a joint venture to export cars to Latin America and Eastern Europe within a year, and to North America and Western Europe shortly thereafter. In Europe, the second-hand-car industry is starting to feel the heat. The sector has boomed in the last two decades, thanks to Africa and Eastern Europe. The Netherlands, with flat lands and low speed limits that don't stress engines, are a popular source of used cars. At a market every Tuesday morning in Utrecht, in the country's south, more than 1,000 cars change hands. More than 80% of the sales are destined for Eastern Europe, says Liddy Keermans, one of the market's organizers. For now, sales to Eastern Europe remain strong, but organizers fear Chinese imports could hurt them in a few years, too. In Belgium, car merchants occupy a dozen city blocks in Brussels, attracting thousands of African car buyers a year. For those selling to the African market, "the strong euro and China are bad news," says Majed Ghammachi, whose Brussels export company ships 40,000 to 50,000 cars a year to 15 different destinations in West Africa. "We've had to be aggressive about finding new markets in Africa in order to keep our numbers up." On a recent day, Elir Odio went shopping. For years, the 36-year-old Congolese banker has bought used cars here and shipped them home to family members. Last year, though, his parents told him they would shop for a Chinese model because those were available on the lot in the Congo. Western companies have mostly pulled out of the country. "European companies need to come to us, or we're all going to buy Chinese," he said. 2008-03-17 |
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