Chinese EV makers continue with Africa expansion

From the newsletter

From South to the North, Chinese EV makers are making inroads into Africa. BAIC, China's sixth-largest automobile manufacturer, is entering the Egyptian market by partnering with Egypt's Alkan Auto, a few months after launching its range of EVs in May 2024. This follows the entry of other Chinese EV brands like Xpeng and FAW.

• The goal of the partnership is to establish a local EV factory in Egypt.  The factory will be built on a 120,000-square-meter area, with operations expected to begin by the end of 2025.  

• It is set to produce 20,000 EVs in its first year, reaching 50,000 EVs annually by the end of its fifth year and is expected to employ 1,200 people.

More details

• The Egyptian automotive market is one of the largest in Africa. In 2023, there were approximately 271,000 annual vehicle registrations, and this number is projected to reach 353,000 by 2028.

• However, on the production front, Egypt is expected to see a slight decline. Vehicle production is estimated to reach about 56,000 units by 2028, down from roughly 57,000 units in 2023.  While demand is increasing with a growing population, local production is falling.

• To promote local manufacturing and attract investment, the Egyptian government launched the Automotive Industry Development Program in 2022. This program offers various incentives, including reductions in corporate income tax for companies that meet localization targets, exemptions on imported components used in local production, loans and grants for research and development and establishing new manufacturing facilities.

• This initiative is already bearing fruit, with the entry of Chinese EV players like Xpeng and FAW. FAW, the second-largest of China's "Big Four" state-owned car manufacturers, plans to build a local plant.

• These new entrants will compete with established companies like Chevrolet, which holds the largest share of the Egyptian market at 20%, Hyundai at 15%,  Nissan, Renault, Toyota, Suzuki, and Kia.

• However, the newcomers have the advantage of starting with electric vehicles, while established players will need to retool their plants to accommodate EVs.

• Egypt's strategic location and membership in international trade agreements like the African Continental Free Trade Area (AfCFTA), which includes 48 countries, will benefit its export ambitions.

• Egypt aims to establish itself as a regional hub for EV manufacturing. The government targets increasing the use of local raw materials in production from 48% to 58%.

Our take

• This is just the beginning of the Chinese EV expansion in Africa. We anticipate a shift from mere exporting to the establishment of local manufacturing plants across the continent.  

• The AfCFTA offers significant export opportunities, with markets like Ethiopia ripe for EV adoption. 

• Egypt's population density and concentrated urban areas make it easier to establish charging infrastructure..