There is ample evidence of EV viability in African countries. However, government policies would be key to accelerating the transition. Even so, achieving scale would probably take a while. 50,000 to 300,000 new EV sales by 2030 seems realistic. Used ICEVs would probably overwhelm in the early EV transition periods on the continent, as owners abroad dump them for electric vehicles. The market for used EVs would probably also accelerate faster, as foreign owners move on to newer models. Even so, adapted EV models for the peculiar African environment may increasingly become more attractive, buoying new EV sales. Incipient innovations that make EVs cost significantly less to acquire could also turn the tide. Investors, managers, and policymakers should be guided by the following recommendations:
EV transition would be slow, policy holdups likely
With more pressing priorities, African governments would probably be slow to act on EV transition policies. Still, more would likely follow in the footsteps of Cape Verde and South Africa, setting EV adoption targets and time-bound ICEV bans. Likely greater interest by foreign ICEV manufacturers in the more labour-intensive $10 billion African ICEV market might be too tempting for African governments to resist. With demand for ICEV parts and accessories estimated to reach $15 billion by 2022, EV models would likely face a tall order gaining market share.
Besides, as foreign automakers would likely seek to extract as much value as possible from their expectedly redundant ICEV line assets from 2030 onwards, owing to aggressive EV transitions in their home countries, they might be reluctant to cannibalise their ICEV models on the continent with EVs too quickly. Additionally, ICEV components that were hitherto imported for local assembly would increasingly be manufactured locally, leaving little room for similar EV ventures.
Thus, without some deliberate push by African governments, and superior value propositions by EV manufacturers and importers, achieving scale with EVs would likely be a daunting task. And considering how grid electricity demand is yet unmet in many African countries, the potential additional burden of EVs on largely weak power infrastructure may discourage some governments.
Target South Africa, Egypt, Algeria, Morocco, Nigeria and Kenya for new EV sales
Africa’s largest regional economies South Africa, Nigeria, Egypt and Kenya would likely be the key EV markets on the continent to 2030. Currently, the biggest African market for EVs and ICEVs, South Africa’s evolution is already well underway. While new South African EV sales of about 230 units are minuscule compared with an annual 355,000 new ICEV sales in 2019, there is clearly ample opportunity to convert many South African ICEV owners to EVs.
Thus, without some deliberate push by African governments, and superior value propositions by EV manufacturers and importers, achieving scale with EVs would likely be a daunting task
The business cases for Nigeria and Kenya are underpinned by anecdotal evidence of emerging buyer-seller interest and government support. Additionally, according to the IEA, Nigeria and Kenya have some of the highest car ownership per urban household rates on the continent. For potential scale, Algeria, Egypt and Morocco, which after South Africa recorded highest passenger car sales in 2019, are likely to be commercially successful targets. Egypt is particularly attractive amongst the North African trio.
EV manufacturers must be wiling to invest in public charging infrastructure
As the South African example shows, foreign automakers looking to sell EVs in significant numbers on the continent must also be willing to invest in public charging infrastructure. Additionally, there might be a need to include off-grid power capabilities to each charging station owing to weak grids in many of the continent’s markets. In other words, EV manufacturers and importers must factor into their upfront costs not only just bringing EVs in, but also building charging stations and off-grid power systems in tandem.
Focus on large cities
EVs are not suited for long-distance travel in most African countries. It is sub-optimal to install charging stations on highways where they could be easily vandalised or stolen. The resale value of EVs and their components are relatively attractive. Thus, owners would likely be reluctant to travel long distances with them amid the insecurity even if the infrastructure were readily available.
In any case, the otherwise daring EV owners may find that they are frequently robbed on the continent’s major highways. The charging range is also a consideration. It is not unheard of for traffic in some of Africa’s biggest cities to endure for hours longer than most EV batteries would be able to endure, adding to the gridlock if a significant number of EVs happen to discharge at about the same time.
Plan for phased and gradual market entry
New EV sales are probably going to be slow at first. There would be emerging electric taxi opportunities in specific cities. Large ones like Johannesburg, Cape Town, Cairo, Casablanca, Nairobi, and Lagos are good candidates. A significant used-EV market would likely also be ascendant, albeit there would likely be much competition from owners abroad who might find second-life opportunities for EV batteries to be too attractive to give up.
And with ICEVs likely to be extremely cheap, as owners abroad dump them, EV manufacturers and importers would also need to lobby governments and international organisations to derail what would not only be unfriendly for the environment and but almost certainly elongate the lead time for greater EV adoption in African countries.
An edited version of this article was first published by Nanyang Business School’s NTU-SBF Centre for African Studies, Singapore. References, figures and tables are in the original article. See link viz. https://www.ntu.edu.sg/docs/librariesprovider100/aci-latest/2021-47.pdf?sfvrsn=7652eb60_2
