Angola Autos Report Q3 2012

The end of the second phase of the Vehicle Restitution Programme in December 2011 has dampened BMI's optimism towards new vehicle sales in Angola in 2012 and prompted us to slightly revise down our 2012 sales growth forecast from the 27% y-o-y expected earlier to 23% currently. Despite the slight downgrade, Angola remains one of the most high potential markets in the broader Sub-Saharan region.

Gradual improvements in road infrastructure are translating into an increased vehicle fleet in the country. In April 2012, Augusto da Silva Tomás, the Angolan minister for transport revealed that a some 5,000 light vehicles and and 1,500 trucks were added to the roads nationwide in the previous month, as a part of the goverment's overall programme to modernise the country's vehicle fleet. More boost to the new vehicles market will come from the contiuned strength of the oil and gas sector and the consequent increase in demand for support infrastructure and growth in the wider construction industry.

German truck maker MAN already seems to be benefitting from the trend. In March 2012, its subsidiary MAN Latin America won a hefty order of 17,260 trucks from the airport authority in Angola. The trucks are due for delivery in June 2012. The order is a significant improvement from the 237 vehicles the company had shipped to Angola in 2011. The growth opportunity has also prompted Iveco to consider investments of US$60mn in Angola between 2010 and 2013 to boost its presence in the country and work towards becoming a leading importer of trucks in Angola by as early as 2013. Industry players will be looking tap Angola's growth story which is set to be the sixth fastest in the world and the third fastest in Sub-Saharan Africa (following Ghana and Uganda), according to BMI forecasts.

In 2012 itself, real GDP expansion is expected to reach 12.8%, owing to a number of giant oil projects coming online and ramping up production, and continued investment into the infrastructure that was destroyed during the 27 years of civil war.

The market is dominated by Japan's Toyota Motor, which reportedly occupies close to a fifth of total new sales, but entry of a large number of foreign brands is steppping up competition in the market. In January 2012, Il-Seop Lee, the deputy chairman of South Korea's Kia Motors, indicated the company's willingness to increase investments in Angola, without stating exact details about the amount of funding.

Meanwhile, CSG Automovel-Angola, a subsidiary of China International Fund, is keen on launching its US$30mn plant for the production of pick-up trucks, SUVs, cars and buses in Luanda by the end of 2012.

However, in terms of its investment profile, the country fares relatively poorly in BMI's Risk/Reward Ratings for the autos industry, being ranked in 13th position - out of 17 countries - with a total score of 26.5 points. The difficulty of doing business in the country, which is plagued by corruption and red tape, poses considerable challenges to foreign businesses looking to invest in Angola. Meanwhile, Angola's vehicle ownership rate is also significantly lower than that in other southern African countries such as Botswana, Namibia and South Africa, placing them significantly higher than Angola. On a regional level,

South Africa and Nigeria are our most favoured countries, with Tanzania and Sudan currently the regional laggards.