Angola Autos Report Q4 2012

BMI maintains its forecast of a 23% year-on-year (y-o-y) rise in new vehicle sales in Angola in 2012, onthe back of expected 12.8% y-o-y growth in the country's real GDP this year. We expect growth to bebroad-based as the booming oil exports will encourage spending by businesses, while the income growthwill boost vehicle demand in the private sector. Meanwhile, government spending is also likely to remainhigh in the run-up to the August 31 election this year.

Over the medium and longer term, we believe that the ongoing improvements in road infrastructure willhelp to increase vehicle fleet in the country. In April 2012, Angola's Minister for Transport Augusto daSilva Tomás said 5,000 light vehicles and 1,500 trucks were added to the roads nationwide in the previousmonth, as a part of the government's overall programme to modernise the country's vehicle fleet.

With new vehicle sales growth at an average of almost 20% between 2013 and 2016 - as forecast byBMI, it is unsurprising that industry players are looking tap into Angola's growth story. In June 2012,General Motors Company (GM)'s authorised dealer in the country Angomotors launched its newshowroom and after-sales service centre in Benguela. Following this, the company also launched its allnew Chevrolet Cruze Hatchback at the second Benguela International Fair to promote the dealership andpromote its brand name in the country. The growth opportunity has also prompted Iveco to considerinvesting US$60mn in Angola between 2010 and 2013 to boost its presence in the country and worktowards becoming a leading importer of trucks in Angola by as early as 2013.

The market is currently dominated by Japan's Toyota Motor, which takes nearly a fifth of total newsales. In January 2012, the deputy chairman of South Korea's Kia Motors Il-Seop Lee indicated thecompany's willingness to increase investment in Angola, without stating exact details about the amount offunding.

However, in terms of its investment profile, the country fares relatively poorly in BMI's Risk/RewardRatings for the autos industry. It is 13th - out of 17 countries - with a total score of 26.5 points. Thedifficulty of doing business in the country, which is plagued by corruption and red tape, posesconsiderable challenges to foreign businesses looking to invest in Angola.

Angola's vehicle ownership rate is also significantly lower than in other southern African countries suchas Botswana, Namibia and South Africa, which are all above Angola in our ratings.