Africa’s auto advantage: Strategies to seize emerging market potential

A $6.5 billion investment in Morocco this year marked Africa’s first electric vehicle battery gigafactory, notating a step toward transforming the continent into a global EV manufacturing hub. This major investment reflects the broader dynamics of the African automotive investment arena. In the past few years, Morocco signed a $300 million agreement to construct a cathode (a component critical for EVs) production unit, Afreximbank pledged $1 billion to accelerate automotive development continent-wide, and BMW launched its new BMW X3, a plug-in hybrid vehicle produced exclusively in South Africa. Meanwhile, Isuzu Motors is betting big on its South African branch, with a goal to localize 45% of its sources and 45% of its production on the African continent. After decades on the sidelines, Africa is experiencing an unprecedented automotive investment boom that’s rewriting the global industry map.

Africa’s automotive industry is projected to grow by 40% from $30.44 billion in 2021 to $42.06 billion by 2027. New car sales are currently low in Africa, with only 1.5 million new cars (1% of global new car sales) being sold across the continent in 2024. Yet with over 500 million Africans projected to be part of the middle class by 2030, this figure is projected to grow to 10 million new sales per year. As discussed more in my recent book, “Realizing Africa’s Potential: A Journey to Prosperity,” for investors to reap the benefits of this growth potential, they must understand the trends, key players, challenges, and strategies for success unique to Africa’s automotive industry.

Key trends and opportunities

The electric revolution: In 2024, 17 million EVs were sold globally, while Bloomberg estimates the global market across all EV vehicle segments will reach $9 trillion by 2030 and grow to $63 trillion by 2050. Africa sits on 19% of the world’s critical minerals needed for EV batteries; for example, Morocco controls 72% of the world’s phosphate reserves. This reality means African countries will play a key role in the EV value chain as evidenced by the DRC-Morocco-Zambia MoU for EV value chain integration, where Morocco is focused on manufacturing, the DRC is focusing on processing its battery-critical minerals, and Zambia is focusing on local processing of its copper reserves. Other government actions are also accelerating the market for EVs, such as those in Ethiopia, whose ban on petrol and diesel cars resulted in 100,000 deployed EVs, or in South Africa, whose 150% tax incentive for electric and hydrogen vehicle production is attracting Chinese investments.

Infrastructure and digital transformation: Beyond technology to power EVs, advanced technologies are being integrated elsewhere into the automotive value chain, offering more important opportunities for investors. For example, 91% of fleet managers surveyed in South Africa plan to integrate digital investment, while 58% expect to adopt AI in the next five years (up from 23% currently using AI today). According to them, AI has the potential to help optimize route planning, improve driver safety, and enhance predictive maintenance, while big data and the internet of things can help improve vehicle connectivity and customer service. Social media is also an untapped but highly lucrative industry within automotives, as 76% of South Africans use social media for product research, indicating an unmet demand for digital marketing, AI-enabled targeting, and other tools that respond to how African youth prefer to buy vehicles. E-commerce and logistics are also emerging facets of the automotive industry growth. With 85% of exports to ports or airports are delivered via road transport, new companies are exploring how to reduce costs and crowdsource delivery services.

Demographics and preferences: By 2030, more than 500 million Africans could be part of the middle class and “annual car sales could surpass 10 million units in sub-Saharan Africa.” As the younger generations will dominate African and global markets, investors must understand the unique preferences and dynamics within the automotive industry for this population. As of 2025, African consumers are keeping their cars for 6-8 years on average (compared to 5 in the past) and Gen-Z has had a 27.9% increase year-on-year in vehicle finance volumes. More affordable options such as some competitively-priced Chinese automotives might be contributing to a decrease in the used car market.

Key players: Production powerhouses emerging

South Africa and Morocco are ranked 20th and 23rd in global automotive production in 2025.  For South Africa, automotives contribute about 5% of the country’s GDP, and the market has grown at an exceptionally quick pace, with 12 million vehicles on the roads in 2025 compared to 10.3 million in 2020. South Africa stands out as the main hub for intra-African trade (accounting for 60% of the continent’s intra-African trade in the sector in 2021).

Morocco’s key advantages include its strong industrial policy, its proximity to Europe, and its ability to integrate into European value chains. The country has evolved from producing single components as inputs in the early 2000s to now producing entire cars, so much so that in 2023, Morocco overcame China and Japan to become the EU’s top supplier of automotives by value. Its largest car factory, Renault-Nissan in Tangier, exported its vehicles to 68 countries in 2024, with 76% of its total volume exported to Europe. Amidst trade protectionism in the U.S. and the EU, Morocco has become a preferred option for Chinese investors to host operations and is geographically positioned to meet demand in West Africa.

Investment risks and mitigation strategies

Key challenges: The automotive industry also faces unique challenges that investors must navigate. Used cars still dominate automotive imports for African countries largely due to affordability. To meet the demand for advanced automotive manufacturing, investors might face a deficit of skilled workers given the speed of technological evolution, indicating a need for specific training programs. High acquisition costs compared to fuel-powered and infrastructure limits that mean few public chargers are available, hindering EV adoption and manufacturing growth. However, countries are overcoming these deficits via public-private partnerships and FDI, offering companies further opportunities to invest. Supply chain disruptions have also become an increasingly consequential challenge given the trade protectionism in some countries like the U.S., which significantly decreased South African automotive exports this year. 

Risk mitigation: Investors should consider the role advanced technologies can play and the ongoing transformation potential of the AfCFTA to navigate these challenges. Advanced technologies can help strengthen supply chain resilience using tools like additive manufacturing, advanced robotics, AI for manufacturing, material optimization, and process efficiency. The AfCFTA can also help overcome supply chain, affordability, and infrastructure challenges as regional integration that connects such a large market of people can spur more local manufacturing and local content via affordable mobility within and between regions.

Winning investment strategies

Given the opportunities and challenges, a few sector-specific strategies emerge. First, investors should explore the potential of “two-wheelers” as they have lower technological barriers and faster market entry with the potential for innovative electric models.

Second, component manufacturing will become a key industry given the AfCFTA’s push for regional value chains and the fact that a high percentage of high-value components are currently imported. This opens up opportunities for investors to supply basic materials, subcomponents, and major components within African countries focusing on regional strengths and specialization.

Third, investors should leverage Africa’s critical mineral reserves to target downstream processing and battery assembly in Africa to build a battery value chain.

Fourth, investors should leverage digital services and technologies to optimize fleet management services or even offer fintech solutions for vehicle financing. For example, BMW’s strategy to stay competitive in South Africa is to integrate battery electric vehicles into local production, focusing on technological innovation (including electrifying the local industry) consumer trust, and adapting to changing consumer preferences while working together with the South African government.

All in all, with astute strategies, Africa could become a manufacturer of 4-5 million vehicles with 20+ additional full-size manufacturing plants by 2035, presenting unprecedented growth opportunities for new and existing automotive and automotive supplier companies to seize this generational investment opportunity.