What car market is dominated by Toyota? Try Africa

Johan_van_Zyl-3-picture courtesy Bertel Schmitt

Global automakers look for untapped growth markets, and with Antarctica looking less than promising, Africa is the last continent left that is worthwhile to be put on four wheels. Africa as a whole has more than a billion people, which puts it in the same league as China or India. As a new car market, however, Africa shrinks to the size of France. About 1.7 million new automobiles change hands in Africa annually. But then, that was the size of the Chinese market only some two or three model cycles ago, and look at it now. No wonder that automakers with a longer horizon than the next quarter are setting their sights on Africa – only to find out that it has been taken over by Toyota, and that for more than 50 years already.

Toyota’s Africa business is run by someone who has been there even longer. Toyota’s  Africa CEO  Johan van Zyl was born in South Africa, and he spent the last twenty years at Toyota’s South African outpost. Speaking to a small circle of reporters in Tokyo today, Zyl has advice for carmakers coming to his region:

“African consumers basically are the same as anywhere else in the world. African consumers are extremely quality conscious. The biggest mistake yon can make in Africa is to sell something inferior.”

That lesson had been ignored by Chinese automakers who thought that in Africa, they would not have to contend with entrenched opposition, and that those poor people would not mind a little poor quality as long as it is cheap. “The Chinese have been in the market for a few years,” says Zyl, pauses, and adds diplomatically:  “But you know, to enter a market is not always easy.”

While still at the University of Potchefstroom, where he received his PhD in business economics in1986, Zyl was “involved in a research study where they wanted to electrify township areas.” The thinking was that the poor folk living in huts would want cheap appliances once they could be plugged-in. But, recalls Zyl in Afrikaans-tinged English, “the feedback was: We don’t want to buy the cheap stuff. We want a brand. When low income people buy durables, they want something to last for a long time, because it’s a huge expense.”

To make the expense a little more palatable, Zyl and Toyota will introduce a car this coming May. It will be “priced between the Etios and the Corolla.” The car will be called “Quest,” but deep inside, it will be a Corolla. The Quest is based on the previous generation Corolla.

Quest née older Corolla and the new Corolla will be built side-by-side at Toyota’s Prospecton plant in Durban, South Africa. The plant can make 220,000 units per year, but currently, it produces only 160,000. Zyl hopes that the Quest will help solve the utilization problem, even if the lower price comes at the cost of excitement. “The car reflects quality, durability and reliability,” says Zyl, and referring to Toyota’s slogan for hearts beating faster, he continues: “The waku-doki needs to be created by marketing.”

According to Zyl,  Toyota’s main competitors in Africa are “Volkswagen and Hyundai. On the LCV side, it’s Nissan, Isuzu and Ford.”

The absolutely biggest competitor in African however is the used car. Data on the unregulated used car market are not available on the continent, but Zyl figures that used car imports to Africa are “about three times the size of the new car market.”  Ports in right hand drive West African countries receive millions of used cars, mainly from France and Germany. LHD East African markets are a favorite destination of used cars from Japan. With Toyota owning nearly half of the JDM, it also dominates the used car exports, thereby increasing visibility and value for the brand in Africa.

In South Africa, which accounts for more than a third of the 1.7 million units sold in Africa, “Toyota is the number one brand, and it has been the number one brand for the last 34 consecutive years,” says Zyl. In many African countries, Toyota leads in sales. In populous Nigeria, Toyota holds a Japan-like share of 50 percent of the market.

Automakers coming to Africa in search for a market that is ripe for the plucking will find it claimed and defended by a feisty Toyota. Zyl sees the market volume of Africa grow to 3 million (think Germany, Russia) in the 2020 – 2025  time-frame, and he promises that “we want to maintain our position in the market.”

P.S.: The name Quest isn’t new. Nissan makes a minivan by the same name. Folks at Toyota are unfazed, saying that their Quest will not go beyond Africa.