Why top EV firms are fighting for dealers in Africa

From the newsletter

Global EV companies are locked in a stiff battle for dealers in Africa as part of their plan to grab market share in key regions. BYD has made CFAO Mobility, an established distributor, its dealer in multiple markets like Kenya, Nigeria and Rwanda. EV firms are jostling for dealers that have wide distribution networks and experience.  

• There are thousands of motor vehicle dealers across Africa, where the dealership model is the dominant distribution channel for new and used vehicles. This involves independent dealerships that partner with vehicle manufacturers or large importers to sell and service their vehicles.

• While direct-to-consumer (DTC) is emerging as an alternative model for the sale of EVs in developed countries such as the US, China and in Europe, it is yet to take root, especially in Africa. The EV industry is fairly new in Africa, and as such, global car manufacturers prefer to appoint dealers that already have deep knowledge about the local market.

More details

• The case for car dealerships is simple. They provide physical showrooms and service centers, making vehicles more accessible to a wider range of customers. They know their customers, their purchase behaviours, and they know what works and what doesn’t. This is crucial in a market like Africa, where online infrastructure or logistics for direct delivery are still developing.

• In developed markets like the US, Europe and parts of Asia, EV manufacturers have been attempting to cut out dealerships for years. Their reason is also simple: cut out the middleman, sell directly to customers and make more profits.

• In the US for example, Tesla pioneered direct-to-consumer EV sales. It was soon followed by the likes of Rivian, Lucid and Fisker. Due to its scale and brand recognition, Tesla has largely succeeded in this approach, but its competitors have struggled. This has forced them to revert back to dealerships or do hybrid models.

• This has been a lesson to some EV manufacturers that, at least for the time being, dealerships are indispensable, especially in a frontier market like Africa, where they do not have a lot of visibility.

• Dealerships know all the major car buyers and even potential buyers, something a global brand like BYD or Tesla would struggle with. They also know how to navigate local regulatory challenges, politics and other corners that only experienced local companies would. This is the reason why most of the global EV firms that are coming to Africa, mainly from China, are waging a war for the best dealerships in town.

• The bigger the dealer the better. Dealerships that have wide networks in key locations and towns offer brands better visibility. This is especially key for a new product like EVs, which not many people in Africa have interacted with. Customers going to a showroom and seeing the actual vehicle, testing it, learning the specifications, pros and cons live could be essential in accelerating EV adoption on the continent. 

• At the same time, traditional vehicle manufacturers that have ventured into EVs like Toyota, Nissan, Hyundai and Honda are mainly sticking with their existing dealers to sell their EV brands. These dealerships have built trust over years, which is valuable when introducing a new technology like EVs, and also help customers to get flexible financing.  

Our take

• Dealerships will continue to be the preferred way for EV manufacturers to reach the market for many years to come. Direct-to-consumer sales, however, will likely dominate EV segments like electric motorcycles, which are increasingly being manufactured on the continent.

• Global EV manufacturers, whether new entrants or traditional players, must continue to invest heavily in empowering their chosen African dealerships. This includes providing comprehensive training for sales and technical staff on EV technology, charging infrastructure, battery maintenance, and software updates.

• To accelerate EV adoption, vehicle manufacturers and their dealership partners should collaborate with governments and energy providers to drive the expansion of reliable and accessible charging infrastructure across key urban and inter-city routes.