Motoring Africa. Edward T. Hightower
The ride sharing service Uber has an estimated valuation greater than most global OEMs. Several global automakers promise to have self-driving autonomous vehicles (AVs) available for sale by the early 2020s. Africa has the opportunity to jump on this train even though it is moving. Entrepreneurs, investors, and global automakers and parts manufacturers should build an African auto industry not simply to catch up, but should build an African auto industry that can thrive, win, and last.
Given the diversity and geographic size of the African continent, Motoring Africa will recommend industrializing automobile production in six countries–South Africa, Morocco, Kenya, Ghana, Ethiopia, and Nigeria–to serve the markets of their four respective local regions, the South, North, West, and East, plus exports outside of the continent. This section will also discuss the strategic decisions around the creation of mobility business models, product strategies, and supply chains, to optimize success. Options for financing the creation and launch of these industrial enterprises using public and private sources of capital will also be discussed. Public-private sector partnerships are also essential to industry development. They enable supportive trade policies, banking and financial institutions, energy and infrastructure plans, and workforce education and training resources.
Part 3 will conclude with a call to action for entrepreneurs, investors and interested participants in building industrial capacity for automobile production, or for manufacturing within other product sectors. For those of you who may feel that this is too far of a leap for Africa, I challenge you to think big, be bold, and go all-in. Africa is rising. Africa’s time is now. Africa will be the next economic miracle.
Motoring Africa is not only the title of this book, it is a movement. The sustainable industrialization of automobile production on the African continent will transform economies, create jobs, and create value for investors. There is sufficient supporting evidence to bet on the African population and economic growth macro. This book is a road map to execute. If you missed the chance to grow with the China macro over the last 20-30 years, here is your opportunity for redemption.
Chapter 1 — What is Industrialization?
Yes, a real tiger! My introduction to manufacturing localization
I had worked in the global automobile industry for more than 15 years before my first trip to India. It was 2004, and I had recently resigned from my position as chief engineer of the Expedition and Navigator full-size SUVs at Ford Motor Company to lead a start-up motor scooter manufacturing venture that would be based in Africa.
I was visiting the city of Pune, in India’s Maharashtra state, for meetings with Kinetic Motors, one of the leading motorcycle and motor scooter manufacturers in India. Kinetic had recently secured the rights to build the motor scooter designs of bankrupt Italian manufacturer Italjet Moto SpA. Manufacturing of these models had recently begun in Kinetic’s Pithampur plant near the city of Indore. My start-up company was looking to source parts kits of these Italian-designed, India-produced bikes, assemble them in Africa, and ship them to the US market.
While I was well aware of India’s strengths in the textiles and clothing, pharmaceuticals, information technology, customer call centers, and tea sectors, I had no expectations for “made in India” two-wheelers. It’s not that I thought the bikes would not be “strong,” which is how Ghanaians describe vehicles of good quality; it was that I did not expect much vertical integration. I expected motorbike assembly instead of hard-core, ground-up manufacturing. My expectation for the India plant was that I would see crates of motor scooter parts–shipped in from Italjet’s former Italian suppliers in Bologna–being assembled by local Indian workers, like parents putting together their child’s new Schwinn 10-speed bicycle in a living room on Christmas morning.
Instead, what I saw taking place at the Kinetic plant was both surprising and impressive. The plastic body panels and fenders for the scooters were being injection-molded out of raw resin pellets. These body panels, along with the stamped steel fuel tanks for Kinetic’s motorcycle models, were then painted using waterborne paint processes similar to the paint booths and spray guns used at the Ford Expedition/Lincoln Navigator plant in Wayne, Michigan. Aluminum engine blocks that had been locally cast from melted ingots in the next town were machined, coated, and finished on site. Gears, sprockets, and camshafts were heat-treated for added strength and durability. An on-site materials engineering lab confirmed their finished quality. Handlebars, kickstands, and wheels were dipped in nickel-plating baths to create a chrome finish. And in another nearby supplier’s plant, seats were fabricated in foam molds, then upholstered using locally produced vinyl and fabrics of various textures and colors. As I watched, one of the scooter seats was trimmed in a very realistic looking red leather-like vinyl of a shade you might see in the interior of a Ferrari 488 GTB.
While seeing this complex manufacturing capability at the Kinetic plant in India was initially a surprise, the more I learned about the local Indian manufacturing sector on this first visit to the subcontinent, the more things made sense. After all, India’s Bajaj Auto had started building vehicles by securing a license to locally produce the iconic Vespa motor scooter in the 1970s. After many years of assembling and selling Vespas in India, industrious entrepreneurs figured out how to manufacture replacement and production parts for the scooters. In the early 2000s, as part of their cost-reduction strategy, Vespa parent Piaggio & C. SpA, decided to move the production of its new generation Vespa from Pontedera, Italy, to India. Also, for more than a decade, local Indian companies like Hero and Maruti had partnered with established global two-wheel manufacturers and were building Honda and Suzuki bikes, respectively, in India for both local market consumption and export.
The parts suppliers followed suit. Starting in the mid 1970s, they built factories and brought in the machines and tools necessary to build batteries, tires, wiring harnesses, filters, lighting, and other parts at the required scale and quantities. A local supply chain was established in India. As proven by my walk-through of the Kinetic plant, all the necessary parts could either be built in house or purchased from an Indian company in the next town. Kinetic had achieved localization. Kinetic and its local Indian supplier companies were no longer just assembling motorcycles and scooters, but were manufacturing motorcycles and scooters. They were not simply participating in the two-wheel industry, but had industrialized two-wheel production.
Back to my visit...In addition to seeing their bike production and vertically integrated parts production operations, I also had the opportunity to spend time with their design team, engineers, and road test operations. A product and technology development center was in a rural area not far from the Indore plant. Adjacent to the center was an on-road and off-road test track. I test-rode several of the Kinetic models on the track, from 50cc to 250cc (engine displacement) models. All had cleaner burning four-stroke engines, as Kinetic, like many other two-wheeler companies, had eliminated 2-strokes from their engine portfolios to reduce emissions. While taking either the fourth or fifth model through the off-road portion of the track, I stopped after crossing through one of the puddles formed by the morning rain to admire the view and chat with a few of the engineers and technicians. One of the technicians, Jaggdish, casually commented that he had seen a tiger on the track earlier in the morning. Yes, a real tiger! That ended my test rides, and we headed back into the technology center.
Concurrent with my evaluation of suppliers and product, other members of my team were conducting research to evaluate the market’s acceptance of motor scooters in West Africa. While there was interest in the product, the projected sales volume was much lower than expected and not sufficient to meet our business case objectives. The people and the products of Kinetic were great, but simply taking and kit-assembling their portfolio of products in West Africa would not meet the needs of the market and would not make business sense. We decided to not move forward with that venture. We concluded that if we could launch a more vertically integrated business, with more control of the part production costs and more flexibility to tailor the products to the local West African market, we could revisit this opportunity in the future, once the market was ready.