Automotive Sector

Strategically located in West Africa, Ghana is a gateway to a regional market of over 400 million people.

Ghana’s automotive sector is nascent, with a growing interest in developing local assembly and manufacturing capabilities. Its potential lies in leveraging Ghana’s strategic location within West Africa, access to natural resources, and membership in trade agreements such as ECOWAS and AfCFTA. Ghana’s emerging automotive industry, projected to grow to $11 billion by 2028, offers significant opportunities for industrial growth and job creation.

Strategic Importance

The development of Ghana’s automotive sector offers significant potential to transform the nation’s economy.

By establishing local manufacturing capabilities, Ghana can reduce its reliance on imports and bolster its GDP through industrial growth. This diversification is critical to building a more resilient and self-reliant economy.

Ghana’s geographic location and trade agreements make it uniquely positioned to become a regional hub for automotive trade. As a gateway to the ECOWAS market, projected to grow to over one million vehicles annually by 2035, Ghana can serve as a key player in meeting regional demand.

The automotive sector aligns with Ghana’s sustainability goals, supporting industrialisation while promoting sustainable practices. By fostering local production and reducing reliance on imported used vehicles, Ghana can reduce its environmental footprint and advance its commitment to sustainable development.

Local and Global Context

Locally, Ghana’s automotive sector is defined by its nascent manufacturing base and heavy import reliance. The Ghana Automotive Development Policy (GADP)

eeks to address this by offering incentives for local assembly and imposing tariffs on used vehicles to encourage new vehicle purchases. Within three years, this framework has catalysed over £60 million in investments to establish greenfield automotive assembly facilities.

More than eleven global car makers have invested in assembling semi-knocked-down (SKD) kits into fully built units for the local market, with some exports to nearby countries beginning to emerge.

Despite these measures, affordability remains a significant barrier, necessitating robust vehicle financing frameworks to unlock demand for locally assembled cars.

Globally, Ghana must contend with intense competition from established automotive hubs like Southeast Asia, India, and Morocco, which benefit from cost efficiencies and advanced manufacturing ecosystems.

However, Ghana’s relatively affordable labour and access to natural resources such as aluminium and rubber provide essential components for vehicle manufacturing, including body frames, tyres, and batteries. By leveraging locally available materials, the industry can reduce reliance on imports, lower production costs, and create a more sustainable supply chain.

Global Trends in the Automotive Sector

The global automotive sector is transforming significantly, driven by technological advancements, shifting consumer preferences, and evolving regulations. A prominent trend is the transition to electric vehicles (EVs), fueled by environmental concerns, government policies, and demand for cleaner transportation. However, EV adoption remains uneven due to affordability and infrastructure challenges, with hybrid vehicles playing a crucial transitional role.

Another key trend is the rise of software-defined vehicles, where software controls significant functions. Supply chain disruptions, like the semiconductor shortage, highlight the need for resilient operations. Automakers are diversifying supply chains and exploring regional manufacturing hubs to mitigate risks and improve efficiency. Cost pressures, driven by inflation, labor shortages, and supply chain challenges, remain critical. Manufacturers focus on cost-competitive inputs and streamlining operations to stay competitive.

Regional Trends

The automotive industry in the African region is shaped by unique challenges and opportunities. Regional demand for vehicles is growing, with ECOWAS projected to reach over one million vehicle sales annually by 2035. However, this market remains dominated by used vehicle imports, which account for over 90% of sales in countries like Ghana. Local assembly and manufacturing efforts are still in their infancy, with Ghana producing approximately 5,000 vehicles annually across six assembly plants.

Trade agreements like AfCFTA and ECOWAS are playing a significant role in shaping regional dynamics. These agreements aim to promote intra-African trade and reduce dependency on imports from outside the continent. However, restrictive rules of origin and protectionist policies pose significant challenges to achieving seamless regional integration.

Opportunities

Import Substitution

Developing local assembly and manufacturing can replace imports, especially given the high tariffs on used vehicles.

Aftermarket Components

Manufacturing spare parts, such as filters, batteries, and brakes, offers significant opportunities to create jobs and reduce import dependency.

Electric and Hybrid Vehicles

Although in the early stages, developing an ecosystem for EVs, including charging infrastructure, presents a long-term opportunity.

Skills Development

Investments in training programs can improve workforce quality, making Ghana more competitive.

Export Potential

With adequate scale and compliance with trade agreements, Ghana could export vehicles and components to ECOWAS and beyond.

Collaborations with OEMs

Strengthening partnerships with Original Equipment Manufacturers (OEMs) can bring investment and technology transfer.

Government Measures

Ghana Automotive Development Policy (GADP)

Offers tax exemptions and incentives for SKD and CKD assemblies.
Imposes tariffs on used car imports to encourage new vehicle purchases.
Supports local assemblers through reduced costs for components.

AfCFTA

Ghana’s hosting of the AfCFTA Secretariat places it at the centre of Africa’s trade integration, providing preferential access to a market of 1.4 billion people. AfCFTA’s local content requirements incentivise the development of local supply chains.

Other Preferential Trade Agreements

Duty-free exports under ECOWAS Trade Liberalisation Scheme (ETLS)

After care

Investors in Ghana benefit from strong infrastructure support, with institutions such as the Ghana Investment Promotion Centre (GIPC) offering aftercare services to streamline business operations. This proactive support system ensures companies can efficiently navigate regulatory processes and focus on growth.

Capacity Building Initiatives

Technical assistance from international development partners through initiatives like the Jobs and Economic Transformation (JET) programme.

Ghana’s automotive manufacturing industry presents a compelling investment opportunity for businesses seeking to enter the African market. The country offers a range of incentives designed to attract large-scale manufacturers, including access to land, significant tax exemptions, and duty waivers. These incentives reduce business costs and enhance profitability.

As a member of the African Continental Free Trade Area (AfCFTA), businesses in Ghana benefit from preferential trade agreements, enabling seamless access to multiple African economies. This positioning makes Ghana an ideal hub for regional expansion.

A well-structured regulatory framework ensures a stable business environment. Ghana’s policies support long-term economic growth and investment security, bolstered by political stability and sound economic policies. The country also boasts a well-educated and skilled workforce, reducing the need for extensive expatriate staffing and lowering operational costs.

With a unique blend of incentives, market access, stability, and skilled labour, Ghana stands out as a premier investment destination in Africa, providing businesses with a strong foundation for sustainable growth and success.