How to build an automotive industry from scratch 

Ninety per cent of Ghana's vehicles are used, but the country is determined to become West Africa's leading automotive hub. It currently produces around 7,000 vehicles annually, a small fraction of the 100,000 sold each year, most of which are second-hand imports.

South Africa remains Africa's largest car producer, manufacturing 633,000 vehicles in 2023, but Morocco is set to surpass it in 2024 with 614,000 vehicles, driven by strategic investments and proximity to European markets. South Africa's output is expected to fall to 591,000, hindered by logistical inefficiencies such as strained ports and limited rail infrastructure. President Trump’s fluctuating US tariffs also likely to impact these markets.

Trumps's tariffs are an opportunity for Ghana

“Trump’s tariffs will significantly affect Africa’s emerging auto industry,” says Dr Issaka Tetteh, a principal consultant at Monty Nobilitas, an Accra-based consulting firm. “Some experts argue that Trump’s tariffs will compel global manufacturers in the auto industry to explore opportunities in new markets.”

“Morocco and South Africa are the countries that are most likely to be affected by Trump’s tariffs. The export of vehicles and auto parts from South Africa and Morocco to the US is valued at over $2bn."

“This could be an opportunity for countries like Ghana and other countries in Africa. Although Africa currently accounts for less than 1% of global annual new car sales, this could be doubled within the next 5 years with the right level of investment and support from countries with advanced auto industries, including Germany, Japan, China, South Korea, and the USA.”

Ghana is focusing on local assembly, policy reforms, and regional export opportunities to grow its emerging automotive industry. Drawing lessons from South Africa and Morocco, Ghana plans to scale production and integrate into global supply chains, boosting its competitiveness in West Africa. For the time being, the country will focus on internal combustion engine cars, as the market is not yet ready for electric vehicles.

Ghana's three-step programme to becoming an auto hub

"Ghana is an emerging auto hub in the West African sub-region," says Issaka. "As a country, we've decided that we need to industrialise our auto sector, and by so doing, we want to manufacture as many vehicle parts as possible here. The policy the government has developed is in phases. The first phase is to make it easy for companies to set up semi-knocked down (SKD) plants, then transition to completely knocked down (CKD), and eventually full manufacturing. As a country, the ambition is to become a competitive manufacturing hub."

SKD plants assemble vehicles from large pre-manufactured parts, while CKD plants require more local production of smaller components before final assembly, representing a more advanced stage of industrialisation.

Several companies have set up assembly plants in Ghana, including global manufacturers such as Volkswagen, Toyota, and Nissan, alongside the local Kantanka Automobile Company. These plants currently produce vehicles from SKD kits.

The need to attract global players

Ghana’s automotive strategy was formalised in 2019 with the launch of the Ghana Automotive Development Policy (GADP). Key objectives include attracting global manufacturers, transitioning from SKD to CKD production, and fostering local component manufacturing. The policy also seeks to reduce reliance on used car imports by promoting locally assembled vehicles through a planned financing scheme.

Under President John Dramani Mahama, who assumed office on 7 January 2025, the future of the policy is uncertain. It remains unclear whether the new government will continue prioritising the automotive sector.

"From their manifesto before the elections, the President's inaugural speech, and some statements that are coming through, we are not certain that the automotive industry is a priority for the current government," adds Tetteh. "But our focus as a programme is to ensure that there is no rollback in the policy provisions because any rollback would be detrimental to the sector's growth."

The lack of affordable vehicle financing is a significant challenge hindering Ghana's automotive sector. With interest rates between 30% and 40%, many consumers cannot afford locally assembled vehicles, reducing demand and impeding the transition to CKD manufacturing. The government is addressing this with a vehicle asset financing scheme.

"The main challenge revolves around the development of the vehicle asset base finance," says Eugene Sangmortey, a representative of the UK-funded JET Programme, which supports Ghana’s industrialisation and economic diversification initiatives, including its automotive sector. "This will be crucial to the growth of the automotive industry. If we are able to get the vehicle finance framework implemented, the sector will grow as demand increases, spurring the transition from current SKD towards manufacturing and localisation."

Ghana's used vehicle problem

The GADP includes plans to ban the import of vehicles older than ten years and restrict salvaged cars —vehicles damaged by accidents, fires, or floods and deemed unsafe for use — aiming to promote locally assembled vehicles, improve road safety, and address environmental concerns. However, the previous government did not enforce the ban due to pressure from used car importers and fears of alienating voters reliant on cheaper second-hand vehicles. The new government has yet to clarify its stance on these restrictions.

"The truth is some of the vehicles are not fit to be on the roads in other parts of the world," says Tettah. "And in this era of climate change and environmental concerns, some of these vehicles need to be assessed in their countries. If they are fit to be on the roads, they should be allowed here."

Ghana aims to expand its automotive sector by manufacturing components for export to established markets like Morocco, Africa's second-largest vehicle producer, which imports many parts for assembly. Supplying components such as wiring harnesses offer Ghana the chance to integrate into regional supply chains, create jobs, and build industrial expertise.

Nigeria, Africa's largest automotive market, sells around 750,000 vehicles annually, driven by strong demand for used and new cars. Ghana's exporting locally assembled vehicles or components to Nigeria could significantly boost production and strengthen its sector, taking advantage of proximity and shared trade networks.

The African Continental Free Trade Area (AfCFTA), headquartered in Accra, plays a key role in Ghana's automotive ambitions. AfCFTA opens access to a market of 1.5 billion people by eliminating tariffs and trade barriers. This regional integration could accelerate industrialisation and position Ghana as a vital player in the continent’s automotive value chain.

Lessons from South Africa

South Africa’s approach to developing its automotive sector offers valuable lessons for Ghana, particularly in building strong institutional frameworks and fostering collaboration among key stakeholders. "Long-term vision and strategic planning are key pillars of South Africa’s automotive industry," adds Sangmortey. "Its Automotive Industry Development Council serves as the body responsible for the strategic development and support for the automotive industry, collaborating with government and industry players to grow and develop the industry. I think this is a key lesson for Ghana. While we have the Ghana Automotive Development Centre, which received support from the JET programme to be operational, the institution needs to be supported to build capacity and deliver on its mandate."

Ghana’s automotive sector is on the verge of significant growth. With consistent policy support, strategic investments, and integration into the African Continental Free Trade Area (AfCFTA), the country has the potential to become a key player in West Africa’s automotive industry. By scaling local production and expanding regional exports, Ghana can drive industrial growth, create jobs, and reduce reliance on imports. Drawing from lessons in South Africa and tapping into key markets like Nigeria and Morocco, Ghana has the opportunity to strengthen its position within the regional automotive value chain.