Industry Trend Analysis - C?te d'Ivoire Car Sales To Outperform In ECOWAS - APR 2017


BMI View: Strong household spending in Cote d'Ivoire, which will be a major contributor to the country ' s robust economic growth trajectory , will see g rowth in car sales outperform that of other ECOWAS member states - Ghana and Nigeria - over our 2017-2021 forecast period .

Cote d'Ivoire will be our top pick for growth in the passenger car segment in the Economic Community of West African States (ECOWAS) in 2017 and over our 2017-2021 forecast period, outperforming member states Ghana and Nigeria. We forecast passenger car sales in Cote d'Ivoire to grow 10% in 2017 and at an annual average rate of 8.6% over our 2018-2021 forecast period. Growth in car sales in Ghana and Nigeria will lag behind, falling 2.3% and 9.3% respectively in 2017, before starting to recover over the rest of our forecast period.

Cote d'Ivoire Car Sales To Lead
Cote d'Ivoire, Ghana & Nigeria - Passenger Car Sales, units, % chg y-o-y
e/f = BMI estimate/forecast. Source: National sources, BMI

Cote d'Ivoire The Shining Star

We hold a bullish outlook for car sales in Cote d'Ivoire, with forecast growth of 10% in 2017 and at an annual average rate of 8.6% over our 2018-2021 forecast period ( see ' Positive Consumer And Economic Outlook To Drive Car Sales ' , December 22 2016). We expect this robust growth to be driven by strong household spending supported by the country's low interest rate environment and weak inflationary pressures. Our Country Risk team forecasts private consumption to grow 7.0% in 2017 and at an annual average rate of 7.1% over our 2017-2021 forecast period. We believe this growth in consumption to be a major contributor to Cote d'Ivoire's strong economic growth trajectory which we believe will spill over into positive growth in the passenger car segment ( see 'Improving Business Environment Will Support Growth Outperformance', September 30 2016).

Ghana And Nigeria To Lag Behind

We expect growth in car sales in Ghana and Nigeria to lag behind that of Cote d'Ivoire as consumers grapple with high borrowing costs and elevated inflation rates. We forecast passenger car sales to fall 2.3% and 9.3% in Ghana and Nigeria respectively in 2017 ( see ' High Import And Living Costs To Drag On Car Sales ' , January 11 2017 and ' Vehicle Sales To Fall Despite Economic Recovery ' , December 15 2016).

Consumer purchasing power in both countries will continue to be eroded by high price growth, with inflation forecast to average 13% and 15.8% in Ghana and Nigeria, respectively, according to our Country Risk team. This will be down to further weakness in both the Ghana cedi and Nigerian naira, which we forecast to depreciate on average 4.3% and 33.6% respectively in 2017. With both markets heavily reliant on vehicle imports, this drop in the value of both currencies will push up prices of car imports.

We, therefore, expect monetary policy in both countries to remain tight in 2017, which will constrain demand for credit in the economy, thereby also limiting growth in auto loans. In order to help combat high inflation in each economy, we expect interest rates in Nigeria to end 2017 at 14%, while those in Ghana will be even higher, coming in at 22.0% by the end of the year.

Beyond 2017, we expect to see the beginnings of a recovery in car sales, with forecast average annual growth of 2.4% and 4.1% in Ghana and Nigeria respectively over our 2018-2021 forecast period. The main drivers of this return to growth in both countries will be the easing of inflationary pressures and the loosening of monetary policy, which will drive an uptick in consumer spending and thereby an expansion in both new and used car purchases.