Time For Tesla To Start Looking Seriously Into Africa: A Proposed Approach

Time For Tesla To Start Looking Seriously Into Africa A Proposed Approach

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Tesla’s mission is to accelerate the world’s transition to sustainable energy. The world includes Africa, but unfortunately so far, besides a few superchargers in Morocco, Tesla has essentially just ignored the African market when it comes to its vehicles. This probably not unusual, as large OEMs tend to overlook Africa in general most of the time. That is because in most countries, the majority of vehicles sold here are imported as 5-year-old used vehicles — or even older. That means the market for brand new vehicle sales is a bit on the small side when compared with a lot of other places. There are some exceptions though, like in South Africa for example, where brand new vehicle sales are usually over half a million units per year.

It is not all doom and gloom in terms of the total addressable market. There is still a good opportunity on the African continent for Tesla and other OEMs in the EV space. The African brand new vehicles sales market does have a lot of potential for the much anticipated “$25,000 compact Tesla,”  as this would probably fall in the same market segment as some of the higher end Toyota Corollas, etc., which have quite a decent market in a lot of countries. A lot of corporate fleets go for this type of vehicle. Ride-hailing platforms and car rental companies could also be key growth partners for such a vehicle.

There is some good potential for some sort of Tesla ecosystem in quite a number of African countries for Tesla’s existing line-up of higher priced models. There are some existing premium ICE vehicle brands that have a decent presence on the continent already. These include Mercedes-Benz, BMW, Audi, Jaguar, Land Rover, and Lexus. So, if there is a sizable number of people buying S Classes, E Classes, and C Classes on the continent, as well as the equivalent — Audis, BMWs, Porsches, and Lexus’ — there could be some decent business for Tesla as well in a number of markets like South Africa, Morocco, Egypt, Ghana, and Kenya, etc. for brand new vehicle sales. Tesla is no longer as production-constrained as in previous years and should therefore be able to ship a decent number of new vehicles to these markets, where they should definitely sell more cars than in Singapore and Malaysia, etc.

An inclusive/hybrid approach would be more ideal for the African continent. The inclusive/hybrid approach would be a scenario where Tesla could open up an official presence ASAP for brand new vehicles sales in places like South Africa, Morocco, Egypt, Kenya, and some others, and at the same time and quite immediately also, start to offer full support for software updates and associated services for used Teslas coming onto the continent. Quite a large number of consumers buy 5- to 10-year-old Mercedes-Benz S, E, and C Classes from overseas. They get these from Japan and the United Kingdom or from USA or mainland Europe for left-hand drive markets. These consumers can comfortably afford 3- to 8-year-old Tesla Model S, 3, X, and Ys. I am sure quite a number of them will also be eying Cybertrucks as a priority on their shopping list in a few years’ time.

There is already a well-established supply chain and ecosystem feeding used ICE vehicles to the African market. For example, on one of the main channels in Japan, Be Forward, you can find particularly good deals for 3-year-old Model 3s now for $24,000. After import duties and taxes, people in Zimbabwe could drive away with one for about $43,000. This price will be much less for people in countries that have lower import duties and taxes than in Zimbabwe. A lot of consumers could be looking into bringing some of these, but they would be worried about the availability and support for software updates, amongst other things.

Top African Markets for Used Light Duty Vehicle Exports from the 3 Major Global Exporters in 2018

Source: Used Vehicles and The Environment, Sustainable Mobility Unit of the United Nations Environment Programme (2020).

The United Nations Environment Programme (UNEP) conducted a study on the emissions of these used vehicle imports, and the results showed that the high age of used vehicle imports has resulted in a relatively old fleet in these countries, and that these older vehicles are less fuel efficient and have higher emissions. Encouraging the reduction of these used ICE vehicle imports by substituting them with equivalent EVs would have a significant impact on reducing these emissions.

We need to encourage more EV imports across all vehicle segments. While the majority of used vehicle imports are in the range of $5,000 to $10,000 ICE vehicles, there is a respectable number of vehicles in the more premium segments which could be displaced by used Teslas with the right support from the company. With Tesla having made over five million vehicles, there is a growing number of used Teslas that can be exported to Africa from the traditional source markets.

Used ICE vehicle imports dominate the market due to lower incomes and disposable incomes. However, encouraging the displacement of those used ICE vehicles with used EVs presents a good opportunity for these consumers to save money on running costs, as they will save quite a bit from lower fuel costs. Older ICE vehicles tend to break down more often and therefore consumers are constantly battling with the costs of frequent repairs.

Estimated Fuel Consumption and CO2 Emissions of Vehicles in 3 East African Countries

Source:  Used Vehicles and The Environment, Sustainable Mobility Unit of the United Nations Environment Programme (2020).

Tesla is big on customer experience and ensuring users get the best experience, hence the rollout of its own Superchargers and service centers in markets where it has an official presence. Tesla is also big on direct relationships with customers as opposed to the traditional car dealership model. For a lot of markets on the African continent, local knowledge of the market and business landscape will be crucial. To activate this program fairly quickly, Tesla could open up relationships with key strategic stakeholders in the vehicle and energy ecosystem. Tesla could partner with a plethora of reputable vehicle service centers and body repair shops in the various countries on the continent. Quite a lot of these repair shops have been around for decades, have deep pockets, and can offer credible repairs in collaboration with Tesla after some training and certification.

This could help ensure that anyone who imports a used Tesla from overseas would be guaranteed to get any necessary spare parts and repairs after a minor accident, etc. Tesla could also partner with companies in the various countries to facilitate the installation of Superchargers, destination chargers, Level 2 chargers at homes and businesses to support charging and ease any fears of range anxiety, opening up long distance travel routes for people that import used Teslas from overseas. Tesla recently signed a number of key strategic deals in USA and in Europe for Superchargers and destination chargers with BP and Hilton Hotels, respectively, for example. A similar approach could fast-track a roll-out in Africa. Of course, solar and Tesla Megapacks could be incorporated into some of the larger sites to complement the existing grid services. There are a number of credible businesses with deep pockets in some of these markets that would be happy to diversify their portfolios by entering into these forward-looking businesses such as EV charging and support services.

Tesla can help displace a sizable number of used ICE vehicles that are coming to Africa by incentivizing the adoption of awesome preowned electric cars. Full warranties for used ICE vehicles do not exist anyway, and there is much more that can go wrong in an ICE vehicle than in a used EV. For example, a friend of mine had an issue with the timing chain/belt on a used Range Rover, and to sort out that mess they needed about $10,000.

If consumers of used vehicle imports in the African continent can be assured they can get original spare parts from some of the traditional spare parts retailers, as well as guarantee FULL SUPPORT for all software updates, etc., I believe this will catalyze an avalanche of used Tesla imports. Tesla is all about sustainability, right? So, it is only right that it should support used vehicle imports and the associated ecosystem in Africa. As one consumer in Japan or UK may decide to upgrade their 4-year-old Tesla Model Y, that Model Y can be part of a more sustainable circular economy, displacing the potential purchase of a used ICE vehicle from overseas by a family in Kenya, for example.

I think Elon really needs to look seriously at this. The software updates could even be powered by Starlink. It could be just like when someone buys an iPhone in New York City and they take it home to somewhere in Africa — that iPhone gets all the software updates and services.

To Elon, can we get some activity in Africa anytime soon?

To our readers, let us know your thoughts in the comments below.

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