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Business News of Wednesday, 22 April 2020

Source: Class FM

Coronavirus: Auto assembling industry to suffer short-term setback – Report


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Ghana’s nascent automotive industry will face considerable setbacks in 2020, as plans by various automakers to set up assembling facilities using imported kits face supply chain disruptions due to the COVID-19 outbreak.

According to rating agency Fitch, major automakers in Asia, Europe and North America have closed plants, as the need to stem the spread of COVID-19, takes priority.

This has resulted in major supply bottlenecks for vehicle assembly jurisdictions such as Ghana that rely on the semi-knocked down (SKD) and completely-knocked down (CKD) kits due to the lack of a domestic automotive components industry.

“Thus, Ghana’s nascent vehicle assembly operations will be hard hit in the short-term as the inability to import critical components, forces automakers to shift their timelines to a more suitable date to commence and/or establish assembly operations”, it said.

Global automakers Volkswagen, Toyota, Nissan, Sinotruk and Suzuki plans to begin full-scale assembling of vehicles in Ghana this year.

Fitch, however, said the long-term picture looks more promising, as domestic vehicle assembling can tap into a largely untapped market due to a low vehicle ownership rate in the country relative to the region and the globe.

Parliament passed the Customs Amendment Bill on 13 March 2020 which seeks to revitalise the new vehicle sales market in the country by banning used vehicle imports older than 10 years.

“We believe this sets the stage for a new vehicle sales industry to emerge over a medium to longer-term period (3 – 10 years) so long as other variables fall into place, such as increasing the level of financial inclusion to make vehicle finance feasible, and ensuring economic output recovers post COVID-19”, Fitch mentioned.

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