the presentation of a proposed plan to sustainably industrialize automobile production on the African continent.
Part 1 – What, Whys, and How – will define the concept of industrialization in detail. I will discuss how industrializataion impacts the cost structure of a product, and how it reduces risks and improves the profit potential of a manufacturing enterprise. I also explain why industrial manufacturing creates more jobs and results in more lasting improvements to a nation’s productive capability, vs. other business sectors or approaches to economic development. This section makes the case for the automobile industry. A car is the most complex consumer product that an individual will purchase: highly technical, heavily regulated, and expensive to buy, operate and maintain. Countries that invest in developing the industrial capacity to create and manufacture motor vehicles will build businesses, create jobs, grow their economies, and generate skills and capabilities that are transferrable to multiple industries and sectors.
Part 1 will also cover the topic of sustainability, from both business longevity and environmental perspectives. How do countries and businesses industrialize auto production in a manner that results in companies that are profitable and able to sustain through economic cycles, foreign exchange fluctuations, increased competitive threats, and changes in consumer tastes? How do you industrialize auto production in a manner that yields a car parc–industry vernacular for the number of vehicles on the road in a market–with minimal negative impact on the environment? How do you industrialize automobile production with advanced manufacturing processes and supply chain networks that will have minimal negative impact on the environment? How do you create businesses that serve their local communities as well as serving the needs of their shareholders?
The largest of the recently developed and developing auto markets, specifically urban centers in China and India, are facing significant challenges due to traffic congestion and air quality. Is It wise to accelerate the introduction of more vehicles into a market only to force gridlock on the public, increase pollution, and have these vehicles sit parked and unused for 90% of the time? What if African markets and investors, looking to participate in the industrialization of automobile production, decided to leapfrog the historical practices and create a local auto industry where alternative propulsion systems (electric vehicles), advanced manufacturing tools and processes, shared vehicle usage, and ride sharing were part of the development of the industry at the outset, instead of retrofitting these advancements later?
Africa sustainably industrializing automobile production does not mean doing things exactly as in China. While China is the country and market most recently and most significantly transformed through the development of their automobile manufacturing and design capabilities, the industry has continued to evolve. Lower local wage rates, compared to developed nations, are not the only reason to invest in automotive industrialization. African nations must also adopt the latest manufacturing process technologies to optimize productivity and costs. Industry 4.0 tools, the internet of things (IoT) and increased data computational offerings have enabled the development of advanced manufacturing tools that have the potential to reduce capital investment and production costs, while improving product consistency and quality. Tools and technologies like additive manufacturing (also known as 3D printing), advanced robotics, product performance simulation, and manufacturing process simulation are driving product innovation and efficiency. Industrializing with these tools at the outset will provide African regions with the treble benefits of lower manufacturing and labor costs, optimal productivity, and proximity to growing markets.
When my British Airways flight first landed in Ghana for my summer 1994 project, the phone system throughout most of Accra was not working, due to damage from severe weather the night before. Of the few people who had land lines, most were out of service. I had to wait two days to make a “safe arrival” call back to my family in the US. I mention this because I have made multiple visits back to Ghana and other parts of Africa since the mid-90s. By the early 2000s, nearly everyone had a cell phone and internet cafés were sprouting up all over the city of Accra. Most Africans have leapfrogged directly to cell phones and lived their entire adult lives without having a land line. By the early 2010s, local African ingenuity had made mobile payments by phone a reality, using Kenya’s M-Pesa.
The ability to innovate and develop new products and technologies that excite the customer are foundational to developing great brands, value creation, and sustainable business success. The ability to innovate is also critical to the creation of environmentally sustainable personal mobility solutions. Twenty years ago, Accra’s resource-conscious taxi drivers would shut off their engines at every red light or traffic jam to save fuel. Today, new vehicles are being designed with stop-start systems that automatically do this for the driver. Stop-start technology is being introduced on typical internal combustion engine vehicles in every segment and price point around the world. What other eco-technologies have been or could be developed by leveraging the local ingenuity in these African markets? Both sustainability of the business and sustainability of the environment will be covered, and the reality is that they need not be conflicting objectives.
Part 2 – The Latest Models – walks through examples of where the industrialization of automobile production has 1) been exemplary, 2) where strong progress is being made, and 3) where automotive industrialization remains a work in progress. Examples of automakers and governments from emerging markets in Asia, Latin America, and Africa will be unpacked, and lessons-learned discussed. The most successful companies and regions have moved beyond importing kits made up of the parts from partially disassembled vehicles from a global original equipment manufacturer (OEM) known as semi-knockdown kits (SKDs), or kits made up of the parts from fully disassembled vehicles known as complete-knockdown kits (CKDs), and locally assembling them into finished vehicles. The successful companies and regions have also developed local parts manufacturers, developed local design and engineering capabilities, and created their own brands. The most successful companies have also invested in the development of new technologies and innovative products for their local markets. A key to their success has also been their drive to build their vehicles at a world-class quality level suitable for sophisticated export markets. As an example, the BMW 3 Series plant, soon to be X3 plant, in Rosslyn, Gauteng Province, South Africa is part of BMW’s global manufacturing system and regularly achieves internal production quality scores that surpass all other BMW assembly plants in the world!
From a parts supply-chain perspective, regions that have successfully industrialized automobile production have also developed, and often have equity ownership stakes in, local parts manufacturers. Building parts in a lower labor cost local region typically results in a lower total cost of the parts. Local production in the intended market of sale yields lower parts shipping and logistics costs, and reduces risk from foreign currency exchange rate fluctuation.
In the most successful recently industrialized regions, local manufacturing was followed by the development of local design and engineering capabilities. Building these capabilities allowed these automakers to innovate and move further up the value chain. Innovative and exciting designs and features that cause the consumer to fall in love with the product create the opportunity for price premiums and higher profit margins. Achieving profitability by participating in the highest-margin segments of the value chain is the aspiration of businesses everywhere in the world.
The emerging market regions and companies most successful at industrializing automobile production achieved this success with the support and partnership of their local governments. Their governments’ primary roles were to:
Create the legal framework to support commerce and encourage and secure investments
Create trade policy frameworks–e.g., tariffs and duties on imports, incentives on local production–to give the local auto companies time and space to succeed, and allow the benefits of industrialization to take root
Educate the workforce
Create the physical infrastructure such as highways, railways,
