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Business trends

Nissan revs up African production with 2 new plants

Automaker looks to Algeria and Ghana to meet continent's surging demand

Nissan already produces Sunny sedans in South Africa and Egypt and is expanding on the continent.   © Reuters

TOKYO -- Nissan Motor is planning to open plants in Algeria and Ghana in its push to tap rising demand for passenger cars in northern and western Africa.

In Algeria, the Japanese automaker is considering importing parts for final assembly while limiting operations in Ghana to a simpler process because of the lack of manufacturing infrastructure. Nissan is currently in talks with Ghanan authorities, and if the plan goes through, it would become the first Japanese automaker to set up production in West Africa.

China is aggressively investing in Africa as part of its Belt and Road Initiative, pledging in September $60 billion in financing for the region. With Nissan expanding operations on the continent, Japanese companies, too, are jumping on the bandwagon to tap rapid growth backed by the rise of the middle class.

Details of the two locations have yet to be hammered out, but the plan is likely to call for construction in the early 2020s. Nissan, which now ships vehicles to various African nations from South Africa, Japan and Europe, seeks to start local production to increase its competitiveness.

Nissan already builds such vehicles as pickup trucks and the Sunny subcompact at its final assembly factories in South Africa and Egypt. Output in these two markets totaled about 50,000 units in fiscal 2017, with sales coming to roughly 74,000.

New car sales in Africa are projected to reach 3.26 million units in 2025, double the figure in 2016, according to business consultancy Frost & Sullivan. That number would put the continent on a par with Germany, the world's fifth-largest market. South Africa is the biggest market in the continent with roughly 400,000 vehicles sold yearly, while Nigeria expects annual growth of more than 5%, driving demand in West Africa.

Toyota Motor is another Japanese automaker stepping up operations in Africa. The company, which already has a plant in South Africa, is bolstering its partnership with Suzuki Motor, which has a factory in Egypt. The two will market Suzuki-developed vehicles in Africa, collaborating in distribution and maintenance services under a partnership announced in May. Increased assembly by automakers encourages local production by partsmarkers as well.

European automakers dominate in Africa, with Renault -- Nissan's French partner -- boasting a strong edge with factories in Morocco and elsewhere. The Renault-Nissan alliance, which includes Mitsubishi Motors, churned out an aggregate roughly 680,000 vehicles in the Middle East and Africa last year, says consulting firm PwC.

The moves come as African nations are working to wean themselves off natural resource extraction and build modern industries. The economy in sub-Saharan Africa is on course to grow 3.8% in 2019, faster than the 2017 rate of 2.8%, the International Monetary Fund predicts.

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