Gabon Autos Report Q4 2012

Includes 3 FREE quarterly updates

Executive Summary

A marginal increase in new car sales in Gabon during Q112 - totalling 1,424 units, compared with the 1,420 units sold in Q111 (according to estimates from the Union of Automotive Industry Representatives - poses severe downside risks to BMI's forecast of a 17% year-on-year (y-o-y) growth in total vehicle sales in 2012. Part of the weakness in sales is owing to the unfavourable base effects from 2011 when the market sold 23% more vehicles on a y-o-y basis, marking a strong recovery from three consecutive years of contraction between 2008 and 2010.

We, however, hold on to our 2012 forecasts on the back of a bigger government budget, ongoing investments in road transport infrastructure and President Ali Bongo Odimba's Emerging Gabon diversification strategy, the latter of which emphasises on development in services, industry and the environment. These factors will also support average vehicle sales growth of around 9% y-o-y between 2013 and 2016, taking the new vehicle market in Gabon close to 8,000 units by the end of forecast, more than double the levels seen in 2010. We see particularly strong prospects for commercial vehicle sales growth in the country.

We warn that there could be downside risks to our outlook if demand gets dampened by the slowing economic growth in the country. Our Macroeconomic team is currently forecasting Gabon's real GDP growth to slow down to 3.0% in 2012 and just 1.7% in 2013 after growth of 5.6% each year between 2010 and 2011 as oil production declines. Additionally, the highly competitive used car market and the existing structure of tariffs on imported vehicles also pose significant risks to our optimistic outlook.

All of these factors rank Gabon fourth in BMI's Risk/Reward Ratings for the autos industry in Africa, lagging behind its bigger regional rivals South Africa, Nigeria and Botswana. As of now, we do not see any scope for Gabon to overtake its rivals, as Gabon will remain constrained by the relatively small size of its new vehicles market and the uncertainties surrounding the progress of its economic diversification strategy.

The competitive landscape is largely dominated by Japanese brands which together occupy almost 80% of the market. Estimates from the Union of Automotive Industry Representatives (Urai) revealed that Toyota Motor remained the dominant player in the market during Q112 with sales of 498 vehicles, followed by Mitsubishi which sold 258 units during the same period. However, as the Gabonese government enters into new economic partnerships with the South Korean government and businesses, we see significant opportunity for the increased participation of South Korean brands Hyundai Motor and Kia Motors going forward .