More and more car dealers are seeking new market opportunities overseas, from Russia to the Middle East, where they earned high profits from trade when the market exploded in the early days. Now they are targeting Africa. Zimbabwe, Ethiopia, Ghana and other countries that may still be unfamiliar to many people are becoming new dream destinations for car dealers. Africa, a land that is often labeled as "poor" by the outside world, also contains amazing wealth and potential. When we focus on the car market, a surprising phenomenon is quietly unfolding: Chinese cars priced at more than 400,000 yuan are also being favored by local "tycoons".

The price is more than twice that of domestic

On July 25, 2024, the sun penetrated the blue sky of Harare and sprinkled on a brand new and modern building. This is the new office that Peng Xian officially opened in Harare, the capital of Zimbabwe, six months after starting his business. It covers an area of 3,000 square meters and is equipped with a swimming pool. Originally the general agent of Great Wall Motors in a certain place in China, Peng Xian brought the car business to Zimbabwe in 2024. What attracted him to cross the ocean and go to Africa was the huge potential of the car market here. Africa's population accounts for 15% of the world's population, but car sales account for only about 3% of global car production. Compared with the car ownership rate of about 600 per thousand people in Europe and Japan, the car ownership rate in the African market is insignificant, with only about 40 per thousand people.

The African car market has its own characteristics. On the one hand, Japanese cars have been deeply cultivated here for many years and have firmly occupied the dominant position in the market; on the other hand, the sales of used cars far exceed those of new cars. Masakazu Ohira, director of Toyota Africa Mobility Department of Toyota Tsusho Africa Headquarters, once admitted: "In the African market, the annual sales of new cars are about 1.2 million, while the sales of used cars are as high as about 5 million." This phenomenon is not difficult to understand. The middle and low-income people in Africa account for a large proportion. For them, second-hand cars with more affordable prices are undoubtedly a better choice. But Peng Xian did the opposite and sold high-end cars in Harare. In addition to European, American and Japanese car brands such as Land Rover and Toyota, there are also Great Wall Cannons from China. In Peng Xian's words, domestic cars have just torn a hole in the African market. According to data from the China Automobile Dealers Association, in the first half of 2024, China exported 158,000 vehicles to Africa, a year-on-year increase of 53%. Among them, passenger cars accounted for about half, including brands such as BYD, Geely, and Great Wall. More importantly, the price of domestic cars in the African market is quite considerable. "Take the Great Wall Cannon as an example. Its domestic price is about 160,000 to 170,000 yuan, but it can be sold for as high as 460,000 yuan in Africa, which is almost more than twice the domestic price. And for each car sold, we can make a profit of 10,000 to 20,000 US dollars. Such a profit level is simply unimaginable in China." Peng Xian said with emotion.

Zimbabwe, where he is located, is known as the "mining pearl of southern Africa" and is famous for its unique mineral resources. There are up to 2.8 billion tons of platinum group metal ores underground, ranking second in the world; the reserves of lithium resources are also impressive, ranking sixth in the world; in addition, there are up to 10 billion tons of chromium ore and 130 million tons of gold ore reserves. These dormant treasures have not only attracted investors from all over the world, but also spawned the rise of a group of local rich people. The consumption power of these rich people made Peng Xian see the huge potential of the high-end car market.

In areas where rich people live, you can see houses with independent doors and courtyards, exquisite decoration, and small shopping malls that are small but extremely luxurious. The consumption level here is staggering. "A simple rice bowl in the rich area costs $10, and a haircut costs $20." The community where Peng Xian lives even has a golf course.

Originally, Peng Xian wanted to do business with local Chinese by selling Great Wall Cannon, after all, there are 60,000 to 70,000 Chinese gold diggers here. But what he didn't expect was that the locals were so enthusiastic about Chinese cars. He revealed that this was mainly because Chinese cars won the favor of the local market with their excellent cost-effectiveness. Take the Great Wall Cannon and Toyota's Hilux as examples. The price of the Great Wall Cannon is $62,000, while the Hilux is $68,000. Not only is the price cheaper, but the seats of the Great Wall Cannon are all made of luxurious leather and equipped with advanced assisted driving functions, which are unmatched by the Hilux.

Unlike Peng Xian who directly develops overseas markets, Wang Yan plays the role of an intermediary in China. The EthioOcean company she founded with her husband mainly helps Ethiopian customers establish connections with domestic auto suppliers.

At one point, she was able to export about 50 cars a month, half of which were BYDs. She revealed that BYD models that cost 80,000 to 100,000 yuan in China could be sold for more than 160,000 yuan locally. "Some customers also consulted about Ideal, but because the price was relatively high, the deal was not made."

I paid 3 million yuan for the goods, but the car was not delivered

Under the surface of the African auto market, there is a complex picture that is both tempting and full of thorns. Various uncertain risks are like storms on the African grasslands, which may strike at any time and catch practitioners off guard.

Wang Yan's husband is Ethiopian. This unique family combination gives her a natural advantage in the African auto market-a deep understanding and integration of the cultures of the two places. Her husband is responsible for communicating with local customers, while Wang Yan is responsible for finding reliable domestic suppliers. However, even though she is so familiar with this market, Wang Yan will step on the pit. The complexity and uncertainty of the African auto market far exceeds her imagination. Among them, the fluctuation of logistics costs is an issue that cannot be ignored.

"As a bulk commodity, the shipping cost of automobiles is affected by many factors." Wang Yan explained. A person engaged in China-Africa shipping revealed that if the car is shipped to North Africa and East Africa, it must pass through the Red Sea. This means that the security situation in the Red Sea region plays a decisive role.

Since November 2023, the frequent attacks of the Houthi armed forces in the Red Sea will cause shipping costs to rise sharply, and even transportation interruptions may occur. "This is undoubtedly a huge challenge for us," said Wang Yan. She had personally experienced such a crisis. At that time, she was planning to transport a batch of cars from China to Ethiopia, but just before the ship was about to set sail, a conflict suddenly broke out in the Red Sea region. This caused the freight for a container to soar from two or three thousand US dollars to eight or nine thousand US dollars, and the originally calculated cost budget was instantly disrupted. Wang Yan had to communicate with suppliers and customers urgently. This batch of goods was delayed for three months before delivery.

However, the fluctuation of logistics costs is just the tip of the iceberg that Wang Yan encountered in her journey of African automobile trade. In this market full of variables, there is another more difficult and unpredictable factor-the instability of exchange rates. The instability of exchange rates in African countries is a complex and common problem. Among them are factors such as domestic economic conditions and political stability, as well as the impact of global economic changes. Ethiopia is no exception. For a period of time, Ethiopia's exchange rate was like a roller coaster, and it could plummet by 30% in one day. Such drastic changes are undoubtedly a bolt from the blue for automobile traders like Wang Yan. "During that time, my phone was almost silent." Wang Yan recalled, "The originally lively consultations and orders seemed to disappear overnight. Customers were all calculating that if the exchange rate fell like this, they would have to pay several percent more than before to buy the same car. No one wanted to do such a loss-making business, so they all chose to wait and see." The undercurrents in the transaction process also exacerbated the risks.

In May 2023, Wang Yan received a customer's order request for more than 50 cars, so she posted a content on the social platform, "I am engaged in automobile export and foreign trade, and I have a large number of African customers. I need to order new energy vehicles such as BYD and Toyota. Where are the first-hand automobile suppliers?" Unexpectedly, the carefully selected supplier has not sent the car to the customer, and the customer has paid 3 million yuan for this batch of cars. After many communications, Wang Yan gradually pieced together the truth of the matter: It turned out that the customer had previously purchased a vehicle with this supplier through the introduction of another middleman. The customer paid the full amount to the middleman as agreed, but encountered unexpected twists and turns at the key link of the funds flowing to the supplier. Cross-border transactions are complex and changeable, and the flow of funds is sensitive and fragile, which can be easily frozen. Since the supplier insisted on settling in RMB, the middleman may have adopted some informal channels in the process of fund conversion to try to avoid exchange rate risks and cumbersome procedures. However, it was this non-compliant operation that was frozen in the process of paying domestic suppliers. The vehicle was sent out according to the agreement, but the supplier has not received the payment for a long time. What's worse, the middleman ran away. The fire in the city gate affected the fish in the pond. "The supplier put the unpaid debt on the customer's head. In retaliation, they were reluctant to release the batch of vehicles I handled."

This sudden change not only put the customer in trouble, but also severely impacted Wang Yan's business. Originally, Wang Yan and this customer had signed a stable supply agreement, but because of this dispute, the customer never placed an order again. "Now it's good to export an average of 5 units a month."

What makes Wang Yan helpless is that some scammers even pretend to be suppliers, lure customers to pay deposits at low prices, and then disappear without a trace. "They are betting that cross-border lawsuits are difficult to win."

Africa is also starting to roll up

Before going to Zimbabwe, Peng Xian's car dealership footprints spread across multiple car markets such as Russia and the Middle East. In his words, he was forced to migrate by internal circulation. In 2022, Peng Xian was still like a fish in water in the Russian auto trade circle, easily earning a profit of 20,000 yuan for each car. This year, the profits that were once within reach were like being tightly pinched by an invisible hand, shrinking sharply to 2,000 yuan, and even had to bear the huge risk of advance payment. "Because more and more people are doing it, if you don't lower the price, there are a lot of people willing to lower the price."

What makes him even more headache is that Russian customers seem to have "awakened" in this internal circulation. They are no longer as ignorant as before, but have become extremely shrewd and picky. They even get the lowest price in the Chinese market through professional platforms such as Autohome, and directly use these prices as bargaining chips at the negotiation table. "China sells at this price, you make so much money from me, isn't it too much?" Peng Xian has heard such words more than once. Harare City Center

To escape the "involution vortex", the African market has become one of the few pure lands. "At present, Africa's population age structure is young, with an average age of 19, a fast population growth rate, and a rapid economic development." However, as more and more participants flock to this hot land, although its market potential still needs to be further explored, the haze of involution has begun to approach quietly.

An industry insider who is engaged in domestic car sales in Ghana revealed that many local businessmen who were originally engaged in other fields are now involved in the automotive industry, resulting in a significant reduction in vehicle profits. The current profit of each car has been halved to only 20,000 yuan. "We are turning our attention to other African countries to seek new development opportunities." Wang Yan has a deep understanding of this. She said with emotion: "In the past, customers rarely bargained when buying cars, but now it is completely different. They not only compare prices from three different stores, but can even accurately repeat the quotes of other merchants, becoming more savvy and picky."

Today, her profit margin has also been greatly reduced compared with last year, even more than half. "In the past, the profit of exporting a car could earn 10,000 yuan, but now it has dropped to 5,000 yuan. As for suppliers, their profits have also shrunk from the original 20,000 to 30,000 yuan to 10,000 to 20,000 yuan." Faced with this grim situation, Wang Yan opened an offline store in the Ethiopian market. Last year, she went to Addis Ababa, the capital of Ethiopia, for an investigation and found that although there were some car sales outlets in the local area, most of them were limited to vehicle sales themselves and lacked a complete after-sales service system. Many car owners often face the embarrassing situation of difficult repairs and maintenance after buying a car, and the influence of domestic cars in overseas markets is increasing. Whether in terms of quality, technology or price, they have gradually gained recognition in the international market, which made her see opportunities.

"Brand authorization is difficult to obtain, so we will still get some domestically produced cars from China and provide some after-sales services. We are currently selecting locations." Peng Xian is already discussing cooperation with a domestic brand to become the general agent in Zimbabwe. By obtaining authorization from the OEM, we can enhance our market competitiveness. "We must build a moat before more people enter the market," he said.