Sales of new cars assembled in Ghana have failed to meet the optimistic forecasts that drew major global automakers to establish assembly plants in the West African nation.
The companies, including Volkswagen AG, Nissan and Toyota, operate semi-knockdown facilities, importing vehicles in kits and assemble them locally.
Their investments followed the launch of the Ghana Automotive Development Policy in 2019, which offered enticing fiscal incentives and pledged to restrict the influx of used cars from Europe, Asia, and North America.
“The new car market was based on government backstopping and leading, rather than market dynamics, and that was problematic from the start,” said Godfred Bokpin, an economist and professor of finance at the University of Ghana Business School.
The policy, however, sparked a surge of optimism among auto manufacturers desperately seeking expansion as they faced intense competition from Chinese automakers. As sales weakened in their traditional markets, the carmakers turned to West Africa’s 460 million population to shore up demand.
Latest data, exclusively available to The High Street Journal shows slower-than-anticipated consumer demand for new cars is weighing on the car manufacturers, compelling them to run below capacity.
“New locally assembled cars come with some perks and benefits, but affordability is a major challenger for most Ghanaian buyers,” said Dr. David King Boison, a supply chain expert in Accra.
Volkswagen was the first to unveil its assembly plant in Ghana in 2020 at a colourful ceremony that had the then President, Nana Akufo Addo in attendance. The German automaker assembled 352 cars in 2024, according to its production sheet, and aims to increase production to 670 this year. But that is far below the plant’s annual capacity of 5,000 units.
Volkswagen in an email said “it is impressed with sales in Ghana so far and hoping it will reach new heights.”
Nissan, in partnership with Japan Motors, is operating at less than 10% of its single-shift production output. The Japanese automaker cut its production for 2025 by 27% after assembling 815 units in 2024.
Toyota, one of the most preferred auto brands in sub-Saharan Africa, sees consumers opting for used models instead of new locally assembled ones. The Asian giant operates a smaller plant with a yearly output of 1,500 units but is struggling to reach capacity. It assembled 999 units in 2024 and forecasts a 9% increase in output this year.
Hyundai, Foton, KIA, Kantanka, and others are also struggling to lure buyers away from the used-car segment of the automotive market.
“With operations below breakeven, the assemblers may rationalize model lines to a few units, limiting consumer choice,” Dr Boison noted, warning it could lead to “job losses.”
Ban on used-car importation
As part of efforts to attract automakers, the government banned the importation of vehicles older than 10 years in October 2020. However, it suspended the ban indefinitely following pushback from importers and dealers of used cars who feared job losses.
The move was a major setback for the automakers hoping to tap into the $4 billion automotive market.
“Supporting an industry that could inconvenience local people who have been in that business for decades is not that simple,” the economist said. “They have their pressure points and know how to manipulate the politicians.”
Ghana imports over 100,000 vehicles annually, with more than 90% being used and salvaged cars. In 2023, about 120,000 vehicles entered the market, with only 6,000 being new, according to the Ghana Automotive Development Centre.
The used-car market flourishes because buyers find vehicles that fit their needs and budget, enabling them to save significantly on costs.
“I think everyone would like to have a brand-new car for the flex, but we cannot afford it,” Kofi Boateng said.
The auto makers offer years of warranty and free maintenance service on new car purchases, but these benefits seem insufficient to lure Ghanaian consumers.
Limited access to car loans
While 90% of new car sales are financed in South Africa, lenders in Ghana finance less than 10%, according to the country’s Automobile Dealers Association. This results in South Africa having a penetration rate of 132 passenger cars per 1,000 people, according to Fitch Solutions in 2019, compared with 22 per 1,000 people in Ghana.
In most cases, banks require direct salary deductions from the buyer or an insurance policy to cover potential defaults.
Ghana’s high cost of borrowing makes it difficult for consumers to access loans for new cars. Interest rates have remained between 25%-35% in recent years, making it challenging for consumers.
Professor Bokpin argued that “the high-interest rate regime can never support the automotive industry. Unlike South Africa where the rate is comparatively low.”
On average, a car loan in Ghana amounts to the cedi equivalent of between $25,000 and $35,000. Banks typically demand a high down payment with shorter loan limits.
The government pledged to collaborate with banks to create robust car financing facilities, but this never materialized, leaving car assemblers to their fate.
West Africa’s auto hub
Ghana’s blend of incentives and attempted ban on used-car imports aimed to position it as West Africa’s auto hub to bolster its economy.
Nigeria, the region’s biggest economy and Ivory Coast, the world’s leading cocoa producer, have all pursued the role of the regional automotive centres. However, change in governments and pressure from used car importers often derail the drive.
The Ghana Automotive Development Policy, an initiative of the Akufo-Addo led government, could suffer the same fate.
“There was no commitment, it was more of a political initiative. Because the political will to drive the industry was not there,” Godfred Bokpin said.
The new Mahama-led administration, which opposed the ban on used-car importation in 2020, may not offer much attention to the moribund car assembly industry. If it happens, their vision of Ghana becoming the automotive hub of West Africa would crash, just as it did in Nigeria.
