THE AFRICAN AUTOMOTIVE AFTERMARKET WITH MICHAEL DEHN

In this episode of Wiki Bearings, Hassanein Alwan sat down with Michael Dehn, Director of Automechanika Johannesburg, to explore Africa’s rapidly expanding automotive market. 

Whether you’re a business owner, investor, or industry professional, this episode is packed with insights to help you stay ahead in one of the world’s fastest-growing markets.

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Transcript

[00:00:00] Welcome to Wiki Barings, where we dive into the worlds of engineering excellence. From the automotive marvels to the industrial giants. Join us to explore the wonders that keeps the world in motion. My name is Hassanein Alwan, and I'm your host.

Welcome to another episode of Wiki Bearing. In this episode, we are gonna talk about the automotive market, the automotive aftermarket, and with me, I have a special guest, Michael Dan. He's the auto Mechanica director for Johannesburg. He have been in the industry for more than 20 years. He made an impact from India to Dubai, Frankfurt to Johannesburg.

He have led one of the most iconic exhibitions in the industry, like Beauty World Auto Mechanic at Dubai, and now he's leading auto mechanic at Johannesburg. Michael Den. It's [00:01:00] lovely to have you. Thank you for coming. It's what a, what a place that we are in, in, in Johannesburg in the center, in the south center of Africa.

Yeah. That's really cool. Um, especially seeing you here after, um, I've seen you so many times in Dubai at the exhibitions and, and even outside of it, so it's really nice to see you here in my new home market. Um, just a, a little extra information. So we are running here, not only Hanukah, but we have, uh, seven other exhibitions as well.

Okay. Yeah. So, so you are the director for me, Frankfurt in, in South Africa. That's correct. Yeah. Okay. The last time we met, we, we were in Frankfurt. We had a lovely meeting there. Uh, thank you for showing me around. Uh, it's a, a Frankfurt is, is the, where the whole thing started. Yeah. Um, I wanna know a little bit about your journey throughout.

I know you have been for a long time with Mei Frankfurt. Tell us about [00:02:00] your journey. So probably my first exposure to me, Frankfurt was as a little child. My parents were visiting friends that were exhibiting at a show, and it took me along and, uh, I have fond memories of that. That was two years ago. That was, uh, yeah, that was in the, in the eighties, right?

Yeah. And, um, from then onwards, of course, every two years I was very, very excited to attend the Frankfurt Motor Show. Okay. Um, at the time it was just, you know, one of the biggest events in automotive worldwide. Yes. And, um, one nice little gimmick there. They were giving you. Pins from the car manufacturers.

Oh, nice. And as a little boy, um, you would have much better chances of collecting those pins from the ladies on the stand than if you are a bit more grown up. Yeah. So I always had the charm. I got a lot of those pins, and in school we would, [00:03:00] uh, trade them. And, you know, I think in that time, uh, I, I got a fascination for exhibitions in general.

And, uh, I saw myself Frankfurt as a gate to the world. Hmm. You, you have now been in South Africa for pretty much three years now. Three years, yeah. Okay. So let us uh, talk about the automotive market. Um, now the southern part of, uh, Africa is a growing market. It's expected to be 12 million cars. How can you describe us the, how do you see the automotive market in the southern sphere, in the southern side of Africa?

So in the Southern African countries, I would actually say, um, by now we, we are probably even, uh, have surpassed 12. We are probably, uh, more nearing 16 million cars. So Okay. If you add all these markets, obviously, um, not, uh, uh, uh, very exact, but, um, approaching that [00:04:00] number. Um, so these markets are all quite different.

So South Africa is the most advanced automotive market and the biggest, probably it's the biggest in, in south southern Africa, but also across Africa in terms of manufacturing. Um, and the big difference in South Africa is that we have, uh, seven manufacturing. OEMs and the remaining ones are importing.

Right. So, um, that already is a big separation between, uh, the brands here and they manufacture both for the local market as well as for the export market. Hmm. Um, then we have other countries, uh, around Southern Africa that have, uh, much, that are much smaller, smaller volumes, and some of them don't really have a new, new car market at all.

They, they import everything used and, uh, obviously that is, uh, a [00:05:00] different, um, a completely different setup. Mm-hmm. So if we look at the, the automotive market, it's expected to grow, I think now it's around 20 billion. It's expected to grow to 26 million billion, uh, by 2029. Hmm. Uh, what do you think is, is the driver behind this, uh, growth?

So there are some undeniable facts that, um, you can just, uh, extrapolate into the future. And these are the population growth, uh, urbanization. Um, these things are definitely happening. And then there are of course some variable factors such as government policies and, um, maybe also change in, in customer behavior.

Um, but, uh, and and additional to that, um, we are experiencing quite an interesting. Uh, new, uh, phase of stability in, [00:06:00] in South Africa. The new government has implemented a lot of, uh, policies and we can see a much, much increased confidence into the market. So, um, that is definitely driving the growth. In fact, South Africa is projected to be part of the fastest growing countries in the next 10 years.

Oh, wow. With an annual projected growth of about 2.9%. Nice. Um, and that's worldwide amongst the top 10 countries. So all of that contributes to, to those numbers and, um, it, it looks good from today's point of view. Nice. If we look at, when we talk about the automotive market, it's automatically impacting the automotive aftermarket.

And we have seen the rise of, um, new distributors. Wholesalers. And so, so how do you, do you look at this and, and what, what, describe that market. [00:07:00] I, I think from, again, from a South African perspective, um, and that's not only the, uh, in the automotive aftermarket or in the automotive market, we have a lot of highly professional, uh, private sector companies in South Africa.

And, um, they, their influence goes far beyond South Africa. They, they expand into Southern African countries, especially the neighboring countries, definitely. So, uh, it's the same in the aftermarket. Um, there are a number of companies that have branch offices all in all the resounding markets, and they cater to those markets.

And, um, that is a trend that has been going on for a while, but it's, it's, uh, it's getting, it's getting bigger and, and, uh, these companies are reaching even further into Africa. Of course they want to expand as well. And, uh, from South African base, that's a very good base to, to do that from, I think, I [00:08:00] think it's, uh, becoming very normal for.

South African companies to approach, uh, their businesses to the neighboring country. I think the ease of, now with the growth of the logistics solutions, it's easier to export. It's easier, the, it's easier for them to visit, and I think it's becoming much more connected. If you compare 10, 20 years ago, the stability of these countries is also contributing that the trade between these countries are, are also becoming much more, uh, acceptable, much more facilitated, easier and so on.

Definitely there is a new factor, uh, which is, if you consider the size of it, um, the A-F-C-F-D, a free trade agreement, the African Continental Free Trade Agreement is a fairly young agreement that has only been really put in place in the last two, three years with actual shipments. Hmm. It has been in preparation for a long time, but that is also a game changer.

And, uh, when you. [00:09:00] Uh, here, his Excellency, Juan ki speak about the intro, the introduction of the process. He also mentioned that, um, the expectation of how to get all the signatories into this agreement, the expectation was that that will take 10, 20 years. The reality is that well was quite fast. It took less, much less than 10 years.

I think within five years they had pretty much everybody, uh, signed up and, um, so that is a game changer as well for intra African trade. Okay. And, and do, do you see this with, with, have a great impact on the on, on the, the inter Africa? Yes. Will, yeah. Is it really on practically easier today to do business between these countries?

Uh, easy areas? Is it easy? Probably not yet. Mm-hmm. Um, and it always depends who the countries are that are trading, but uh, it certainly is becoming easier and, um. As I said, that free trading agreement [00:10:00] is progressing much faster than anybody would've expected. Hmm. And so you can probably see that every country can see that it's to their benefit to join that agreement because they will benefit from the intra African trade.

Hmm. You know, when, when we look at the automotive market or the automotive aftermarket, or in general, South Africa is, is is the biggest market in, in many, many sectors. But I think if you look at the neighboring countries, they're much smaller, um, nations and countries and, uh, which will bring both challenges and opportunities in that market.

How do you see that companies that is looking to approach a thousand, the southern part of Africa mm-hmm. Can get advantage on, on, on these, uh, opportunities. Yeah, indeed. So there are the, they, they are challenges. Um, to give you an example from a a car manufacturer's perspective, [00:11:00] um, some countries don't justify the volumes to even open up a dealership or to be represented directly.

Hmm. So, um, uh, in some countries, the car manufacturers are not directly there. And, uh, hence also the strong reliance on imported vehicles. The challenge on that, of course, is, um, I mean, you're from Dubai. You know how the export of used cars to Africa is always a, a challenging, uh, project. And, um, the challenge for those countries is that the quality of those cars is not always obviously standardized.

And, um, um, it, it poses a challenge for the receiving country because some of those cars are even not even roadworthy. Hmm. So, um. On the other hand, for the aftermarket, that's, uh, also a big opportunity because that car, once it's sold, it's immediately a potential customer. Yeah. You might immediately need to [00:12:00] change the tires.

You might immediately change the batteries or, or other parts. Right. So, um, from the aftermarket perspective, it's an opportunity, um, to have a older vehicle fleet across the country. Um, and also sometimes, uh, volume, the smaller volume is an opportunity for a smaller company to take something that a bigger company might not want to look at.

Yeah, sure. Right. Um, and then another interesting aspect that I've noticed on our recent roadshow is, um, we visited, uh, six countries directly and one additional one indirectly. Okay. And I could see the adoption of electric vehicles was quite different. Um, in some countries you see it. It's very, very present.

And in other countries it's um, not available at all. And the interesting thing here is that I visited Rwanda, which is quite a small country, and in Kigali you see [00:13:00] electric vehicles Yeah. All around from the delivery bike up to the electric bus. And so the smaller size is there an, uh, an opportunity? Hmm.

Because you don't cover big distances, you don't have to worry about a huge, uh, network of charging stations there. It is really possible to introduce something and, and roll it out. Um, and, and yeah. So they're, the smaller size is maybe an opportunity. So, um, that's how you see the differences across Africa.

You you're mentioning, uh, Kigali, it was for me, very interesting to see BYD charging stations in different. Areas. Mm-hmm. And then like, uh, I actually, the first time I saw a charging station, I, like, I took a photo of it because for me was, um, this is not the first thing you expect from a small nation, a small country, uh, like Rwanda.

I think, um, as you said, the [00:14:00] Africa is, is not one size fits all. It's very different from one country to another. Mm-hmm. I think, um, it's very challenging. I was very surprised that, uh, especially when I was there, I spent, uh, quite some time to understand the market and I saw many big players does not, as you said, not presented by themself.

And I was surprised that few dealership would have. Not one, not two, not three brands. Mm. But they present 5, 6, 7 brands. Uh, which in, in other developed, uh, markets, if, if you are a distributor for Toyota, so you're Toyota only. Mm-hmm. If you are Mercedes, you have Mercedes only. Yeah. But I was surprised in some of, uh, Africa, you would have, uh, one distributor or automotive distributor that would have 5, 6, 7 brands under their portfolio from the luxury to the mid to the, to the electrical and so on.

And it was a very different model than what we used to see in the Middle [00:15:00] East. For example, in Dubai. In Dubai, you would have for the same dealer, maybe two different companies because of the size of the business and exclusive dealerships. Yeah. Which you don't always have in other markets, right? Yeah. Yes.

So it's, it, it, it is so, so different. And I think, uh, when, when we, we, we look at it, I, I don't think. Many companies understand the individuality of these different markets. Mm-hmm. Uh, they are, they're serving both opportunities. Mm-hmm. And, but they are also challenging for, for, for many of them. When, when looking in general in, in Africa, especially in this, let's call it in South Africa, uh, as an automotive market, we see that the financing of, of cars, the, the, the availability of financing is maybe limited to 20%.

Mm-hmm. Take or leave. Mm-hmm. Um, and it's not the same way as it, for example, in Germany or in some other well developed market. Correct. Um, how do you see [00:16:00] this, uh, process a challenge or an opportunity in, in this way? So here I can only speak for South Africa because I haven't experienced anything else, but, um, uh, as I already mentioned, private sector companies in South Africa are extremely professional.

And I would have to say the banks are not only very professional, but also, uh, very innovative here. Okay. Um, that's the one side. The other side is that they're also very invasive in terms of data and, uh, so if you go for car finance, um. The bank would know every last thing about you. Okay. Without you ever giving them that information.

They would know if you have a house, they would know what insurance you have, they would know everything about you. They would know if you pay your phone bill. So, um, their information, their access to information is absolutely astonishing. Okay. So, um, and another thing that I noticed is when you do go for car finance, um, the [00:17:00] interest rate you pay depends very, very much on the, let's say, accumulation of all of the information.

And the difference between interest rates here to consumers could vary by up as up to 4%. Wow. Yeah, that's a lot. So if you are higher risk clients, you pay 4% more interest rate. Okay. Right. And, and so, um. Uh, but what you said is correct. The, the availability of car finance is only for a certain percentage of the population.

And of course that plays into the, again, into the used car market. We have some very, very large used car, uh, dealers here, platforms online, as well as, uh, physical dealerships. So the, the ones that only broker between buyer and seller, and the ones that actually buy the cars and, and put them up in a showroom, uh, that is a very, very big market.

And, um, then of course, also a big opportunity for the [00:18:00] aftermarket again. Hmm. Interestingly, you're mentioning about the used cars, and I think we cannot deny that Africa is depending on, on used. I read in a recent report, 85% of all imported cars into Africa are used cars. Yes. And, and this can be a major opportunity for aftermarket.

Mm-hmm. Um, do you, do you think it's an opportunity or is this a more of a challenge? It's definitely both. Um, by the way, that number 85%, you know, that it is so different in every country. Yes, true. You have countries that near almost a hundred percent, and you have countries where that number is lower. So again, it's, it's not like a, it's completely, it's very different from, it's very, very different from country to country.

Um, having spoken to a lot of, uh, policy makers, um, it is a big challenge because a lot of countries, uh, uh, dump their [00:19:00] junk cars in, in, into Africa and Africa. Uh, African countries are. Since many years taking measures to, to push back. Mm-hmm. Because, um, they're saying quite rightly that, uh, we want to make sure that the cars that arrive in our harbors are of a certain standard.

They're roadworthy at least, right? Yes, yes. Um, actually I remember, um, probably 10, 12 years ago in Dubai, there was a, an agreement between Kenya and Dubai, uh, signed to have, uh, the inspection in Dubai before the export. And I think that was done through a Japanese, uh, vehicle inspection service that was also in, in Dubai at the time.

Um, I don't know what happened to it, but, uh, these are certainly, um, initiatives that help, uh, African countries, um, control the quality of cars and bring in some certain, uh, standard of cars. Um, coming back to your question, [00:20:00] of course, it is also an opportunity, especially when we talk about the aftermarket as.

Yeah, that car is right from day one, needs service. Is it, it needs service and it's not bound to any service agreements or anything, or with a, with a OEM initially. And, uh, yeah, it, it, if done well, this is an opportunity. And, um, also if the quality of the car is, is good, then I don't see also a major issue with the, with that I've, I've, I've recently read there are certain countries that are taking measures to, as you said, to at least to make the car reduce the num, the age of the car.

So they're putting, uh, I think there is policies coming on. There is, uh, lots of discussion. Between to have a more of a standard policy because actually if one country can import, then it's move to another country. So I think there is a lots of, uh, discussion on policy makers [00:21:00] to put a certain standardization on, on this.

And I think it's driving that, um, to a more safer car, important. Mm-hmm. The car are, uh, more worthy for, but in, in, in general, it's also brings an opportunity for aftermarket, especially the independent aftermarket. And this must benefit a lots of the spare part companies, the, the, the spare part, OEMs, mm-hmm.

The, the dealers and so on. You, you have been here now almost three years, and you, you leading the, the auto mechanic at Johannesburg. Do you see that also plays, uh, you know, a role in the momentum? Yeah, I mean, I think that has always played a big role and, uh, it, it is definitely, uh, still a very, very big part of, of that.

Um, but a big part of the momentum is also that, uh, with the population growth does [00:22:00] come, uh, additional wealth into, uh, a growing middle class in Africa. And, um, even though not everybody might have access to finance, but it does definitely uplift the market. Um, and, and then everybody benefits from that for sure.

Um, on the other hand, when there is a market that is dominated by used car imports, like where you, where you're nearing a hundred percent, um, I know that car manufacturers also don't see really a, a way to enter that market because they're competing not against other car manufacturers. They're competing with their new cars, with other used cars, and.

That makes it nearly impossible to enter the market in sufficient numbers because you cannot compete against used cars. Mm-hmm. Uh, what we said is very interesting because, um, you know, we, we, we meet OEMs and car manufacturer and, and, and sometimes in certain markets that they are [00:23:00] mostly depending on used car, they find it very challenging.

And the feasibility I've done, done more than one time, and I've seen, uh, not to mention names, but I've seen manufacturer that withdrawn after five, four, or five years into the market saying, okay, we, we can't do this market because it doesn't make sense. Um, I've seen major, uh, car manufacturer that is not even selling 10 cars a year.

Mm-hmm. Even they have, it's there, they're established. But again, the gap between a used car mm-hmm. And a new car is so, so big that there is no. No comparison. And, um, then financing this card is also not, not very easy. It's not accessible to, to everyone. So we, we see the, there is, there is a, a major, a major, uh, challenge.

Uh, we have seen certain markets developing a, a, a [00:24:00] niche market into rent it to own it. Uh, we have seen, uh, I mean they're finding new, new models. I think some of the new manufacturers, some of the Chinese car manufacturers, they're finding their way into not the through the traditional financing, but the microfinancing, uh, uh, sharing models and so on.

And I think it is interesting how this is going to, to evolve. I can say that from, also from the bank side. So one of our partners in one of our events is West Bank. Yeah. And, um, I know that they are looking into many different ways of ownership and subscription models and all of that. And, um, that is definitely the new reality.

Um, the traditional car ownership. I buy a car and I own it, uh, until I sell it. Uh, I think is, um, on the decline in favor of other ways of ownership. True. And [00:25:00] also the other question is, uh, that I hear a lot is, um, does my car really have to stand still in the garage overnight or is there somebody that might want to use it in that time?

Mm-hmm. So I think all those, the, the digitization and, um, the smart car combined with a smartphone, it opens up all these doors and. That in change makes it a lot more affordable for somebody to at least own the car partially or at certain times of the day. Mm-hmm. Right. And, um, so all of that is gonna, uh, happen and I don't see why it shouldn't happen very, very soon.

I think also the, the, the, the younger generation doesn't look at the car the same way we used to look at the car. That's true. Yeah. You know, we, we, when, when we were, even before 18, we, the first thing we wanted to do is getting a driving [00:26:00] license. The second thing on the list is to own a car. Exactly. And the car was, you know, looked at as a, um, a prestige.

Uh, it's, it's, it was a, it was fanon freedom. It's freedom. Freedom. Uh, it was, it, it was a milestone. Mm. That owning a car. And, uh, and I think the newer, the younger generation doesn't look at it the same way. It's, it's, it's, it's, it's looking at it at a way of transportation. And this is why it's, it's a bit, it's, it's, it's changing with time.

So let me tell you, I've seen that, but not here. I've seen it in Germany. Okay. So I've seen it in, you know, relatives and, and their kids or friends and their kids. I've seen that, uh, even the driving license isn't a priority at all. Um, and uh, then a car ownership is also not a priority, but of course there you have wonderful public transport.

People love using their bicycles whenever they can. And, [00:27:00] um, that is absolutely a trend in Germany. Mm-hmm. Or maybe even in Europe. But I have not come across that here. Not yet. But no, um, including that public transport is also not. Such a viable option, especially not in Johannesburg. Um, uh, so. It, it still, it still is a priority.

Hmm. And I think between this, this extreme to, to owning a full car with, with the cost of it, I think what, what we see is evolving in, in this shared mobility, and it's, it's becoming more, and micro mobility is also getting traction. I don't need to own, um, a big car. I can have a smaller car. Mm-hmm. I can take a scooter or I can take a, I've seen the, the very smaller, uh, type of vehicle.

What, so part of the micro uh, mobility and with micro mobility, it's easier to charge [00:28:00] them. So I think we, we, we are seeing the trends in there. Maybe it's not yet fully developed, but I think this is how the market is, is moving. Well, if I think back, um, it's really, I forgot about it for a while, but, uh, with this discussion here, I remember it now again, that, uh, my first car sharing.

A subscription, uh, was 25 years ago in Frankfurt. Okay. And at the time, I, I had a brief period where I didn't have a car and, um, uh, there was no smartphone obviously, so you had to send a, an SMS to a number, then you would get a code in response. The car was parked in a certain location and there was a little locker box, which the code would open that box and the key was inside.

So, and then you could park it at a specific other parking. And, uh, so those concepts are around for a long time. But of course, smartphones and smart cars make them much, much more accessible. And, um, [00:29:00] there, there's so many options now available in Dubai, uh, also, yes. And yeah, so I mean the, the extreme example I've seen on this, uh, shared cars was, uh, when I was, uh, the last time in, in, in the us.

Um, so I, I have a friend that lives in the us. He is young, working for, for Apple. So, so I phoned him, I said, you know, I have the weekend. I wanna rent maybe an American muscle, you know, just over the weekend, you know, it's fun to, to be, he said, rent, why would you rent? Um, although, what do I do? And then he send me an app mm-hmm.

And the app. Um, so we have seen many shared mo mobility models and so on, but this app actually, you download this app, you, they would ask you for a driving license, credit card, whatever. And then you look at the neighborhood and then you see other people owning cars. Just other people. [00:30:00] It's normal people owning cars.

And then you can look at the list of, okay, this, this guy have a, a Mustang, the other have a Lamborghini. Mm-hmm. And they put it on the app. And this is not, it's P two P, like Yeah. And I did not. I believe initially in it. Like, will it be really, will it work? And how does it work? What is the key? Um, what if does it have petrol?

Doesn't, what do I, you know, it was initially very interesting. So I said, let's, let's test this. And then I looked at the map, there was like 10 minutes working distance, a car park there and you, you see like, okay, I want to take it for two days or one day. Actually, initially I wanted it for three days, but I said, I'll take it one day, I'll try another car later.

Mm-hmm. And the, it was very, very easy. You, once you, you book the car and once your phone comes close to the car, you can unlock the car and then the [00:31:00] keys is inside. Mm-hmm. You take the key broom, you, you are on the go. Yeah. It it, and, and after we finished, um, it'll give you some suggestion. The owner would have suggested certain location of parking the car.

You park the car, you lock the car, it's done, finish. Okay. And, and it is, it was for me, very new. He said, I've never rented a car. I never own a car. And this is always a pick a car. And this is why always with a different car. And this is how lots of this enablement of 5G connected cars, uh, uh, digitalization have made this much, much easier.

And this is why I think, of course, us is the front, front of this technology, but I think, I don't see a hinder that this coming in the coming years, not at all. Maybe that model won't come here for some time, but, uh, not yet. Um, but uh, you know, and all of these new [00:32:00] ways of owning cars, they don't need a big infrastructure.

So it's normally, you know, when you talk about 5G internet or whatever that needs. Big infrastructure, but those things, they can be implemented immediately, right? Yes, exactly. Just needs the right, uh, consumer to be open for that. You know, when we, we look at, at Africa in general, it's very, depending on what we call the internal combustion engine, the ice engines.

Mm-hmm. Mm-hmm. It's, uh, we know that, uh, generally it's growing 20% year on year, but still it's less than 1% in general. Uh, what, what do you see is, is the, is the main challenge adopting electrical car? You mean the electric vehicles? Yes. Yes. So, um, when you look at the numbers in South Africa, they are, um, let, let me split between purely electric vehicles and the hybrids, because the hybrids have been actually developing much better, much faster.

Yes. Yeah. So there we are about, [00:33:00] I think we'll reach 10,000 units, uh, soon. Yeah. Per year. Um, but the purely electric vehicles, they have been. Doubling every year, but the total number is still in the low thousands. Yeah, so I think two, three thousands. Um, and the reason for that is that for the last 12, 14 years, electricity supply was very unstable in South Africa, not anymore for six months.

Now we haven't had any power cuts for six months, which is, which is nice. It's nice. It seems that this period of unreliable electricity is finally over. But, uh, of course in the minds of people that sits very deep, right? And so people expect that if they want to own an electric vehicle, a purely electric vehicle, they would also have to have solar panels.

So now, and the electric vehicle itself is more expensive. You pay a a, a premium for that. [00:34:00] You have to have a charging station. Now you think you have to have solar panels. That's another massive premium that you pay. So it's basically not an option. And so you're targeting with that the top 1% who can afford solar panels charging station, and who probably would only use this as a second or third car.

Okay. Right. And that's what, what you're seeing here. Um, if electrical supply becomes much more reliable and so on, maybe that will change. But, um, actually owning a purely electric vehicle is not so bad in South Africa because I recently heard that the, uh, the ratio of electric vehicles to charging station is seven to one, which is, which is really good.

Phenomenal ratio. Yes. So you are alone here pretty much when you're on one. And the coverage seems to be also pretty good because, um, just last month there was a group of journalists that went on [00:35:00] 1,400 kilometer ride from Joburg to Cape Town. Okay. The classic route, right? Yes, yes. And, um, they all arrived and, uh, I just spoke to one of them with a purely electrical car.

Purely electrical, and, and just spoke to one of them and he said, yeah, it was fine. Yeah, so, so at least there is no, um, let's say there is no traffic on, on, on, on charging stations on stations. No, no. So, and I see them frequently also. Um, and so from that point of view, South Africa is ready for more. Um, but it's just, uh, the economic and the infrastructural realities in terms of power supply and, and of course expense that I think holding is holding this back still.

But the hybrid seem to be, um, really moving. We, we have done a study, I think it was three years ago in general, just, I mean, we are in this industry and we want to see [00:36:00] what could be the next move into the industry and actually. When we looked at the global market, was very different than when we looked at Middle East and Africa.

Mm-hmm. And when we did the simulation was, um, uh, one of our consultant, which is very, um, knowledgeable about the, the market trends in, in ev and, and we found that the, the, the Middle East and Africa, now the Middle East have a different reason because, uh, petrol cost is cheaper. Um, there is, there is not so much of in financial incentivization incentives to own and, and, and electrical car.

Here a bit more is the infrastructure challenges and electricity availability. So we reached to see that the, the, the name of the game of the coming 10 years in Middle East and Africa would be first hybrid cars. Mm-hmm. Then. Plugin hybrids mm-hmm. [00:37:00] Before we come to a the boom in the, in the ev if it's ever become something.

Yeah. And, and, and this is, uh, and when we, we, we started this, uh, study, which was, uh, in 2020 and it was a little bit disrupted by what, uh, but we had a little bit more time to do online. Yes. Discussion initially did not really make sense to me initially. Like, we don't see any hybrid cars really. And 'cause they're more expensive than a normal car and mm-hmm.

But very soon, very soon we saw a boom, at least in Dubai. Now almost all our taxi are electric, uh, hybrid cars. Sure. Yes. Okay. That, that is a little bit also steered by the incentivization government policies, government policies. And, uh, Dubai was always at the forefront of. Wanting to try the new things. I think the biggest Tesla fleet was, uh, was always in Dubai [00:38:00] taxi fleet and so on.

Um, and they wanted to be at the forefront. I remember that because more than 10 years ago, um, uh, RTA asked us to help them organize a conference, um, to make sure that the battery manufacturers keep the heat in mind when they develop their batteries. Yeah. Right. Um, and so, which is, which is they were always thinking very much ahead.

Yes, true. To say that, you know, we want to be part of this technological revolution. Yeah. These are, I think, I think yes, of course Dubai is, is always leading, but we, we, we now see that hybrid is, is becoming much more accessible, easier. They, they are not anymore as expensive as it used to be because it becomes more mainstream.

So we see the, the, the difference between a hybrid car and, and, and normal car. Uh, or an ice, fully ice engine is not that big difference. And the what you save in, in, in, in running cost is actually, [00:39:00] uh, compensated. So now we see that in the Middle East and Africa, the, the hybrid is, is getting the, the most of the traction.

Mm-hmm. Um, working in the, in this region. Um, and I have been here now for, for almost a week and discussing with different companies, uh, manufacturers, suppliers, um, OEMs, customers. Logistic seems to be a challenge for almost everyone in the room and. We, we look at, uh, shipping or logistic in general is, is is becoming, sometimes it's a bottleneck.

Takes three months, sometimes more to get a product or parts from wherever. Is it, if it's from Germany or Japan or Dubai, or maybe Dubai is a little bit shorter, but it's becoming a challenge. Uh, how do you see we, we can work [00:40:00] on this. Yeah, I mean, there are quite a few challenges. Um, port congestions, cross border problems, strikes, infrastructure, failures, whatever.

So nothing new. But, um, you know, they, they do, uh, they do affect sometimes, uh, the, the accessibility, um, since they're really, I. Real physical problems. Yeah. Um, they also offer, on the other hand, every problem offers an opportunity. They offer also offer a lot of opportunity for people who have availability in their stock and so on.

So that, that is always the thing here that you can see sometimes, uh, price fluctuations because something's not available but somebody's got something in stock. Um, I mean, the solution is twofold. I would say. One is the very [00:41:00] simple, straightforward, uh, uh, not simple but straightforward improvement of the infrastructure.

And there are many projects on the way, such as the north, south corridor that they're working on since 15 years. Um, that is a massive project that connects Africa right through from north to south. Um. And it goes through so many countries. So of course you can expect that somewhere it goes a bit faster than elsewhere.

And you know, obviously as it goes right, uh, there are many railway projects, um, and you know, these things, they take their time, but when they're implemented, then they also solve a lot of problems. Um, on the other hand, um, you know, I always say here a lot, uh, since I'm here that uh, we need to solve this maybe a different way, an African way.

And um, funny enough, we have a little exhibition here that's called Aero South Africa that deals with general general aviation, [00:42:00] so plane, air, airplanes and helicopters and so on, but smaller ones like the business jets and, um, and there's an absolutely phenomenal network of small airports across the country.

So, and, and across, uh, Africa. Africa as well. Um, and sometimes, um, those things need to be considered as well. If something is urgent and maybe not so big, then uh, let's see if that's an option. Um, and so there are alternatives that you would probably not think of in another country. You would say, no, that's definitely not an option.

It's too expensive or whatever. But, um,

you need to think and approach problems differently as well. Y you know, it's interesting what you said because we, we see like, uh, for our business that, um, air shipment into Africa especially, especially certain countries, is so, so. We sometimes, um, [00:43:00] so we have different logistics partners that we, we partner up with and, uh, so, uh, we know for example, into our Moroccan office, uh, we sometimes have a challenge because now looking at, uh, the disruption into shipping and the Red Sea and so on, so we have discussed with one of our logistic partner to call it maybe Airbridge or something, and what we have trying to solve a problem because normally it would take 35 days to ship from maybe Dubai to Morocco of 30 days.

But now going all the way, uh, it's taking sometime two to three months. Mm-hmm. And, uh, we had to reinvent, like, and, and discuss. And now we have, uh, found a way to have a fixed number of kilograms, which is I think now 30 or 40, which goes every two or three days. We negotiated, uh, with, with, with the, um, a major logistic, uh, or [00:44:00] major logistic, uh, company, air into air freight.

And, um, we got a very, um, different model. I mean, it was to develop a model, which is they come up with a fixed box because here we have weight, we have volumes, we, if we gonna keep measuring it every time, it's complicated for them. Mm-hmm. So now we have defined a fixed size of a box that we put what we want every two or three days, and it's get picked up, delivered there two, three days later.

Mm-hmm. Becomes very competitive and solves many of this. And sometime, let's say we have 60 kg to ship. Mm-hmm. Sometime we do it over two days rather. So 30 days today and tomorrow, another 30 days. And. Um, this is, this is how you, you, you try to find a solution to, to, to something like this. Um, yesterday we were in a meeting, um, and they requested [00:45:00] something similar.

And I see, you see like, and, and yes, it's more expensive, but I think if you, if you work with the Korea company and, you know, the logistic is now way developed compared to 20 years ago. Yes. Yeah. Uh, both into the countries in Africa, the airports are, are in a different, uh, level. Mm-hmm. And we started to see these, uh, request of a, so an air freight solution.

Um, and that actually it's, it's, it's a growing, many times we see Africa as leapfrogging, you know, moving from, um, if we look at the landline was not adapted as much as the. If you look at Europe and yes, and we had the, the landline and then with the mobile phone and then the internet, where here they moved from no phone to to to, of course.

And now we see it sometime it's happening also on logistics, moving in a much more faster pace and [00:46:00] leapfrog from just a traditional shipment to, to air shipment. You see, this is, this is happening. There is a demand on this. I don't have enough insights into actual shipments and so on. But, um, it, it, you know, at the end of the day, sometimes you need to fix an issue, right?

And if the road is not the way to go, then you have to find an alternative. And, um, you know, what you said about taking the shipment on the plane, I. It doesn't even have to be that the plane is flying just for that smaller one, but if they have some space, yes. You know, and that's what the logistics companies, they're very good at at last minute, you know, you know, I still have some capacity here, uh, to broker that and to sell it to the one who needs it right now.

There's always a way to do that. Um, when I was still in [00:47:00] Dubai, I asked one of my partners, uh, um, what was the most favorite airline from Kenya? To Dubai, what was the most used airline? And he said, it keeps changing. And I said, how can they keep changing? And he said, it depends who offers the most, uh, luggage allowance at the moment.

Really. Some allow 25 kilowatt, some allow 40 kilo, and some allow 60 kilos. So it keeps changing just based on that. And now I thought that was a fascinating way of looking at things. Okay. Yes. I wouldn't think about that exactly. Right. And, um, luggage allowance can, can, can, can give new opportunity for, well, exactly.

If you have 60 kilo luggage allowance, you, you can think of bringing some products with you that you normally have to send through a shipment. So I, I thought that was a, a interesting preview of what, know what Africa is about. Yeah, true. It's a very practical thinking. And, and, uh, yeah, I, I, this is why I say, you know.

Uh, [00:48:00] people are very innovative in finding solution to their problems. Yes. Yeah. And, and they, they always find a way to, to solve, uh, a problem that takes years to solve. Uh, this is the, let's say, African way of solving problems. And you know, in South Africa they say, we make a plan. Hmm, let's make a plan. And that's what I've heard pretty much from the day, day I arrived here when something, when there was a problem.

And it's not like, oh my God, we have a problem. It's like, okay, let's make a plan. It's looking ahead and looking for the solution and not too much worrying about the problem. And that is a big difference to many other places. True, true. Um, looking at the global market, doing business online have been almost the trend with Amazon and all of these, uh, bigger platform, um, in Europe now.

There is a major online spare part, companies that are really doing massive business. Do you see that this adaptation of [00:49:00] buying online is, is changing, uh, the, the way business is done in Africa? Yes, a hundred percent. Yeah. And, um, I was earlier mentioning the private sector and, and I feel they're quite advanced also on the digital side.

Uh, if I tell you my local banking app is, I haven't seen that before anywhere else. Okay. So what I can do on my banking app here surpasses everything I've seen before in very developed countries. So, um, uh, very digitally savvy, digitally advanced, and, um, uh, BMW has one of their global IT centers here with I think 3000 employees.

So, wow. Yeah. That, that also speaks volumes. Um, and, uh, interesting fact here that a company. That you would absolutely need before you start thinking about e-commerce is somebody like Tech Alliance. Mm-hmm. Because they offer you the [00:50:00] backbone, they offer you the data catalog. Mm-hmm. They have all the, the part numbers and descriptions and everything.

And, and they open an office here, I think three years ago. Yeah. And, um, yeah. So that is a clear indication that that is moving. And, uh, I've just spoken to them a few days ago and they're, they're doing well and, and, uh, expanding here. So, um, to answer your question, yes, uh, definitely e-commerce is moving and, um, I don't see it stopping.

Um, you know, I think, uh, when you see data companies entering a market, then you, you can definitely see. That the demand on, on, on digitalization and eCommerce is, yeah. Um, and I think, uh, the, the right way, uh, we need data and, and as you mentioned, tech Alliance is good in there, especially, they're specialized in the automotive aftermarket data.

And, [00:51:00] and, um, it is, it is I think looking at data in general, uh, you, you mentioned something and I was very surprised. I had a meeting with one of the banks yesterday and uh, I was really impressed. Now you mentioned that as well. Uh, you had a similar I. I was really impressed how much data they have on different companies.

Mm-hmm. Even in some modern country, we do not have, and I was, I was, I was, uh, discussing yesterday, um, with one of the banks and I was surprised how confident they are also on their data. Mm-hmm. So it's not because we struggle of having clean data, good data. Yes. Uh, I don't know how they do it, but I was very impressed with the amount the data they have on from my side was on companies.

But you are saying also on people? Yes. No, no. They have some data accumulators here in the background that are supplying, um, [00:52:00] highly sophisticated data on many different things on consumer level, but also on company level and on trends on. You know, it, it's very, very impressive. And I think this would drive, and because data is, is when we look at, uh, digital transformation, ai, all its database.

So I feel that there is a mine, a new gold mine to dig mm-hmm. Into the, the African data. So, uh, I, I was, I was pleasantly impressed by, by their, their, uh, data, their digital, they're very digitally savvy. Uh, they knew what they are talking about. Uh, and even another aspect that I am very impressed with is not only the data they have, but also the integrations that they manage to achieve between different companies.

Now I'm going back to my banking app, um, uh, how my, my insurance, which is a separate [00:53:00] company, how my insurance is integrated in that and how. Uh, other companies are integrated into my banking app, even retailers and, and so on. So the retailer can push a certain promotion into my banking app that I get a certain discount through my banking app on their website and all of that, and, and through the payment providers and so on.

And, uh, that actually all works. It's not only there, but it actually also works. And, uh, knowing how difficult it is to integrate, integrate just two companies with each other. But here it's like 20 companies that are integrated there, or even more. And, and it all seems to be working, uh, through my banking app.

I can book discounted airline tickets and stuff like that, which is very specific to my profile. And, uh, it is really impressive and I think this is what, what's gonna really be advantages for, uh, um, companies that is willing to, uh, want to adapt in, in, in this part of the [00:54:00] world. Yeah. Um, another aspect when we look at the, a typical or, um, bus doing business in Africa, affordability have been a key.

Uh, some studies says that around 60% with value, price over quality. I dunno if you agree on this or you don't agree on this. And, and this also puts some, uh, supplier into a challenge. Um, how do, how do you see, how do you see that they can adapt to this? Well, right now, um, especially the last two years when I talk about the, the new car market, right?

Uh, uh, we all know that there's a big shift happening. Um, and when we look at the pricing strategies, especially from the newcomers, uh, how low they go into the market, um, uh, so the consumer actually right now is in a phenomenal position because the consumer can choose. A great [00:55:00] value at rather low prices.

Um, but I've also seen what happens next, right? So, um, when we look at, let's say a Chinese brand that entered a few years ago, one of the first movers, um, they entered at a certain price point, let's call it 300,000 grand or 150,000, sorry, $15,000, right? Um, and they, they, they stayed on that level for about two, three years, and then they hiked up their price by to 500,000.

Oh, wow. Right? So you could clearly see that was a, um, market entry strategy and then, you know, the price went up tremendously. Um, so I think that's a, a bit of a short term effect right now, um, where some consumers have an opportunity that they will not get again. Um. But [00:56:00] I wonder if that is at the expense of when you have, do, have a problem, uh, and their service network is not fully established, then maybe, well, your problem doesn't get sorted out that quickly or at all, maybe.

So I'm sure there's always a trade off. And when you trust a new brand, that brand also has to prove that they are actually, uh, fully ready and, uh, they can fulfill, they deliver their promises, they can fulfill their service promise as well. Um, yes, a new car car is not supposed to break down at all. So maybe two, three years you have peace of mind.

But at the end of the day, consumers also have to choose between, uh, good deals and maybe also peace of mind. Because peace of mind is also a value, right? Definitely. And if you can't use your car for a few days or even weeks because the service can't be sorted out, um, then you also have a problem and it's gonna cost you money.

Somewhere with the other, like fire. So, yes. Um, [00:57:00] uh, I don't know if you're referring to new cars or maybe also parts or, or whatever. Um, both. But, um, what I see is that in South Africa there's, there's, um, definitely the different price levels, also the aftermarket. Um, there's also good value options, um, by suppliers here that, that provide very good, uh, service as well.

And, um, the, the core of the issue, I believe is that, um, not only South Africa, but also many other African countries distinctly have a very big disparity between, let's say the average, um, buying power, purchasing power in other countries. I cannot compare that to Dubai because it's astronomical over there.

Um, and the car manufacturers do. To a certain extent adapt to that. But of course, you can only [00:58:00] adapt to a certain extent. You cannot, uh, you know, yeah, definitely cut your prices enough. It's, it's not possible. But, um, they do adapt to local pricing to as much as they can. And wherever there is not enough, uh, of course they're suffering then, uh, with lower sales.

Um, yeah. On the other hand, um, where I feel there is still a very high willingness to pay very high prices, uh, is on the commercial vehicle after market, right? Because, um, it's a very simple calculation. The cost of a breakdown in between, uh, Botswana and, uh, Namibia, uh, is astronomical. The, the truck is standing there and the cost of.

Getting a replacement part over there is much higher than buying a good part in the first place. So I think many of the operators in that area, they, they, they always go for quality [00:59:00] and because reliability is their main USP and because they know it's costing them a lot of money if the, their truck breaks down.

So you see there is more opportunity in the commercial segment, especially in the aftermarket maybe compared to, well, if you, if you're offering, uh, quality reliability, then there's certainly a higher willingness to to pay for it. Yeah. Now, if we look at, uh, some studies say in 2050, the Africa would be double in terms of population.

So we have the, the, the, the boom of, of demography. Now, how do you see this would affect the, the automotive market and the automotive aftermarket? Well, I think I touched on it already when we talked about the growth in the market value, uh, by 2029. Of course, that is one of the undeniable facts of simple extrapolation.

You see the population growth and it won't suddenly stop. [01:00:00] Um, so it all depends on under which circumstances that growth happens. Like is, uh, is the, the growth of the income going alongside or even faster than that, which would mean that we are growing a very, uh, good, uh, you know, good middle class that, that can afford to drive cars and things.

So, um, if that's the case, obviously that tremendously impacts the, um, the market conditions and, um, goes hand in hand with the development of the infrastructure and, uh. Uh, yeah. And we see that in, in many countries that is happening in some countries, not so, you know, Africa is a, is minimum of 50, uh, countries, if not even more because of different regions and so on.

So it goes in certain areas up [01:01:00] and in others down. And, uh, definitely now if, if we look at, at the automotive aftermarket, um, auto Mechanica, Johannesburg is playing, uh, a role to, I think, facilitate or becoming a platform for the automotive aftermarket. Um, now that you have been here a few years and you are leading this show, um, how do you see that auto mechanic Johannesburg is playing a role in this, in this, uh, segment?

Yeah, so we finished yesterday. So obviously, um, I can tell you very fresh that we are playing a very big role, especially in connecting the international market to the African markets. Um, we had, uh, visitors from 47 countries Wow. Out of which 22 African countries. So you can see directly from those numbers how, what a diversity there is on the visitor side.

On the buyer side. And [01:02:00] um, I think I mentioned to you earlier that we also went on a roadshow, uh, through six African countries. And, um, it was really funny because I walked through the exhibition and every now and then somebody said, oh, hey, I met you in Zambia, or I saw you in Nigeria at the roadshow. Mm.

And so it's great to see that those people actually attend. Mm. Um, I didn't expect anything else, but then when it really happens, it. It really makes you happy. Flatter. It's flattering. Absolutely. Um, yeah, so if you just think of, uh, even traveling to three African countries, uh, you know, the cost and the time involved in that yes.

Is astronomical compared to attending a show, having a little stand and meeting all these people that you would have to spend weeks and lots of money, uh, if you had to travel and, and visit them [01:03:00] directly. Mm-hmm. The ROI on on this show, for example, works on very small numbers. Mm-hmm. Yeah. Uh, and that's why very confidently saying that, um, we do influence the African aftermarket trade a lot and uh, we are great entry point for that.

Michael, it's, it's really lovely to have you here. I think we can go on in this conversation forever. Episode three and four. Yeah. Um, we will love to see you both in, I mean, auto mechanic at Dubai, Johannesburg, uh, Frankfurt. We always are in touch. Um, thank you for, for your time. It's always good to have a discussion.

Any, any last words if you allow me to elaborate just a little more on our roadshow, because I feel now that the show is over, I feel like this is such [01:04:00] a, actually, I didn't realize how, how big and how interesting this is for companies. And we've started now, um, for the next year, we want to go again to six, uh, countries, different ones in this year.

Take me with you a hundred percent. And that's what I want to say. Um, I want to say that we have started speaking to our exhibitors if they wanted to. Uh, either join in on the road show or, or send a representative or sponsoring or sponsor it. Exactly. Well, that's the whole point. Um, and then if you, if you think about it, you're not only going to be at the show next year, but you're also going to be, uh, around you have several contact points with, with several important markets during the year.

So I think actually that's, um, I didn't realize that this could be very interesting for many companies because we take away that pain of, um, going into these uncertainties, into uncertain markets and so on. Um, interesting. So. That's what I just wanted to mention right at the end. Yeah, no, [01:05:00] I, I think, uh, we, we, we have been in the past in some of your, uh, roadshows and I think, um, to really connect deeper with customers sometime, uh, only in the first visit is it's different.

But when you connect to through, if it's a roadshow through a visit, and then you see them in the exhibition, then we, the, the, the collaboration, then the, the possibility of really doing some business, um, comes, uh, on a, in a, in a different level. Because now you know, the customer and then the trust, you know, Africa's all about trust.

If they trust you, they do business with you. If they don't trust you, you're never gonna get any business. And, you know, despite all the e-commerce and despite all the digitalization and, and and so on, it's also same in the Middle East, you know? Yeah. You know, a person, you shook his hand, you looked into their eyes and you had to chat with them.

Uh, after that, it's much easier to. To do, to start doing business. And in Africa it's just the same thing. And everything is heavily relying on [01:06:00] relationships. And, um, it, at the end of the day, you know, our company is all about meeting yes. In person. True. We never went onto the, uh, virtual, uh, track. And, uh, I'm sure nobody really enjoys that.

Uh, it's, it's sometimes practical, but it's never really, um, it's never, never really the same. It's it's never the same. Exactly. And I think who, as a human in general, we, we like to meet each other and we like to, I mean that's exactly, we flourish that way and. It was a time that we had to use digital solutions, but I think it's not, uh, the preferred way of, of meeting or doing business or celebrating birthday or, you know, so I think it was a time, now it's over.

Yes, with the time of, uh, c and the digitalization. I mean, there are tools. We still using them, but I think [01:07:00] meetings a person face to face is, cannot be replaced with an email or a phone call, or a Correct. An online meeting. And something that I realize as well, now that I'm in this industry for more than, uh, 20 years, 25 years, two decades, more than that.

Yes. And I'm sure you are as well. Um, I feel like at exhibitions you meet your professional family, right? Yeah, yeah. Uh, over the years, you go to Vegas, you go to Frankfurt, you go to Shanghai, Dubai, whatever, and, uh, you, I. You never really, uh, make appointment with that person, but when you bump into that person, you're like, oh my God, we go way back.

And, and so on. There is always a, uh, it's a, it's a like a professional family meeting that brings people together and, and some very big business relationships. They start by coincidence at an exhibition, if I may close with this. Go ahead. In Dar [01:08:00] sala on the way to the airport, we had a little bit of time we passed by a company and it looked really big and it looked impressive.

We'd never heard of it before, so we decided to just pull in and, uh, say hello. Right. And, uh, we were surprised to hear that the CEO of the company when he heard that we were there. Again, we had no appointment. He was immediately, he wanted to see us and we were a little bit surprised because that's not normal that you walk in and you meet the boss right away.

Yeah. And he said, the reason why I wanted to see you is because everything that is here started in 1976 by a pure coincidence at Auto Hanah where I bumped into a person and I made a deal with them. They were my German suppliers and my entire business is based on that one meeting. Beautiful. And he gave us a presentation on his company and we are talking multi-billion dollar company [01:09:00] today.

Nice. Yeah. Nice. So, yeah. You know, these are the seeds we plant. Yes, definitely. Michael, thank you very much. Uh, it was really lovely having you. We, we carry on this discussion offline. Sure. Um, for our audience, um. Here we wrap up another episodes of Wiki Bearings. If you have any comments or suggestion, email us at podcast at mcb ae keep spinning towards success.

And that wraps another episode of Wiki Barings. Don't forget to subscribe for more insights into the fascinating real of the engineering innovation. Until next time, keep spinning towards greatness.