We are revising down our forecast for 2015 to a decline of 51.0% to 3,450 units as momentum from the country's strong sales performance in 2014 is dissipated by significant depreciation in the Tanzanian shilling raising the price of imported vehicles. Past 2015, we predict steady growth in new light vehicle sales from 2016 to 2019, averaging 22.8%.
However, we stress that owing to the markets erratic growth and declines, low numbers of total sales, and limited availability of data these numbers may be subject to revision over 2015. Furthermore, even with the double digit growth in new light vehicle sales through to 2019, we believe that, by 2019, only 7,641 new light vehicles will be sold in the country annually. When compared with a population of some 49.3mn, it is clear that new cars will remain unaffordable to the vast majority of Tanzanians for many years. Instead, used cars will continue to be the more significant market.
In light of this, potential gains for investors are weighted towards the commercial vehicle (CV) markets. While household demand for new cars will remain small, we believe CV demand will accelerate quicker over our five year forecast period to 2019 owing to the growth of Tanzania's mining and infrastructure sectors, which utilise CVs intensively. Our Infrastructure team remain bullish on Tanzania's infrastructure industry with growth in the industry likely to increase demand for commercial vehicles used in the industry. Investments into road and transport infrastructure as well as those into the country's nascent natural gas and power sectors will boost demand for heavy and light goods vehicles. To highlight the strong impact these sectors will have on CV demand, our Infrastructure team points out that transport and utilities infrastructure investments make up USD30.9bn of theUSD33.9bn of planned, financed or under infrastructure projects in BMI's Key Project's database for Tanzania.
Looking more long-term, there are some reasons for optimism on the outlook for new car sales as well. We are bullish on Tanzanian GDP growth, as investment flows into the country's nascent offshore oil and gas sector and infrastructure improvements raise the country's attractiveness for foreign direct investment. This will be supported by growing private consumption. We forecast that real GDP growth in Tanzania will come in at 6.4% and 6.9% in 2015 and 2016, respectively, following an estimated 6.9% in 2014, just below the government's target of 7.0%.
Tanzania has the second highest projected average annual GDP growth over the next five years among the East African countries we cover, but it also has one of the lowest levels of car ownership, at an estimated 4.7 passenger cars per 1,000 people in 2014. This suggests there is considerable long-term potential for growth in the new vehicle market, which is reflected in our largely positive forecast for the four years following 2015 as sales grow from a low base.
On the negative side, the combination of low vehicle ownership, a slowly depreciating shilling, high import duties, the limited supply of new vehicles and poor road infrastructure will all continue to affect new vehicle purchases through their effect of increasing prices. Thus, for most private consumers, used cars will still be the most accessible route to car ownership. More downside to new vehicle market will come from the fact that there is no upper age limit on used imports to limit their supply and encourage a switch to new alternatives. Only a 20% tax on cars over 10 years old has been applied to models being directly imported from Japan.
Competitive Landscape: New Competition For Toyota
For the foreseeable future, used cars, mainly from Japan, will continue to account for the lion's share of first registrations in the country. Among these used vehicles, as well as new vehicles, we believe the largest market share holder will remain Toyota Motor although it is likely to see this market share decline over the next five years .
Toyota Motor has had a presence in Tanzania since 1965 but will face much competition over the next five years and beyond. The CV market has seen the largest rise in competition over the last few years. In March 2014, Mitsubishi Fuso Truck and Bus (MFTB), a JV between German automaker Daimler and Japanese carmaker Mitsubishi, introduced its FUSO truck range in Tanzania. The new trucks include the FUSO 'FA/FI' light-medium and the 'FJ' medium-heavy-duty. The move is in line with the JV's aim to widen the choice for customers and increase its presence in Africa and Asia. The trucks had already been introduced in Kenya and Zambia.
Following MFTB, truck and bus manufacturer Ashok Leyland announced it was making its move into the country. The company had cited Africa as key to their global strategy and, in November, won contracts worth a combined USD79.2mn to supply commercial vehicles alongside spare parts, training and consultancy services in both Tanzania and Zimbabwe. Alongside Chinese manufacturers Foton and the Golden Dragon Bus Company, MFTB and Ashok Leyland, these new entrants all represent the strong wave of competition Toyota Motor is experiencing in the country.
In the passenger car segment, growing competition has been less intense. However, Toyota will begin to experience pressure from new market entrants, especially Chinese producers marketing their products aggressively in the East Africa region. For example, in September 2014, Geely Holding Group announced it was considering expanding its sales operations into Tanzania if it was able to find a suitable dealership partner.
Despite this improving long-term backdrop, Tanzania remains second from the bottom of BMI's auto industry Risk/Reward Index for the Sub-Saharan African autos sector, with an overall score of only 26 out of 100, sitting above Zimbabwe but below Sudan, Malawi, Cote D'Ivoire and Angola and well below the 33.6 average score for the Africa region as a whole.