Chinese auto giant to invest Sh2b in assembling plantOct 24th, 2011 | By ngila | Category: General Information
Fierce competition looms in the light and heavy commercial vehicle industry as a Chinese automaker announces plans to put up a local multibillion-shilling assembling plant.
First Automobile Works (FAW) has received the approval to start building a $20 million (Sh2 billion) motor-vehicle assembling plant at the Coastal city of Mombasa in February next year.
FAW’s increased interest in East Africa comes after China’s biggest automaker established an assembling plant in South Africa at a cost of $100 million (Sh10 billion) to serve the southern Africa.
The proposed Kenyan-based assembling plant is expected to act as a springboard for the automaker as the company eyes the wider East African Community (EAC) market, which has a combined population of 130 million people and an estimated $41 billion gross domestic product.
One of First Automobile Works special truck designed for cargo handling. A Chinese firm has received the approval to build a $20 million motor vehicle assembling plant in Mombasa.EAC’s on-going integration efforts are also being seen as a major ingredient to transform the region into an economic powerhouse.
Consequently, EAC market appears to have suddenly become a centre of attraction to a growing list of multinationals, some of whose boards have resolved to set up regional offices to facilitate their operations. These firms include, among others, Nokia, IBM, HP, Google, General Electric, soft drinks maker, Coca-Cola Company and auto-dealers, Toyota and General Motors.
FAW, which is seeking to tighten its grip on the regional market, sees the assembling plant as a prudent strategy in reducing the price of its trucks and enhancing its competitiveness.
The company is hoping to drastically cut truck prices by 15 per cent and pass on the benefits to its consumers. The new investment is encouraged by the fact that by assembling locally, the firm stands to enjoy duty free as opposed to 25 per cent charged on fully built units.
Japan and India auto giants currently dominate the light and heavy commercial vehicle industries.
Through its local franchise Trans Africa Motors, FAW expects to manufacture 500 units every month for the East African market.
“We are already gazetted as assemblers and plans are in advanced stages of starting an assembly plant,” explained Mr Ali Zubedi, the Managing Director of Trans Africa Motors.
“With an assembling plant, our prices will be more reasonable.”
FAW’s entry is set to loosen the strong hold of Thika-based Kenya Vehicle Manufacturer, the Association of Vehicle Assemblers Ltd of Mombasa, General Motors East Africa and Foton East Africa who are positioning themselves to reap from the booming construction and building, transport and commercial industries.
The Chinese based automaker produces over two million units of light and heavy commercial vehicles every year in collaboration with other auto dealers, notably Voxwagen, Audi, Toyota and Mazda.