East Africa`s automotive industry now gets busier

Jul 26th, 2011 | By | Category: Media Release

East Africa’s automotive industry is getting busier as new vehicle brands enter the regional market in anticipation for the economic boom resulting from economic integration.

Data by consulting company Pricewaterhouse Coopers (PwC) indicates that the automotive industry in Kenya and by extension the East Africa has for long been dominated by Toyota (East Africa) , Cooper Motors Corporation (CMC), General Motors (GM), Simba Colt and DT Dobie.

But other vehicle brands are digging in, either establishing assembly plants here or expanding their sales network across the economic community whose market is set to expand with the independence of South Sudan, East Africa Community’s planned sixth member.

For example, South Korean auto maker Hyundai Motors on Wednesday announced an investment in East Africa of up to 22 million U.S. dollars in the next three years through its subsidiary Hyundai E.A. Holdings Ltd (HEA) to support Hyundai auto sales in the regions and make it easier to access genuine Hyundai spare parts in the region.

“Hyundai has been absent from East African roads for over a decade. But we consider the region as a significant market and will be making strategic investments to make Hyundai cars the leading models in the region,” said Sam Lee, its regional Marketing Director.

The company opened its show room in Nairobi in January. Last week, the company partnered with a Kenyan leasing company known as Vehicle and Equipment Leasing Limited (Vaell) as part of its strategy to increase sales in East Africa.

“Our study of emerging trends in the East Africa auto market found that leasing is the fastest growing new industry. As an aggressive new-car seller, we see it as an enabler and are happy to announce partnership with local leasing company,” said Lee.

China’s vehicle manufacturer Foton Motor has also set eyes on the East Africa market and is now building an assembly plant in Nairobi that will supply at least 10,000 units to the region, company officials said.

The new plant, which will give the company competitiveness because it means it will avoid paying 25 per cent duty if it imported fully built units, will assemble prime movers, light commercial trucks, tippers, buses, and pick-ups.

The company is currently in the process of recruiting dealers across the East Africa. Availability of spare parts could be major win for the company because consumer trends here indicate that buyers go for vehicles that they know they can buy spare parts at the nearest town.

Earlier, India’s Tata Motors said it will establish a USD 12.8 million bus assembly plant in the coastal city of Mombasa to serve the East Africa market.

The company had said it planned to assemble up to 60 buses a month although it was not clear if the assembly has started operations. Just like Foton, the intention is to avoid the 25 per cent duty for the buses to be competitively priced.

Toyota is also another global automaker that announced last year it plans to establish an assembly plant in Kenya to serve the East Africa market.

Martin Owour of the Advisory Center for Trade and Investment Policy said the race to set up assembly plants in the country will result in lower priced vehicles because of competition and avoidind the 25 per cent duty.

Price is a major issue in automotive industry in East Africa and is blamed for the consumer preference to second hand vehicles that command 70 per cent of the automotive market share in East Africa according to various studies.  ”The new assemblers are looking to use Kenya as the launching pad for entry into the regional common market.

The fragmented economies of the five East African countries had discouraged the auto dealers from setting up assembly plants, but the common market has made it possible for the dealers to capture a region of more than 130 million residents,” said Owour in an industry analysis report.

Kenya currently has three motor assemblers, Kenya Vehicle Manufacturer, the Association of Vehicle Assemblers Limited of Mombasa and General Motors East Africa.

The new assemblies will complement efforts by the East African Community (EAC) to encourage setting up of automotive assembly plants.

EAC industrialization strategy for 2010-2030 has identified Numerical Machining Complex (NMC), Kenya’s state-owned company that once manufactured two prototype vehicles known as Nyayo Pioneer, as a possible automotive assembly hub. The company currently manufactures some vehicle spare parts. 

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