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Global car makers drive into EA market

Saturday September 15 2012
foton

Foton East Africa Limited offices on Mombasa Road in Nairobi. Photo/FILE

A rising number of global vehicle manufacturers are setting up shop in East Africa targeting demand in the fast growing regional market.

China’s Great Wall and India’s Mahindra are the latest firms to appoint dealers in Kenya, while Germany’s Volkswagen recently chose Randon Trailers to assemble its buses and trucks.

China’s Sinotruk has announced plans to build an assembly plant in Tanzania, while Chery Automobile, also a Chinese firm, is expected to build an assembly plant in Kenya next year.

RMA Group, a global vehicle distributor dealing in brands like Ford and Land Rover, opened an office in Kenya in July, signalling its interest in the East African market.

“The regional market has become attractive to vehicle manufacturers who see growth opportunities in the long term,” said Dinesh Kotecha, executive director of Nairobi-based Simba Corporation.

Simba Corporation owns Xylon Motors, which was recently appointed the sole local distributor of Mahindra’s pick-ups, light commercial trucks, and sports utility vehicles. Mahindra is Indian.

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“We are now selling Mahindra brands in Kenya. We are in a position to sell the brands to Uganda as well,” Mr Kotecha said. Analysts say most of the latest entrants in East Africa are starting operations in Kenya — the largest economy in the region — from where they later expand to Uganda, Tanzania and, more recently, South Sudan.

Vehicle dealers in Kenya sell an average of 12,000 units in the local market annually, and export another 400 units to the rest of the EAC market, mostly to Uganda.

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Uganda is the second biggest market, recording sales of 1,785 units in the eight months to August 2011, from 1,618 units the year before, according to Uganda Motor Industry Association.

Foton East Africa, a subsidiary of China’s Beiqi Foton Motor Corporation, recently completed its $15 million dollar assembly plant in Nairobi, and has started selling its pick-ups and trucks in Tanzania and South Sudan.

Foton’s plant has the capacity to produce 10,000 vehicles a year. Great Wall and Volkswagen — whose buses and trucks are to be assembled at Randon Trailers — are also eyeing the regional market.

“We want to boost sales of Great Wall in Kenya. We plan to start selling the vehicles in neighbouring countries in the next one to two years,” said Sarfraz Premji, the general manager at CICA Motors, the dealer of Great Wall pick-ups and SUVs.

The establishment of the East African Common Market in July 2010 has set up the unified region as a major market, helped by duty-free trade on some goods and easier rules on movement of labour across borders.

The economy of the region, which has a population of 130 million, is expected to grow in the medium term, fuelled by discoveries of high value minerals.

New vehicle sales in the region rely heavily on orders from the government and private companies, as individuals prefer the relatively cheaper used imports.

The entry of more players will increase competition in the commercial vehicle market — the biggest and fastest growing segment.

“Demand for commercial vehicles, including buses, pick-ups, and light commercial trucks, is highest in the region and more players are interested in these product lines,” said Rita Kavashe, the managing director of General Motors East Africa.

A recent report by research firm Business Monitor International said China’s Sinotruk has shown interest in the construction of a heavy-duty truck assembly plant in Tanzania. Chery has also announced plans to build an assembly plant in Kenya next year.

The assembly plants are meant to avoid import duty on fully built vehicles, helping the manufacturers to increase their pricing competitiveness.

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