No deal on common age limit for cars
Tuesday January 30 2018
Used motor vehicles from Japan on sale at a yard in Mombasa. East Africa spent some $2 billion to import used motor vehicles over the past three years. FILE PHOTO | NATION
Harmonisation of an age limit for imported vehicles and development of automotive plants in East Africa has been suspended on recommendation of a study conducted by the EAC and Japan International Co-operation Agency.
According to the study, it would be difficult to undertake the harmonisation without reducing the number of used vehicles imported by the partner states. It would also make it difficult for an assembly plant to thrive and compete.
Harmonising age limit of car imports
Although the EAC Committee on Industrialisation had recommended harmonising the age limit of car imports at eight years, partner states have asked for more time to consult.
The study recommends that the region should first determine its ability, capacity and ways of producing low-cost utility vehicles.
It adds that the EAC does not have to develop full spectrum capacity to produce a complete home-grown motor vehicle, rather, it should put in place a well-designed and phased strategy to manufacture some car parts where competitive advantage exists.
Once it has developed such competence, it can move towards production of a full motor vehicle.
The report adds that partner states should consider having a national consultation so that various public and private sector agencies can determine and agree on cross-cutting issues in the sector, including financing.
In addition, further analysis of what the region’s entry point: Will it be motorcycles or reconditioning and assembly of used cars, like the United Arab Emirates does or would it be assembly of new motor vehicles.
The study involved research, consultation and interviews with experts in countries that already have motor-vehicle assembly plants, including Ethiopia, Egypt, South Africa, Vietnam, Thailand and Nigeria, as experts draw up a strategy-policy mix that can be adopted in the EAC.
Manufacturing plants
Ethiopia for example created an engine and body manufacturing plant, known as the Bushoftu Automotive Industry at a military base in Mekele, 768Km north of the capital Addis Ababa, and expected to produce 10,000 to 20,000 vehicles annually, generating $96 million annually.
The EAC’s motor industry largely comprises imported cars, with no significant manufacturing activity. The average cost, insurance and freight of imported motor vehicles in the last three years was about $2 billion.
This comprised of $900 million for Kenya, $493 million for Uganda, $537 million for Tanzania and $80 million for both Rwanda and Burundi.
Kenya is the region’s leader in motor vehicle assembly, boasting a fairly well developed industry with three plants - Kenya Vehicle Manufactures in Thika, Association of Vehicle Assemblers in Mombasa and General Motors East Africa in Nairobi. The three plants focus on assembly of pick-up trucks and heavy commercial vehicles.
In Uganda, Kiira Motors Corporation recently unveiled its Kayoola prototype electric bus in Kampala. It hopes to manufacture all the parts and assemble the bus locally by 2039.
No common standard
Currently, there is no common standard in the EAC motor vehicle assembly sector. Parts used in the sector are exempt from the 25 per cent import duty levied on fully built-up cars. Most importers bring in cars from Japan, Singapore, the United Kingdom, South Africa and the United Arab Emirates.
There has also been a push for harmonisation of valuation of used motor vehicles in order to rid the market of over-age vehicles. In December 2013, the EAC agreed on a harmonised methodology for determining the Customs value for used motor vehicles.
The system will address prices of brand new vehicles, a depreciation schedule, freight, and insurance.
The policy is yet to be effected.
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