Kenya jump-starts auto sector with Volkswagen deal as Ethiopia closes in

September 9, 2016
Volkswagen has signed a deal to use the Kenya Vehicle Manufacturers in Thika to assemble its popular models beginning with the Volkswagen Vivo
Volkswagen has signed a deal to use the Kenya Vehicle Manufacturers in Thika to assemble its popular models beginning with the Volkswagen Vivo

, NAIROBI, Kenya, Sept 9 – Since 1924 when the first car, Ford model T, rolled off the assembly plant, the South African automotive industry has never looked back.

92 years later, when you Google, “overview of Africa motor industry,” the first nine results display information on the South African Motor industry. No search results from any other part of Africa comes up.

On Wednesday, Volkswagen signed a deal to use the Kenya Vehicle Manufacturers plant in Thika to assemble its car models beginning with the Volkswagen Vivo.

The announcement follows closely in the wake of a similar deal with CMC Motors Group in July this year with a commitment to pump money in KVM in what they termed as ‘investing according to scale and opportunity’, in the KVM plant.

“I am happy to welcome back the Volkswagen Group, currently the largest car manufacturer in the world, back to Kenya,” said President Kenyatta at State House, Nairobi.

The German automaker used to operate in Kenya in the 1960s until 1977 and used to assemble Volkswagen vans, microbuses and the famous Kombi.

Hailed by President Kenyatta as a milestone in his administration’s determined push to grow the manufacturing base and transform Kenya into an industrialized nation, the announcements have been welcomed by industry players.

According to a Deloitte Africa Motor Industry insights report, in 2014, Kenya had a vehicle fleet of around 1.3 million units, of which 80 percent were second-hand.

The report quips that in 2012 the average age of vehicles on Kenya’s roads was 15 years. This, in turn resulted in additional problems like frequent break-down of vehicles, high levels of pollution, and a sizeable black market  industry for spare parts.

As the Kenyan motor industry grapples to find its footing to establish a formidable motor industry in the region, South Africa seems to be soaring high.

While speaking in George, South Africa, at the launch of the Ford Ranger 2.2 automatic, Jeff Nemeth, the chairperson of the African Association of Automotive Manufacturer’s (AAAM) noted that among the challenges facing the Sub-Saharan Africa is the skills gap.

“Invest in education. A robust manufacturing, electrical, education system that can train entrepreneurs, engineers and investors in the motor industry,” said Nemeth, who is also the CEO and President of Ford Sub-Saharan Africa.

He also decries the rampant importation of second-hand cars in the African market.

Nemeth notes Africa must be willing to pay the price of short term gains of importing second-hand cars and give lucrative incentives to boost uptake of new vehicles.

“It’s interesting to note that Africa wants to create its own motor industry by importing second-hand cars. Every time you import a used car from Japan, you allow the Japanese manufacturers to make more. If you are trying to create a car manufacturing industry in your country, you should create more parking spaces by exporting cars.”

How did South Africa make it?

According to the department of Trade and Industry of the Republic of South Africa, the industry got a major shot in the arm when in 1995, the South African government launched the Automotive Industry Development Program.

Approximately 567,000 vehicles were produced in SA 2014 which brought in approximately R115.7bn (Sh809bn). The industry, which employs over 100,000, both directly and indirectly, has been identified as an important growth sector contributing 7.6 percent of the GDP.

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