Nissan has announced its intention to invest about USD 20 Million (KShs 2 Billion) in setting-up a vehicle assembly facility in Kenya.
“We’re prepared to enter Kenya as an SKD assembler,” shared Mr. Jim Dando, Nissan South Africa’s Director of Operations. He further reiterated that Nissan was keen to move quite fast.
Outside of South Africa, there isn’t much automotive manufacturing on the African continent because of challenges such as the high volume of imported used cars, few vehicle-financing options, and patchy road networks. In Kenya, sales of new units fell 20% last year to only 11,044.
Nissan will initially put together pick-up trucks from semi-knocked-down kits, or also known as SKDs, on condition that the government agrees to waive a 25% import tax.
Volkswagen, which returned to Kenya last year after a four-decade absence, is currently producing its Polo Vivo model from SKD kits.
Nissan will submit a proposal to the government once market studies and due diligence assessments have been completed and may have an operational assembly line by the end of 2019 if it receives a green light.
The company plans to invest in an existing plant for completely knocked-down kits, or CKDs. Nissan prefers starting with half-finished vehicles as it builds market share and a skilled workforce.
Nissan executives are considering processing their vehicles at plants owned by Isuzu East Africa, Associated Vehicle Assemblers, which belongs to Simba Corp., and Kenya Vehicle Manufacturers, a venture between the Kenyan government, Toyota Tsusho and Al-Futtaim Group.
Once established, the Kenyan facility will feed the Eastern Africa market, which is currently served by imports of light trucks from South Africa with other models coming from Japan. The Kenyan facility will add to Nissan’s existent assembly presence on the continent. Currently, the company has a plant in South Africa and an assembly line in Nigeria.
The decision to begin assembling 1-ton pick-up vehicles is because Kenya’s new-vehicle market is dominated by light commercial trucks. One-ton single-cab trucks made-up almost 12% of all new purchases in Kenya last year, according to the Kenya Motor Industry Association. While there’s great potential in the passenger-vehicle category, the segment is inundated with cheaper second-hand imports, Dando said.
Commonly known as “Nissan,” public-transport vehicles in Kenya received their colloquial name thanks to the first imports of privately-owned minibuses in the early 1990s, which were usually used models from Japan.
Zimbabwe and Ethiopia are also potential countries for Nissan to setup local assemblies, but the company currently has no timelines on further expansion and is yet to make final decisions on those markets.
“There isn’t much scope in Africa to start an assembly plant beyond Kenya currently.”
Many African economies have hit a rough patch, making them unattractive as manufacturing bases in comparison to Kenya.