Used car importers cry foul as assemblers tap new rules

Kenya’s ambitious National Automotive Policy has tapped foreign automakers into local assembly partnerships as used cars importers lose out to dealers and assemblers.

With the government seeking to cap the age of used car imports at five years by 2021, three years in 2022 and eventually zero in 2024, and eventually pushing used car importers out of the market the players already appear to be aligning to that agenda.

Recently, Mahindra, Renault, Volkswagen, Toyota and Proton invested heavily in the country, opening assembly units in Kenya beginning October last year.

The Kenyan market is huge, having imported about 101,000 used cars annually in a market where used car imports command more than 85 per cent of fully built units sold in Kenya.

“The challenge with respect to importing used vehicles is that, first, they are costly to maintain.

Second, they contribute towards the loss of local manufacturing opportunities, including exporting jobs,” the draft policy notes. 

Entry point

Kenyans spend about Sh60 billion which is $600 million on used cars, a major drain on foreign exchange resources and reserves helping to weaken the local currency.

The vehicle manufacturers see Kenya as an entry point to the larger Eastern Africa region given that Kenya only has a paltry 51 million people most of whom are poor.

Used car importers, however, claim that the assembly plants will add little if any to the economy since the vehicles are not manufactured in the country hence few people are needed to join knocked down parts.

Car Importers Association of Kenya chairman Peter Otieno says that assembly plants will not promote the growth of local component production such as nuts and bolts since every part is imported. “The market should be left to willing buyer willing seller,” he said.

Indian car maker, Mahindra & Mahindra, in March 9, 2020 unveiled its first batch of locally-assembled Scorpio double and single cab pick-up models, which will be assembled at Simba Corporation’s Associated Vehicle Assemblers (AVA) plant in Mombasa.

Toyota last October commissioned the Sh1 billion Toyota Hilux pickup truck assembly line at Associated Vehicle Assemblers (AVA) in Miritini, Mombasa.

Proton Holdings Bhd, Malaysia’s national automotive corporation is the latest entrant in the Kenyan market with the first batch of its flagship automobile offering, the Proton Saga

In March 2020, Volkswagen started locally assembling its 7-seater VW Tiguan Allspace SUVs, which will retail at about Sh5.5 million.

In December, the car maker also launched a local assembly of its 5-seater Tiguan SUV, set to retail at about Sh4.5 million.

DT Dobie and Volkswagen dealer say they had already sold 28 pre-orders with another 40 units currently under assembly.

The winners in the new policy include DT Dobie, Simba Colt, AVA in Mombasa, KVM in Thika and Isuzu EA in Nairobi.

They produce well over 12 brands and 50 models of motor vehicles in Kenya.

It is not clear whether the new entrants such as Proton and Volkswagen will commission production of some parts locally but Isuzu East Africa says springs, filters, glass, shocks, brake linings and radiators are part of the parts that are locally made.

Public entities

This means that they have a ripple effect on the entire manufacturing sector producing more jobs and boosting technology transfer.

The prices of used cars are expected to fall in the coming years as car owners abroad sell their fuel powered brands in favor of electric cars as battery costs continue to fall bringing EVs to parity with petrol cars.

President Uhuru Kenyatta has already directed all ministries, departments and other public entities to give preference to vehicles assembled locally.

“We want Kenyan taxes to be used to buy goods made in Kenya, if they want to go to court to oppose the government’s stand, we are clear on our agenda to ensure all those who invest in the country get value for their money.”

Kenyatta spoke when he commissioned the Toyota Hilux pickup truck assembly line at Associated Vehicle Assemblers.