M a r k e t N e w s

Rapid Expansion of the Automotive Sector in Kenya

Posted on : Saturday , 24th October 2015

 Kenya, the economic, commercial, and logistical hub of the entire East African region and the most developed economy in Eastern Africa, is growing rapidly. The economy grew by 5.3% in the year 2012 and is projected to reach 10% growth by 2017 as the government takes steps to enhance Kenya’s economic competitiveness. The Automotive industry in Kenya is primarily involved in the retail and distribution of motor vehicles.

 
There are a number of motor vehicle dealers operating in the country, with the most established being Toyota (East Africa), Cooper Motor Corporation (CMC), General Motors (GM), Simba Colt and DT Dobie with Honda Motors establishing operations in Kenya in January 2013 as Division of TransAfrica Motors (TAM) which is a Dubai based company representing commercial vehicle franchises in Kenya. There are also four vehicle assembly plants in the country, which concentrate on the assembly of pick-ups and heavy commercial vehicles. 98% of all goods imported into Kenya through the Port of Mombasa and major International Airports in the country are transported by road. The growing middle class is also driving this sector with demand for small cars and major franchises’ have been set up to meet the demand, but are facing major competition from imported vehicles from Europe and far East countries by second hand car dealers.
 
The established dealers face intense competition from imported second-hand vehicles, mainly from Japan and United Arab Emirates. These imports now account for about 70% of the market. The last decade witnessed a significant decline in the number of new vehicles sold in the country. There has been a steady recovery in the last four years, but the numbers achieved still fall far short of the numbers recorded a decade ago. The slump in the volume of new cars sold is attributable to the increased competition from second hand vehicles and the depressed economic environment. The Kenya Motor Industry Association (KMI), the representative body of the corporate participants in the motor industry, has been lobbying hard to reverse this trend.
 
According to data from the KMI, growth in the agriculture, manufacturing and trade sectors is driving demand for pick-up trucks, which accounted for 35% of total vehicle sales in the nine-month period. Sales of heavy commercial vehicles still account for 26.8% of the market, behind pick-ups. We also believe that construction projects in the region will fuel sales in the heavier segments over our forecast period.
 
Further growth in Kenya’s construction sector is forecast over the next two years by BMI’s Infrastructure team, supporting the favourable conditions for the commercial vehicle segment. The government has development plans with a total cost of US$22bn that include significant improvements to roads, railways, seaports, airports, water, sanitation and telecommunications. According to the government, Kenya is focusing on these in the hope of attracting, accelerating and retaining investors who often complain its dilapidated facilities increase the cost of doing business, rendering Kenya’s products uncompetitive in the global market.
There are investment opportunities in assembling of motor vehicle components. There is a big market for vehicles in the East Africa Community and COMESA regions. Currently there are several multinational vehicle manufacturers who have setup workshops to assemble Knocked Down Units (KDU) reducing the costs involved in importing whole units in to the country.
 
Kenya Railways has plans to develop a concept which is aimed at establishment of a dry dock port and a car bazaar on a 100 acre piece of land at Voi, 100km from the port of Mombasa. The features of the proposed car bazaar will include: storage and clearing facilities for imported vehicles, facilities to store and sell cars to prospective customers and support facilities/amenities e.g. offices, banks, hotel and restaurants. Kenya Railways is currently inviting potential investors for the development of this vehicle bazaar.

Source : opentoexport.com
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