General Motors East Africa has doubled the capacity of its plant as auto dealers opt for tax-exempt locally assembly vehicles to cut prices.
GMEA has invested Sh100 million to upgrade its Nairobi plant which can now assemble 10 vehicles per day from five previously.
Imports of vehicle parts headed for assembly plants are not charged the 25 per cent tax levied on fully built units, helping dealers to churn out cars at reduced prices.
This has seen more than half of 52.3 per cent of the 10,422 new vehicles sold in the 10 months to October being assembled locally from 48 per cent in 2011.
GMEA’s assembly plant produces the largest number of vehicles and the latest investment is aimed at positioning the company to take advantage of increased demand for commercial vehicles in the region.
“We are preparing for increased demand for our vehicles in the regional markets such as Tanzania, Uganda, Rwanda, and Burundi,” said Rita Kavashe, GMEA’s managing director.
But General Motors, which sells Isuzu brands of buses, trucks, and pick-ups, is set to witness increased competition from Tata Africa and Toyota that will also start assembling their trucks by March.
Toyota will be venturing into the light and heavy commercial trucks market for the first time with the Hino brand as it seeks to reduce its reliance on saloon car sales. It will assemble the vehicles at the Mombasa-based Associated Vehicle Assemblers (AVA) next month.
Tata Africa, which has been importing fully built units of its Tata trucks, will now be enjoying the tax advantages with the move to assemble its units at AVA.
The growing preference for locally assembled cars is expected to create more jobs and reduce idle capacity in the three plants including Thika-based Kenya Vehicle Manufacturer (KVM), which will assemble Hyundai and Eicher brands.
The assemblers had been hit hard by cheap second-hand imports and concerns over their quality standards. KVM said that increased interest for locally assembled cars is set to revive the fortunes of assemblers, but reckoned that Kenya was still far from hitting the peak levels experienced in the 1980s.
Dave Williamson, factory manager at AVA, told the Financial Times in April that the assembler is currently making 2,500 units compared to a peak of 10,000 units in 1985.