Opinion and Analysis
Vehicle assembly plan a fresh boost for sector
Posted Sunday, July 15 2012 at 16:30
Local vehicle assemblers must have released a collective sigh of relief after major auto dealers announced plans to assemble more models in the country.
Since imports of parts used in vehicle assembly are exempted from the 25 per cent import duty levied on fully built vehicles in Kenya, the local assemblers are now able to produce cheaper vehicles and also compete favourably with other car firms.
The new development will see Tata from India and Japan’s Hino assemble their bus and truck models at the Associated Vehicle Assemblers plant in Mombasa while Hyundai from South Korea and Eicher will assemble their buses and trucks at the Kenya Vehicle Manufacturers plant in Thika.
We welcome the initiative as it will result in the creation of more jobs in the vehicle assembly market, which has been facing stiff competition from cheap second-hand imports that have flooded the country.
The new development will also help the government in achieving its job creation targets.
Customers will also be able to buy brand new vehicles with assured quality.
According to some of the assemblers, their plants have been running at a lower capacity, thus the reversal of fortunes will result in a complete turnaround of their respective plants.
For example, the Associated Vehicle Assemblers currently produces 2,500 units compared to 10,000 units in 1985.
The situation changed following the liberalisation of the automobile market in the 1990s, which led to the wave of cheaper second-hand vehicles entering the country.
A total of 6,049 vehicles were assembled in Kenya in 2011 compared to 5,721 units in 2010. However, this was a mere 10.1 per cent of the 59,600 vehicles that were registered in the country last year.
The government should now ensure that as the number of vehicles in the country increases, the infrastructure is upgraded across the country.