Toyota assembly heralds shake-up in market

Toyota East Africa plans to put up an assembly plant in Nairobi, a move likely to cause price realignments in the motor industry in the region.

The move by the Japanese automaker will allow for the leading dealer to sell its locally assembled units at cheaper prices as it saves on shipping costs and taxes.

The Nairobi factory is also expected to boost body builders who will benefit from increased activity by the Japanese firm.

Toyota’s EA chairman, Dennis Awori, says the key factors to reducing the cost of the vehicles will be taxes and economies of scale.

Duties on locally assembled units are zero per cent against 25 per cent for fully built up units.

Players in the motor industry have been calling on countries in the East African Community to look at vehicles assembled in Kenya as local goods, thus attracting similar rates on duty.

Previously, all the five EAC member states had a uniform import duty of 25 per cent but the other members changed the provision in June 2009.

Tsusho Corporation, the trading and investment arm of Toyota group, is set to establish its regional headquarters in Nairobi to run new projects and investments in East Africa, which include putting up of an assembly plant and non-automotive investments like geothermal and solar power production.

During his visit in Nairobi earlier this month, the executive director of Toyota, Tsusho Makoto Hattori, said the company intends to start with increased production of motorcycles.

He was in the country to scan the environment on invitation by Prime Minister Raila Odinga who was in Japan last month and visited the Toyota hub.

The establishment of the vehicle assembly plant in the country is expected to create more job opportunities as well as business for auxiliary companies in the assembly business.

The move is also expected to increase Toyota’s customer base in East Africa.

Gavin Bennett, an independent analyst in the sector, said the move would be a bold industrial statement that would allow the company to grow its business in the region and at the same time allow for transfer of technology.

Toyota assembles some of its Land Cruiser vehicles at the Associated Vehicle Assemblers (AVA) Limited in Mombasa.

The auto dealer has no share holdings in AVA and has contracted it to do the work for its pick ups.