Motorcycle taxi operators wait for customers at Luanda market, Vihiga. Japanese auto maker has set up Honda Motorcycle Kenya Ltd to sell and manufacture motorcycles to capture the growing demand for bikes in the East Africa region. Photo/FILE
What you need to know:
The Japanese auto maker has set up Honda Motorcycle Kenya Ltd to sell and manufacture motorcycles in Nairobi, this becoming the company’s third local subsidiary in Africa, after South Africa and Nigeria.
The new plant, with an initial production capacity of 25,000 units per year, will boost the profile of Kenya’s auto business at a time car dealers, including Toyota, India’s Tata Motors, Hyundai Motor Company and China’s Foton, are showing a bias for local assembly.
Honda Motor Co is planning to assemble motorcycles in Kenya starting September to capture the growing demand for bikes in the East Africa region.
The Japanese auto maker has set up Honda Motorcycle Kenya Ltd to sell and manufacture motorcycles in Nairobi, this becoming the company’s third local subsidiary in Africa, after South Africa and Nigeria.
The annual demand for motorcycles in the country has increased from 16,293 in 2007 to 140,215 in 2011 on the increased use of the bikes, commonly referred to as bodaboda, for public transport.
The new plant, with an initial production capacity of 25,000 units per year, will boost the profile of Kenya’s auto business at a time car dealers, including Toyota, India’s Tata Motors, Hyundai Motor Company and China’s Foton, are showing a bias for local assembly.
“Combined with Honda’s production base in Nigeria, the new factory in Kenya will bring the company’s total annual motorcycle production capacity in Africa to 175,000 units,” the Japan Times quoted Honda Motor Co.
Honda said it is looking to produce several entry-level models to be marketed in Kenya.
Jerry Midiwo, an executive at Honda Motorcycle Kenya, confirmed news of the assembly plant adding that the Japanese multinational will inject 90 per cent of the initial capital — estimated at half a billion shillings — with unnamed local investors taking up the remainder.
Mr Midiwo says the firm is keen to capture a larger share of the growing bikes market, which received a lift with the removal of 16 per cent VAT in 2007 that lowered costs.
“The removal of VAT on bikes in 2007 and poor infrastructure have contributed heavily to the sales of the motorcycles in the East Africa region,” added Mr Midiwo.
“Even in Uganda the trend is the same where a good number have embraced the use of bodabodas. Nearly 95 per cent of imported bikes are consumed by the informal sector.’’
Honda is seeking larger share of the motorcycle market that is dominated by brands from China and India.
Other players in the market include Yamaha Kenya, which is a unit of Toyota Kenya, and Car and General that deals in TVS and Suzuki brands.
Besides the regional market, Honda will benefit from a lower tax bill through local assembly and offer competitive pricing.
Imports of parts used in local assembly are exempted from the 25 per cent import duty levied on fully built units, giving room to the assemblers to produce cheaper vehicles.
The growing preference for local assembly is expected to create more jobs and reduce idle capacity at the three plants — Kenya Vehicle Manufacturer (KVM), Associated Vehicle Assemblers (AVA) and General Motors East Africa.
