Honda unveils local partner in Sh450m motorcycle plant

Japan’s Honda Motor Co has partnered with a local investor to start an assembly of motorcycles in Kenya opening in September to capture growing demand for bikes in the East Africa region.

The auto maker said it will own 90 per cent in the Sh450 million-venture while environmentalist Isaac Kalua will own 10 per cent of the subsidiary, Honda Motorcycle Kenya Ltd.

Dr Kalua, who is a facilities management graduate from Yale University, is the founder of Green Africa Foundation — which champions pursuit of economic development while reducing environmental risks commonly known as green economy.

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.

(Read: Honda to begin local assembly of motorcycles)

It will be the company’s third local subsidiary in Africa, after South Africa and Nigeria and one of the few joint ventures between a Japanese conglomerate and a local investor.

“The company will establish a system and capability for global parts sourcing as well as efficient production to deliver high quality products at affordable prices,” said Honda Motor Co in a statement.

The subsidiary has appointed Yasuhiro Imazato as CEO, previously a director of Honda Vietnam’s office. Honda’s Japanese rival Toyota unsuccessfully formed a joint venture with local investors before ending the partnership.

It went into partnership with Lonrho Motors —which was owned 20.5 per cent by local investors associated with former President Moi, in 1999 before buying it out.

Lonrho Motors was suspended from trading at the Nairobi Stock Exchange (now Nairobi Securities Exchange) after it was placed under receivership.
The move came after the parent company, Liverpool-based Lonrho Plc, which owned a 79.5 per cent stake, withdrew its financial support.

Honda said the Kenyan subsidiary will initially employ 60 workers and will produce several entry-level models to be marketed in Kenya.

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.

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 &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.