Toyota drops bid to buy AVA

Toyota Kenya has dropped its earlier intention to acquire 50 per cent equity stake in a Mombasa-based vehicle assembler over low sales volumes.

The Japanese automaker was eyeing ownership of the Associated Vehicle Assemblers (AVA) to gain foothold in the commercial vehicle segment through local production of its Hino trucks and buses.

“The volume of the units we are assembling is too low to require our involvement in their plant management,” Toyota Kenya said in a statement.

Toyota Kenya managing director Naoki Takeuchi said the firm does not consider setting up its own local manufacturing plant but will instead engage AVA on contractual basis.

“Toyota does not have any shares in AVA. We have only been outsourcing assembling to them,” said Mr Takeuchi.

“We have not considered owning our plant as our necessary production volume is not big enough to support the operation,” he said in an interview with the Business Daily.

The firm is set to unveil its line of locally assembled medium and heavy duty trucks and buses under the Hino brand into the Kenyan market next week, hoping to loosen General Motors’ stranglehold on the commercial motor vehicle market.

(Read: Toyota starts assembling buses locally)

Toyota said it plans to produce an average of 40 units monthly — 30 trucks and 10 buses — and will next year double this capacity with an eye on the East African Community market.

Kenya has three vehicle assembly plants — Associated Vehicle Assemblers, General Motors East Africa and Kenya Vehicle Manufacturers — which produced a total of 5,874 units in the 11 months to November 2012, representing more than half of total new vehicle sales.

Two weeks ago, General Motors East Africa moved to protect its turf by doubling the capacity of its Nairobi plant in a Sh100 million upgrade in anticipation of increased competition from Toyota, which hitherto had concentrated on saloon cars.

(Read: GM doubles production in shift to locally assembled cars)

General Motors has for the past two years maintained a lead over Toyota in new vehicle sales with a 27 per cent stake compared to its rival’s 24 per cent in 2012.

The Coast-based AVA is 50-50 owned by auto dealers Marshalls East Africa and Simba Colt. It is billed as Kenya’s largest vehicle assembler, and accounts for more than 40 per cent of total national output.

The buses and trucks business in Kenya is dominated by established players such as CMC, General Motors, Simba Colt and DT Dobie.

Toyota began local production of its Land Cruisers at AVA in 1977. Other models assembled at the Mombasa plant include Hilux pickup trucks.

Rival brands produced at AVA include Mitsubishi, Scandia and Tata trucks and buses.