Toyota raises stakes with local bus, trucks assembly plan
Toyota Kenya headquarters in Nairobi. The firm will start assembling Hino trucks and buses locally. Photo/File
What you need to know:
Toyota Kenya will take on rival GM East Africa, which commands the biggest portion of the market helped by its flagship Isuzu trucks and buses.
The firm is manufacturing its line of trucks and buses under the Hino brand at the Mombasa-based Associated Vehicle Assemblers plant.
It will benefit from tax incentives on import of completely knocked down units (CKD) — the parts needed to assemble a vehicle — which are zero-rated in Kenya as opposed to a 25 per cent import duty on vehicle imports.
Japanese auto giant Toyota has started assembling trucks and buses in Kenya, a move set to accelerate price wars in the new vehicles market segment dominated by commercial cars.
The firm will take on rival General Motors East Africa, which currently commands the biggest portion of the market helped by its flagship Isuzu trucks and buses. Toyota has been heavy in the saloon cars segment.
“There is a huge market as about half of the Kenyan motor vehicle market is commercial, mainly made up of pick-ups, trucks and buses,” said Naoki Takeuchi, the managing director of Toyota Kenya.
Mr Takeuchi said Toyota Kenya is manufacturing its line of trucks and buses under the Hino brand at the Mombasa-based Associated Vehicle Assemblers plant and the vehicles are expected in showrooms next month.
“According to our line of schedule, we expect the first unit to come out on February 19,” he told the Business Daily last week.
Toyota’s production of the Hino trucks and buses is expected to intensify the battle for market share with General Motors. While second-hand Hino trucks are available in the market, this is the first time that Toyota Kenya will be selling them in the country.
Hino is a Tokyo-based subsidiary of Toyota Motor Corporation, and Kenya will be its pioneer African market.
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.
Toyota was relegated to position two in 2011 following a government plan to phase out 14-seater matatus which resulted in strong demand for new buses in the public transport sector.
Sales of commercial and public transport vehicles such as pick-ups, trucks and buses accounts for 40 per cent of industry deals, buoyed by increased demand in sectors such public transport, haulage and agriculture.
Mr Takeuchi said the company 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.
The buses and trucks business in Kenya is dominated by established players such as CMC, General Motors, Simba Colt and DT Dobie.
In pricing, Toyota Kenya will benefit from tax incentives on import of completely knocked down units (CKD) — the parts needed to assemble a vehicle — which are zero-rated in Kenya as opposed to a 25 per cent import duty on vehicle imports.
This has attracted global players to consider assembling their brands locally to take advantage of the tax exemption which provides for greater pricing headroom; and Kenya’s unique geo-position, which makes it a hub to service the wider eastern Africa market.
Kenya has three vehicle assembly plants: Associated Vehicle Assemblers, General Motors East Africa and Kenya Vehicle Manufacturers, which produced a total of 5,456 units in the 10 months to October 2012, representing more than half of total new vehicle sales.
At this rate, last year’s total production is projected to grow by about 10 per cent compared to the 6,049 vehicles recorded in 2011 and 5,721 in 2010.
Chinese auto firm Beiqi Foton is currently setting up a Sh1.2 billion vehicle assembly plant in Mlolongo, Athi River. Another Chinese company, Chery Automobile, is also developing an assembly plant at a cost of Sh5 billion.
Indian automotive manufacturing company Tata has also announced plans to build a Sh2 billion motor vehicle assembly plant in Kenya to supply the East African market.
Toyota plans to buy a 50 per cent stake at AVA and expand it to grow its market share and boost capacity to export vehicles to the regional market.
Vehicle assemblers and dealers face intense competition from imported second-hand vehicles, mainly from Japan and the United Arab Emirates which now account for about 70 per cent of the market.
Kenya’s vehicle assembly plants have an installed capacity of over 30,000 vehicles, meaning capacity utilisation presently stands at about 20 per cent.
The locally assembled vehicles make up a paltry 10 per cent of total car registrations made in the year 2011, a pointer to the increased competition from second hand vehicles and the depressed economic environment.
