Kenya has potential to be East African auto industry hub

The automotive industry is identified as a key contributor to Kenya’s manufacturing pillar under the Big Four agenda, which is anchored in Vision 2030, Kenya’s long-term development blueprint in which industrialisation and economic transformation are key goals.

This backdrop largely guided the development of the National Automotive Policy by the Industrialisation ministry in 2019. Not many people are aware of the history of Kenya’s automotive sector. In the 1960s, we had the assembly of the Volkswagen Beetle.

Vehicle assembly that included local development content was an important feature of the 1970s. The Nyayo Pioneer car — a joint venture between Kenya Railways and the University of Nairobi — was built in 1986, but never went into production.

We might not know that this prototype demonstrated a top speed potential of 120km/h!

Economic liberalisation in the 1990s broadened customer choices, and used car imports became the norm. Legal notice changes at the time disincentivised local content requirements for the sector.

By the mid-2000s, many local parts manufacturers had closed. Until recently, local vehicle assembly capacity utilisation levels were lower than 20 per cent, while second-hand vehicles now account for more than 80 per cent of all fully built imports to Kenya.

The automotive policy aims to support the domestic industry in achieving competitiveness in the automotive sector as part of Kenya’s jobs agenda. Initiatives over the next 12 years will support motor vehicle and motorcycle assembly, local components and parts manufacturing, market access, especially to public sector procurement, and cross-industry collaboration on innovation, research and technology.

It is within this context that I write to celebrate a welcome and important boost to this policy agenda.

On Friday, August 21, Proton Holdings Bhd, Malaysia’s national automotive corporation, announced its entry into the Kenyan market with the first batch of 30 units of completely knocked down kits of flagship automobile offering, the award-winning Proton Saga. The vehicles will be assembled by Proton’s local partner Simba Corporation.

As a matter of comparative history, the Proton Saga was first conceptualised as Malaysia’s “national car” in 1979, built through strong public-private partnerships and is today, Proton’s best-selling car model. I was humbled and privileged to flag off the consignment, noting in my official remarks the similarities that Malaysia and Kenya share, from our colonial past to our efforts in developing our nations.

It is my firm belief that Proton’s entry into the country is not just as an entry into a market of almost 51 million Kenyans but a gateway to the East African Community’s 200 million people, the 500 million Africans in our continent’s “Eastern Seaboard’ and, potentially, Africa’s 1.3 billion people.

Nairobi is Proton’s second African market foray, after Cairo in Egypt.

As a potential East African automotive hub, Kenya brings several comparative advantages to the table: relative political stability, a sizeable middle class and progressive business environment, regional market access and a solid history of automotive assembly.

Even a journey of a thousand miles begins with a single step. Our walk is well underway.

Lower taxes, import substitution, foreign exchange savings, technology transfer, local parts manufacturing and content and value chain development beyond sales and after-service are immediate advantages Kenya will pursue, with a clear view of previous experiences and challenges. Beyond job creation, we must think about easier car ownership and innovative e-business models (e-taxis) too.

This welcome development also demonstrates how Kenya’s economic diplomacy agenda actively supports our transformation goals. Today, it is the automotive sector, tomorrow it will be other areas of trade and development cooperation, as we have encouraged our friends and counterparts in Malaysia.