German motor vehicle manufacturer Volkswagen says the delay by the Kenyan government to implement a national automotive policy is holding back its plans to localise its new cars.
Volkswagen Group head for African region Martina Biene says the policy expected to drive sales of new passenger car brands has been ‘stuck’ despite Kenya being the company’s hub country for East Africa.
“Kenya would be our first country when we look at localisation, but it’s not moving. We would love to venture forward,” said Ms Biene.
Localisation would mean increasing production activity in the plant to reduce the cost of a vehicle and the waiting period after customer orders.
“But a lot of promises which have been made to increase new car demand are still not in place. That makes it difficult for us further look into more localisation because it’s all about the numbers.”
Parliament approved the Kenyan National Automotive Policy in May 2022 aimed at supporting local motor vehicle assembly.
The document has not delved into specifics of the support but it is understood that it will include restriction of second-hand imports which the Kenya Bureau of Standards has moved to enforce but has been stalled after a court injunction.
The policy has been in the works for years but has not been implemented. It has undergone several revisions amid lobbying by new and used vehicle dealers.
An automotive council is expected to be formed by the end of August.
Volkswagen in Kenya is assembling about six brands at the Kenya Vehicle Manufacturers (KVM) facility in Thika, where the government has a 35 percent stake, CMC Holdings at 32.5 per cent and CFAO Motors Kenya at 32.5 percent stake after a merger with DT Dobie Kenya.
It employs the semi-knocked down model, where assemblers work on finished vehicles imported from South Africa, knocked down into a limited number of parts.
Volkswagen dealership has been transferred to CFAO after rivalling with other brands, including Toyota, Nissan pick-ups and Mercedes.
Ms Biene says, however, they have not been able to localise due to low car sales volume.
Sales in the entire new vehicle market declined by 6.3 percent to 13,352 units in 2022, according to data from the Kenya Motor Vehicle Industry Association (KMI).
“Kenya’s new car volume is that small. Nothing for us to go into any kind of deeper localisation as long as there is no push in terms of getting more new car volumes in Kenya,” she added.
