Kenya ranked lead market for Toyota Tsusho cars in Africa
Toyotsu Auto Mart, a subsidiary of Toyota Tsusho Company Limited, in Nairobi's south C. Photo/Diana Ngila
What you need to know:
A report by Barclays Equity Research shows that Kenya and Angola each account for 24 per cent of models sold by Tsusho Africa.
Kenya is, however, ranked fifth in Africa in vehicle market, after South Africa, Algeria, Egypt and Morocco.
One of the factors cited as a key driver of Tsusho’s sales in Kenya is the right-sided steering wheels and left-hand use of roads.
Kenya has been ranked the lead market for Toyota Tsusho, the distributor of new and second hand Toyota vehicles in 25 African countries.
A report by Barclays Equity Research shows that Kenya and Angola each account for 24 per cent of models sold by Tsusho Africa, making them the joint markets for the Japanese firm.
Kenya is, however, ranked fifth in Africa in vehicle market, after South Africa, Algeria, Egypt and Morocco.
Toyota Tsusho, which also distributes Subaru cars in some markets, is targeting a bigger share of the continent’s sales following acquisition last year of CFAO, a French firm that also distributes vehicles.
One of the factors cited as a key driver of Tsusho’s sales in Kenya is the right-sided steering wheels and left-hand use of roads.
“We think Toyota provides almost all volume for new passenger vehicle demand in Kenya based on Toyota Tsusho’s most recent new vehicle sales data,” reads part of the report.
Data from the Kenya National Bureau of Statistics shows 60,792 units were sold last year. Notably, the other countries that rank ahead of Kenya in total unit sales are bigger economies well endowed with natural resources, unlike Kenya which is dependent on agriculture and services industry.
Toyota, the parent company of Toyota Tsusho, is setting up regional offices in Nairobi, underscoring the country’s importance in its current growth strategy. The company has also said it intends to set up a bus assembly plant in the country.
The Barclays research report holds that with continued rise of income levels, demand will shift from used to new vehicles and it expects Toyota, which has an overwhelming presence in the used vehicles market, to also benefit from this economic growth.
The research report says that tapping the more resource-rich Northern and Western Africa was the logic behind Toyota Tsusho’s Sh265.4 billion acquisition of CFAO in December.
CFAO deals with European vehicles such as Renault and Peugeot, and American models including Ford and Chevrolet, which are popular in these markets.
In Kenya, CFAO fully owns DT Dobie and CICA Motors implying that Tsusho has direct and indirect control of approximately 40 per cent of the Kenyan auto market.
“We think Toyota Tsusho confronted extremely difficult hurdles for business activities in northern Africa and western Africa on its own due to language, business environment and other differences by individual countries,” said Barclays Equity Research.
“We believe the CFAO acquisition overcomes a significant bottleneck for business expansion in fast-growing African countries by providing Toyota Tsusho with a sales network,” it adds.
Toyota has concentrated growing the African market, a successful strategy given the more than 10 per cent average annual economic growth recorded by stable African countries since 2000.
This has brought with it higher consumption. Africa contributed nine per cent of Tsusho unit sales in 2011.
Through Tsusho, Toyota has gone an extra mile to extend credit to interested buyers to help overcome financing challenges facing many in Kenya.
The recent strengthening of the shilling is expected to impact on car sale volumes as prices start falling. The shilling is trading at seven-month high of 84.50 units per dollar.
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