BY NBM WRITER
The automotive industry in Kenya is an interesting one. In 1986, President Daniel Moi tasked the University of Nairobi under the Nyayo Pioneer Car to develop Kenya’s first ever car. Later, five prototypes were brought forward and named The Pioneer Nyayo Cars, which had a speed of 120Km per hour. Nyayo Motor Corporation was then tasked with their mass production yet lack of funds stopped this project.
Years later as history would judge, this turned out just another white elephant that characterised the Moi regime. Subsequently, the Nyayo Motor Corporation was renamed Numerical Machinery Complex that was to provide manufacturing metal parts to various industries, and up in the smoke the idea went, with funds too.
The automobile market in Kenya represents one of the biggest business opportunities over the coming decade and the political oligarchy assuming they follow both social and economic policies that favour a large development of pro capita income that could provide a good base for the middle class settlement that is rising in the nation is welcome. The extensive road network being rolled up in the countyr is much welcome especially tarmacking of such roads. While this article does not delve on the exorbitant cost it has taken to put up the roads, it does welcome the extensive road network in opening up the country and spurring economic growth.
A rising Ultra High Net Worth Individuals for high-end cars.
A survey conducted by Knight Frank shows that 900 individuals joined the millionaires club in 2016 and Kenya currently has 9, 400 of them, a rise from 8, 500 in 2015. Of these, 900 individuals are worth US $ 1M (Sh102 million), 30 of them worth US$ 10m (Sh1.2 billion), ten are worth US $30m (Sh3.6 billion) and two are worth US$100m (10.2billion), their forecast indicates that 7, 500 High Net Worth Individuals will be created in the next decade (2016-2026).
The above numbers clearly explain the increasing number of high end cars on Kenya roads like the Porsche Macan, Panamera, the Range Rover Evoque 2017, Mercedes Maybach, e class coupe, AMG G65, being just some of the top of the range models we see on a regular basis on our roads. When these Ultra High Net Worth Individuals are not in their private jets or choppers, they use the road and industry players from the mentioned manufacturers do not shy away from saying how their clients seek custom made high end cars and price is their least of concerns, a boom for the players although the sales may be slightly far between one another. Yet, the 20% excise duty that they continue to pay is a burden to the car importers whereas the government sees this as an avenue to get revenue through taxation.
Automobile industry and lessons Kenya can learn from South Africa
Mr, Nico Vermeulen, the director of Naamsa (National Association of Automobile Assemblers of South Africa) in an interview with Reuters had some interesting perspectives. Of importance is to remember that the automobile industry in SA contributes 7.2% to the GDP or Rand 256.7 billion to the country. As at 2015 they had contributed some Rand 569.4 towards the training of the population on the technical skills necessary in the automobile field like engineers and drivers, this amount also was to help medium and micro enterprise development and automobile players had spent around Rand 115m to sports and events sponsorship.
Mr Vermeulen noted that by the year 2015, a total of 412,826 units had been sold with an estimate of 380,000 units being sold in 2016. The drop of around 8% had been as a result of increased customs duties in Nigeria and regulatory challenges in Algeria who are some of the major markets for SA exports. The same can also be said about the Kenyan market as market leader General Motors East Africa did experience a drop in car sales from 6, 690 units in 2015 to 4, 858 units in 2016 out of a total car sales of 13, 869 in Kenya.
While sales of automobiles shrank, SA’s exports in the same year (2016) rose by 12.5% and this was contributed to increase in Mercedes sales after parent company Daimler relaxed production conditions for its 4 worldwide production plants of the Mercedes C Class model, and Toyota launched a new Hilux model
Consumer protection.
Cases of high-end motor vehicles discovered in shipping containers hidden under mattresses to evade customs inspection are not a rare feature in Kenya. This does not only deny the government the necessary revenue, it also exposes the automobile industry to vehicles whose standards have not been verified and thus a risk on our roads.
Kenya Revenue Authority says that currently 8year old automobiles can be imported unlike India who have it at three years. This should be lowered to protect the local market from being a dumping zone for European or Asian car models.
Just like India, we should also ensure that imported vehicles must to our traffic code, which stipulates that automobiles occupy the left hand side of the road. Imported cars should also meet other safety measures like ensuring they are fitted with airbags, which are lifesavers when there is an impact during an accident.
A shake up in the local market
After 4 decades in the Kenyan market, General Motors East Africa (GMEA) will finally be exiting. CEO Mario Spangberg confirmed the news, admitting that since 95% of their total sales are Isuzu products(buses, pickups and trucks) it was only logical that they sold off their 57.7% shares to Isuzu Motors Ltd Japan who will rename it as Isuzu East Africa.
Mr Spangberg allayed fears of job losses by saying that all members of staff would be retained and they would continue to offer after sales services to Chevrolet car owners. GMEA controls 35% of the Kenyan automobile market which was a rise from 33.5% in the year 2015 although this came after a decline in car sales to 4, 858 in 2016 from a figure of 6, 690 units in 2015.
Meanwhile, 2017 has not also began well with most of the automobile sellers recording very slow starts compared to a similar period (January and February) in the previous year. Toyota sales have dropped to 261 units from 403, Simba Colt has 258 units from 481 units, CMC indicate that they have currently sold 121 units compared to 231 units while DT Dobie has sold only 71 units compared to 111 units same time last year.
Most of the automobile companies who spoke on condition of anonymity pointed an accusing finger to the government especially with the new and introduced Bank Capping Rates. This has been a detriment to many individuals seeking bank loans as most financial institutions have tightened regulations for acquiring loans and thus the purchasing power of most Kenyans who normally acquire automobile through bank financing have been disadvantaged.
Tier one supplier
A tier one supplier is defined as a company that provides/supplies an Original Equipment Manufacturer (OEM) directly with components. An OEM is a company that makes final products for the market place
While a number of the automobile manufacturers admit that they have to import their spare parts, this is an inconvenience at times to their clientele. Speaking to some of those in the assemblers, they see the need in the government empowering entrepreneurs to set up tier one suppliers who can easily stock or even produce certain components that they need for their cars like floor mats, s4etas, door locks and headlights.
It is a move that can aid in job creation and greatly reduce some of the costs that their customers incur when they have to wait for the parts to be imported.
Technical Support
The capacity of Kenya to have qualified engineers to the safety standards of the parent company automobile players is a real headache. Some industry players admit to sending some of their technical staff to South Africa to upgrade their skills and at times engineers are flown in to assist. There is also poaching, amongst the players themselves, of personnel especially the highly skilled ones and this normally leaves a dent in HR and on occasions it takes quite a long time to replace them. Companies have taken to it to train in-house their staff as most of the college graduates whom they employ come to them with skills that are not relevant to meet current trends.
A suggestion of incorporating industry players to review and help develop if not update the curriculum to meet industry standards is a welcome move, which the government will really need to help if they are open to it.
Finally, insightful planning and goodwill must lead government policy so that consumers can be spoiled for choice in the industry. If the South African automobile industry can contribute 7.2% to the country’s GDP, why can’t we emulate or even do better?
