Motor experts expect local assembly to lower car prices

Kenya’s motor industry is set to change in the next five years as car manufactures eye assembly of vehicles locally.

This has been shaken up by the re-entry of German car manufacturer Volkswagen which is set to manufacture the popular Vivo passenger car locally, with an eye on more models.

According to Motorist Association of Kenya Chief Executive Officer Peter Murima, the move will eventually lower the cost of vehicles in the country, giving motorists the opportunity of owning first hand cars.

“A new car is cheaper in the long run because it gives you more service and is suited to local conditions, making it better for the market,” Mr Murima said.

The Kenyan car market is awash with imports mainly from Japan, Dubai and Singapore with car buyers spending millions on cars annually.

The return of local assembly is part of government efforts to grow the manufacturing sector. Last year, the national treasury introduced exemptions on vehicle parts meant for local assembly from the previous import duty of 25 percent.

This was further boosted by the removal of the 20 percent excise tax on cars assembled locally.

The return of VW is part of a joint venture with the government, with the Vivo model to be assembled at the Kenya Vehicle Manufacturers (KVM) plant in Thika. The government owns a 35 percent stake in the plant while DT Dobie, the local franchise holder for VW owners a further 32.5 percent.

Motoring Consultant Michael Mwai is however of the opinion that consumer behavior is likely to take time to change with car manufactures tasked with getting the pricing of new cars right to lure buyers.

“For it to make sense it will need to be very price sensitive but also of high quality because Kenyans are used to buying used cars of very high spec. for them to shift from buying a very high quality used car to a locally assembled new car that doesn’t have the basics they are used to, they might not change,” Mr Mwai said.

He said that locally assembled cars would have to be priced at a maximum of Sh1 million if they are to attract buyers.

Volkswagen expects to the Vivo to retail at Sh1.5 million once it’s rolled out in December. An import of the same car would set back a buyer Sh2.5 million.

The return of VW comes at a time when Toyota Kenya is still in talks with the government to set up a passenger vehicle assembly plant in the country. Another German car manufacture BMW is looking to set up a parts factory while French car maker Peugeot has also expressed interest in investing in Kenya with a planned exploratory visit in the pipeline.