Visitors view a Chery Fulwin II at the Beijing International Automotive Exhibition. China’s Chery Automobile is planning to build a n assembly plant in Kenya. REUTERS
Chery Automobile is to become the second Chinese vehicle maker to build an assembly plant in Kenya, joining truck manufacturer Beiqi Foton Motors in a move to tap East African demand and further strengthening Chinese links with the continent.
“They (Chery) are discussing with the (Chinese) government so that they can get some $50 million to invest in Kenya through an assembly plant,” said Mr Justus Nguu, the director of Stantech Motors, the Kenya franchise holder of Chery.
China has made big inroads in Africa, where it is seeking to secure energy, minerals and food and their quest to set assembly plants in Kenya is set to open a new battle front with Japanese, India’s and local assemblers.
Their entry is set to loosen the stranglehold of Thika-based Kenya Vehicle Manufacturer (KVM), the Association of Vehicle Assemblers (AVA) Limited of Mombasa and General Motors East Africa (GMEA) who have come under the spotlight for possible involvement in anti-competitive market practices linked to sale of overpriced goods.
Toyota Corporation plans to acquire half of AVA to assemble Hino trucks and buses locally and tap the rising demand for heavy commercial vehicles in the region with India’s Tata to unveil such assemblies.
The new assemblers are looking to use Kenya as the launching pad for entry into the regional common market, reaffirming Nairobi’s position as East Africa’s economic hub.
The fragmented economies of the five East African countries had discouraged the auto dealers from setting up assembly plants, but the common market has made it possible for the dealers to capture a region of more than 130 million residents.
So far, the auto dealers ship in built vehicles in what has denied them room to lower prices because of high freight and duty charges.
Duties on locally assembled units are zero per cent against 25 per cent for fully built units.
The truck business is dominated by established players CMC Holdings and the Kenyan unit of General Motors. Chery Automobile, which started selling cars overseas in 2002, and is now China’s biggest auto exporter, aims to set up its plant next year after tasting the market by venturing into Kenya in 2010 through a franchise.
The firm sold a modest 120 cars last year, but aims to produce 1,000 units in 2013 at its plant which will serve Kenya, east Africa’s biggest economy, and other countries in the region. Chery Automobile, China’s largest indigenous car maker, aims to increase auto exports by over 30 percent this year to 120,000 vehicles.
The firm targets developing nations in Southeast Asia, Middle East, South America and Africa.
Chery operates 16 assembly plants overseas.
Analysts said proximity to growing markets was the key driver for the firms planning to set up in Kenya.
“(The delay in) lead time for orders … has made it strategically important for auto manufacturers targeting Africa to want a serious presence in Africa,” said Hanningtone Gaya, an independent regional vehicle analyst based in Nairobi.
China’s truck maker, Shanghai-listed Beiqi Foton Motors , a unit of Beijing Automotive Industry Holdings Co (BAIC), plans to begin construction of its assembly plant in Kenya this year, to help it nudge up sales on the continent.
The firm plans to double sales in Africa to 20,000 units by 2013 from last year by ramping up sales to economies that require heavy commercial vehicles for use in the building of their infrastructure projects, including roads, rails and ports. “When you look at the international markets, we are still young. Africa is a good market for us,” Calvin Guo managing director of the Kenyan subsidiary of Beiqi Foton Motors. “In Africa … Kenya has a very strategic position … good socio-economic base for us to open an assembly plant,” said Guo.
-REUTERS