Kenya’s Motor vehicle assembly and components sub-sector is rapidly developing to supply to meet local content requirements. The plants assemble passenger cars commercial vehicles. Kenya has over 20,000 new registrations annually.
Products such as tires, tubes, batteries, springs, radiators, brakes pads, cables, rubber components and filters are also now produced locally while a number of firms fabricate bodies for commercial vehicles. According to data from the three motor vehicle assemblers, the number of locally assembled vehicles stood at 6,681 in 2007.
However, the installed capacity stood at 28,700 vehicles in 2007, meaning that capacity utilisation stood at only 23 per cent. Table 4 gives a break down of the installed versus capacity utilisation for the three assembly plants. The sale of new motor vehicles dropped by 39 per cent in 2009 to 9,433 cars compared to the 13,135 units sold the previous year. This 39 per cent drop in unit sales was the worst performance in a decade and resulted in some dealers revising their profit targets for 2009 downwards.
The slow growth in the motor industry has been attributed to a reduction in spending by key clients - the corporate sector, which is yet to remove cost cutting from its radar. The Government, once a major buyer, has also gone slow on car orders as it rolls out plans to lease cars from private investors. The economic contributions of the entire motor vehicle assembly and components sector to the economy’s GDP has for a long time remained at an average of 0.2 per cent .
The products produced under this sector include Motor vehicle bodies, spare parts and accessories, batteries, lubricants, tyres and tubes, tyre brackets, glass, bolts and nuts, wiring harnesses, seats and trimming materials. The items that are produced and traded in this Sector are contained under the Chapter 87 of the HS Code on Vehicles other than Railway or tramway rolling stock.
According to the 2009 Statistical Abstract, formal employment in the motor vehicle assembly sector stood at 2,813 in 2008. These figures may be a bit higher when informal activities are included, but unfortunately the data is not available. For component manufacturers, employment data has not been aggregated for various com-
ponents, and would actually be difficult to break down.
The sector has 28 members in KAM representing 4.17 per cent of the Association’s total membership. The Sector is regulated Kenya Bureaus of Standards, Kenya Revenue Authority, Transport Licensing Board and the Kenya Vehicles Inspection.
Issues for the sub-sector
Some of the critical issues for the future development of the sub-sector include:
- Stiff competition from second hand vehicles, a problem that started when liberalization of the economy was introduced in 1993. Massive importation of these vehicles has reduced the capacity utilisation in vehicle assembly plants drastically.
- Non recognition of certificate of origin under East African Rules of Origin, which could act as potential barriers to entry of new investors, and in profitable operations of existing ones.
- Small and informal sector businesses grossly lack essential equipment and knowledge for manufacture of various motor vehicle components. This is due to high cost of finance and its poor access, and also because many of them do not go through formal training. However, formal manufacturers have modern equipment and soundknowledge of manufacturing various components.
- Age-limit of 8 years not accepted by other Partner States under EAC, Concessions given to other Partner States on motor vehicles, Weak linkage between motor vehicle components manufacturers and Motor Vehicle Assemblers