Portugal auto firm eyes Kenya base for cheap cars factory

Portugal-based auto-dealer is in talks with a Kenyan assembler to start local production of low-cost Hyundai and Renault brands for sale across East Africa.

Salvador Caetano Group said Thursday it is in discussion with unnamed local assembler as it seeks to enjoy the tax benefit that comes with assembling cars in Kenya.

Kenya Vehicle Manufacturer and Associated Vehicle Assemblers have been assembling locally for top brands like Mitsubishi, Scania, Tata Hino, Volkswagen and Toyota.

Caetano Kenya managing director Ezio Tuniz said the assembly of the two brands would ride on its recently launched Sh350 million Kenya subsidiary on Mombasa Road in Nairobi that comprises a showroom and an aftersales service bay.

“We are alive to the government’s policy that promotes local assembly and collaborations with small and medium enterprises. We are assessing the situation and will disclose our planned assembly plant investments in due course,” he said.

“Kenyans buy used family vehicles in large numbers due to their low pricing and we have done our assessment that will inform the low-cost vehicles that we will assemble locally.”

As a rule, Kenya exempts local vehicle assemblers from the 25 per cent import duty levied on fully-built imported vehicles. The incentive gives assemblers room to produce cheaper cars locally.

Kenya undermined what was once a thriving local assembly industry in the 1990s with policies that encouraged cheap second-hand imports. It is now seeking to attract manufacturers back to help create jobs and support growth.

French carmaker Peugeot and Germany’s Volkswagen recently resumed car assembly locally, joining other brands based in Kenya including Toyota, Nissan and Mitsubishi.

Isuzu East Africa and Toyota last year started local assembly of pickups — D-Max and Hilux models.

Official data shows that the number of locally-assembled vehicles last year increased 38 per cent to 7,802 units.

However, imports of 80,000 used cars each year still outstrip sales of new vehicles in Kenya.

Imported from Japan or the Middle East, the used cars offer an affordable route to vehicle ownership and have dominated the market for decades.

Volkswagen, BMW, Toyota, Nissan and others have joined forces to lobby African governments to adopt steps that would reduce the imports and allow local production to flourish.