Kenya's motor vehicle assembly industry outlook

The motor vehicle assembly industry in Kenya has seen its fair share of challenges in recent years, with a significant drop in sales recorded in 2016. According to reports, motor vehicle sales plummeted by 30.6 percent to 13,535 units in that particular year, leading to a dip in sales for most dealers and assemblers in the country. Despite these challenges, the industry continues to attract a considerable amount of investor interest, with global motor manufacturers like Peugeot and Volkswagen setting up assembly plants in Kenya. Rita Kavashe, the Managing Director at General Motors East Africa, provided insights into the current trends and outlook of the industry in a recent interview. General Motors East Africa has maintained a long-standing presence in the region, with a commitment to long-term investment despite the temporary setbacks faced by the industry. Kavashe highlighted that the company remains optimistic about growth prospects in the region and continues to invest in the market. The challenges faced by General Motors East Africa in 2016 were attributed to several factors. The general economic slowdown in the region affected the uptake of business, particularly in construction, retail, and SME sectors. Additionally, the introduction of a 20% excise tax on locally assembled vehicles caused customers to delay purchases, awaiting government decisions on the regulation. However, Kavashe expressed satisfaction that the issue was resolved swiftly, enabling the company to provide customers with competitive pricing and necessary support for business growth. One of the major hurdles experienced towards the end of the year was the capping of interest rates, which impacted the company's ability to access financing for its customers. Kavashe highlighted that 85% of the business conducted in the region is reliant on bank finance, and the reduced appetite of banks to offer credit post the interest rate cap posed a significant risk to the business. Moving forward, General Motors East Africa is focused on collaborating with financial institutions to ensure continued access to credit for its customers. The company is exploring innovative solutions, including structuring deals with banks and streamlining after-sales support mechanisms to reduce operational costs for customers. Despite the challenges, the brand remains committed to serving its clients even in the face of limited credit access. In response to emerging competition in the light bus and commercial vehicle segment, General Motors East Africa emphasized its market leadership in the bus business and identified growth opportunities in the sector. The company aims to leverage partnerships with investors and the government to accelerate initiatives like the Bus Rapid Transit (BRT) system, promoting efficient and sustainable public transportation. Kavashe highlighted the vast potential in the bus business and the importance of collaboration to tap into opportunities available. Encouraging individual consumers to opt for new vehicles in a challenging economic climate remains a priority for General Motors East Africa. The company is focused on educating consumers, particularly in the middle-class segment, on the value of owning a new vehicle with benefits like warranty coverage and maintenance support. By introducing new products and financing options, General Motors East Africa aims to attract more customers to shift from secondhand vehicles to brand new models. The company's strategy includes offering maintenance packages as part of financing deals and extended financing periods to ease the financial burden on customers. Leasing arrangements have proven to be beneficial for General Motors East Africa, creating a pool of locally assembled products tailored for the Kenyan market. Leasing not only ensures a better customer experience with regularly serviced vehicles but also reduces downtime and operational costs. Customers benefit from the flexibility of payment schedules, allowing them to allocate funds to other business activities. Overall, leasing has been a positive element in the company's business model, contributing to the growth of the secondhand vehicle market. As General Motors East Africa navigates the challenges and explores opportunities in the motor vehicle assembly industry, the company remains dedicated to innovation, collaboration, and customer education to drive sustainable growth in the market.