VW rolls into Kenyan market with high hopes
VOLKSWAGEN (VW), which is establishing a car assembly operation in Kenya, believes the Kenyan passenger car market will within 10 years match the size of the current South African car market.
VW South Africa’s chairman and managing director, Thomas Schaefer, said annual new vehicle sales in Kenya totalled about 19 000 new vehicles, of which 3 000 were passenger cars while about 360 000 cars would be sold in the South African market this year.
The VW Group announced last month that it planned to further expand its production presence in Africa by commencing the assembly of the Polo Vivo in Kenya by the end of this year, using vehicle kits exported to Kenya from its Uitenhage plant in South Africa.
Schaefer said production of the Vivo would commence on December 22, but the plant would halt production the next day and commence full production from January.
He said VW had promised the Kenyan government it would commence production this year and would honour that commitment. Schaefer said they were planning to produce 1 000 cars in the first year.
VW last year launched a semi-knocked down (SKD) assembly operation in Nigeria.
Leading role Schaefer said Kenya could possibly play a leading role in the car market in east Africa, with production focused more on the lower end of the car market.
He said it would be wrong to “get hung up” with the average per capita income in Kenya and other African countries because there was a “pretty rich middle class that can afford a car”.
Schaefer said DT Dobie, VW’s importer and general distributor in Kenya, owned a 30 percent shareholding in Kenya Vehicle Manufacturers, a multiband assembly facility that would assemble the Vivo on a contract basis.
He described the assembly project in Kenya as “an industrial experiment” that would be managed by VWSA.
‘We realised that it was much more important for us… than the guys in Wolfsburg.’
“We realised it was much more important for us to make it successful than the guys in Wolfsburg (VW head office). They can do 1 000 cars in a day so it’s not really important for them. But for us, it’s our future and it’s important we make it successful,” he said.
Schaefer highlighted two important issues if VW’s production volumes were to increase in Kenya, the imposition of restrictions on used car imports and the availability of vehicle finance.
He said the Kenyan government had started restricting used car imports to seven-yearold vehicles, while other African countries still allowed 15-year-old imports.
“Kenya has a plan to push it year by year to younger vehicles and with that you automatically increase the new car market,” he said.
High inflation Schaefer said only about 5 percent of vehicle sales in Kenya now and 0 percent in other African countries were financed because of high inflation and about 80 percent of the population did not have an address.
He said the Kenyan government was working on attracting vehicle financiers into the market. Schaefer stressed that when vehicle finance was available, buyers would not have to fork out $15 000 (R209 422) or $16 000 for a car but pay $1 000 or $800 a month.
He added that the Kenyan government was in a dilemma because it could not restrict used car imports completely because it was the only cheap source of supply for mobility.
Schaefer said there was no local manufacturing that could replace used car importation and they had to phase it out, with new cars produced eventually being the source of supply to the used car market.
Bloomberg reported yesterday that a group of carmakers led by executives from Ford Motor and Nissan Motor would seek to work with Kenyan authorities to develop an automotive manufacturing industry in the east African country, building on talks with Nigerian legislators about their own market.