Local assemblers to bag 40pc government car lease orders

Corporate News

General Motors employees work on the body of a truck being assembled at the firm’s plant in Nairobi’s Industrial Area. The firm is among those expected to battle it out for the 40 per cent government car lease reserve. PHOTO | FILE 

By ANNIE NJANJA

In Summary

• The government will lease 800 more vehicles for the National Police Service in the financial year starting July as it strives to strengthen security operations in the country. An additional 500 vehicles will be leased in the year starting July 2016.
• The government in 2010 adopted the policy of leasing motor vehicles instead of buying outright to trim heavy upfront acquisition costs and check run-away maintenance costs.

Kenyan motor vehicle assembly firms will be guaranteed at least 40 per cent of the government’s annual car lease contracts, which could translate into lucrative deals for the car firms that stand to get orders running into hundreds of units every year.

The government in 2010 adopted the policy of leasing motor vehicles instead of buying outright to trim heavy upfront acquisition costs and check run-away maintenance costs.

The State leased nearly 3,000 vehicles last year, without discriminating on either locally assembled or imported units.

“The move is expected to encourage motor vehicle assembling, support growth of backward and forward industries, boost secondary market of vehicles and generate additional employment opportunities,” stated the Treasury in the 2015/16 budget policy statement released on Monday this week.

Local assemblers produced 7,936 cars in the year to November, up from 5,657 in the same period last year.

The Treasury says it will establish structures for motor vehicle fleet management to cover both leased and government-owned motor vehicles in the country.

The Kenya Vehicle Manufacturer (KVM)—assemblers of CMC and DT Dobie’s trucks and heavy commercial vehicles such as the Nissan double-cab pick-ups, Land Rover, Mazda, Iveco, and Mercedes Benz, Toyota Kenya, Associated Vehicle Assemblers (AVA) and General Motors East Africa (GMEA) are among local assemblers who will battle it out for the 40 per cent reserve.

The government will lease 800 more vehicles for the National Police Service in the financial year starting July as it strives to strengthen security operations in the country. An additional 500 vehicles will be leased in the year starting July 2016.

READ: Toyota Kenya wins Sh3bn police deal amid rivals' protests

The structure will ensure efficiency of government transportation, the budget policy statement by Treasury read in part.

Last year, the government, which accounts for a quarter of all new vehicle sales, leased 2,700 vehicles.

A total of Sh6.7 billion was spent on leasing vehicles and aircraft that various State agencies would have otherwise bought and maintained.
Toyota Kenya and CMC are the major car dealers who won the tender to supply the cars to the state.

Leasing allows a client to use a vehicle for a fixed period while paying monthly, quarterly or annual fees.

In the government’s case, the seller is expected to take care of maintenance. This helps users of the leased vehicles to avoid huge upfront capital expenditure that they would otherwise incur if they opted to buy.

The leasing programme is particularly expected to help the government expand the capacity of police officers to respond quickly and more effectively to reports of crime.