Corporate News
By VICTOR JUMA
In Summary
Motor dealer DT Dobie is set to start assembling
Volkswagen (VW) vehicles including saloon cars and light trucks at the
Thika-based Kenya Vehicle Manufacturers plant.
The company, which took over the VW franchise from CMC
Holdings, has been importing the German vehicles fully built from
markets like South Africa.
Volkswagen South Africa CEO Thomas Schafer said the
German multinational will later this year start assembling some of its
models at KVM, having stopped local assembly in the 1970s.
“We were in Kenya in the 1960s and 70’s and
resuming operations here is part of our Africa strategy,” Mr Schafer
said in a statement. “The Volkswagen Group is excited to be here and we
will start operations immediately.” Mr Schafer signed an agreement with
President Uhuru Kenyatta to launch VW’s local assembly at KVM where the
government has a 35 per cent stake.
DT Dobie is a 32.5 per cent shareholder of the Thika assembly plant while CMC Holdings’ stake stands at 32.5 per cent.
Among the VW models to be assembled are light
trucks and Vivo, a passenger car which will be the first to be put
together locally. “I am happy to welcome back the Volkswagen Group,
currently the largest car manufacturer in the world, back to Kenya,” Mr
Kenyatta said in a statement.
The German automaker used to operate in Kenya until 1977.
20 per cent excise tax
It used to assemble Volkswagen vans, microbuses and
the famous Kombi. Local assembly is largely boosted by the exemption of
vehicle parts headed for assembly plants from the 25 per cent import
duty levied on fully-built cars, resulting in a price advantage.
Dealers say the recent move by the government to
scrap a 20 per cent excise tax on locally assembled vehicles could see
an increase in local production.
The Kenya Revenue Authority (KRA) had started
collecting excise taxes from KVM, General Motors East Africa (GMEA) and
Associated vehicle Assemblers (AVA) for the first time last year at a
flat rate of Sh150,000 per vehicle.
The levy was raised to 20 per cent of a vehicle’s
value in June, sparking protests from the assemblers who said the move
had led to job cuts and reduced sales as prices of pick-ups, buses and
trucks went up by between between Sh231,000 and Sh1.2 million. Mr
Kenyatta said his administration is committed to growing Kenya’s
industrial base through investing in infrastructure and enacting
progressive policies.
Kenya, however, still trails major markets like
South Africa that has developed a vibrant automotive manufacturing
industry on a raft of incentives and a large internal demand for new
vehicles.
The incentives in South Africa include a
non-taxable cash grant of 20 per cent for assemblers/manufacturers and
25 per cent for component producer and tooling companies on the value of
qualifying investment.
An additional non-taxable cash grant of five per cent
is given to firms maintaining their base year employment figure. South
Africa requires companies to achieve a minimum annual output of 50,000
units or a turnover of R10 million (Sh70 million) to qualify for the
incentives.
The incentives have seen South Africa produce more than
600,000 vehicles annually – 60 times Kenya’s output — and sell to the
domestic market and tens of other African countries.
Ethiopia has also announced a number of incentives,
including tax breaks, in an ambitious plan to build its vehicle
assembly industry for internal sales and exports.
vjuma@ke.nationmedia.com
vjuma@ke.nationmedia.com
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