Used motor vehicles from Japan on sale at a yard in Mombasa. East Africa
spent some $2 billion to import used motor vehicles over the past three
years. FILE PHOTO | NATION
Harmonisation of an age limit for imported vehicles and
development of automotive plants in East Africa has been suspended on
recommendation of a study conducted by the EAC and Japan International
Co-operation Agency.
According to the study, it would
be difficult to undertake the harmonisation without reducing the number
of used vehicles imported by the partner states. It would also make it
difficult for an assembly plant to thrive and compete.
Harmonising age limit of car imports
Although
the EAC Committee on Industrialisation had recommended harmonising the
age limit of car imports at eight years, partner states have asked for
more time to consult.
The study recommends that the
region should first determine its ability, capacity and ways of
producing low-cost utility vehicles.
It adds that the
EAC does not have to develop full spectrum capacity to produce a
complete home-grown motor vehicle, rather, it should put in place a
well-designed and phased strategy to manufacture some car parts where
competitive advantage exists.
Once it has developed such competence, it can move towards production of a full motor vehicle.
The
report adds that partner states should consider having a national
consultation so that various public and private sector agencies can
determine and agree on cross-cutting issues in the sector, including
financing.
In addition, further analysis of what the
region’s entry point: Will it be motorcycles or reconditioning and
assembly of used cars, like the United Arab Emirates does or would it be
assembly of new motor vehicles.
The study involved
research, consultation and interviews with experts in countries that
already have motor-vehicle assembly plants, including Ethiopia, Egypt,
South Africa, Vietnam, Thailand and Nigeria, as experts draw up a
strategy-policy mix that can be adopted in the EAC.
Manufacturing plants
Ethiopia
for example created an engine and body manufacturing plant, known as
the Bushoftu Automotive Industry at a military base in Mekele, 768Km
north of the capital Addis Ababa, and expected to produce 10,000 to
20,000 vehicles annually, generating $96 million annually.
The
EAC’s motor industry largely comprises imported cars, with no
significant manufacturing activity. The average cost, insurance and
freight of imported motor vehicles in the last three years was about $2
billion.
This comprised of $900 million for Kenya, $493
million for Uganda, $537 million for Tanzania and $80 million for both
Rwanda and Burundi.
Kenya is the region’s leader in
motor vehicle assembly, boasting a fairly well developed industry with
three plants - Kenya Vehicle Manufactures in Thika, Association of
Vehicle Assemblers in Mombasa and General Motors East Africa in Nairobi.
The three plants focus on assembly of pick-up trucks and heavy
commercial vehicles.
In Uganda, Kiira Motors Corporation recently unveiled its Kayoola prototype electric bus in Kampala. It hopes to manufacture all the parts and assemble the bus locally by 2039.
No common standard
Currently,
there is no common standard in the EAC motor vehicle assembly sector.
Parts used in the sector are exempt from the 25 per cent import duty
levied on fully built-up cars. Most importers bring in cars from Japan,
Singapore, the United Kingdom, South Africa and the United Arab
Emirates.
There has also been a push for harmonisation
of valuation of used motor vehicles in order to rid the market of
over-age vehicles. In December 2013, the EAC agreed on a harmonised
methodology for determining the Customs value for used motor vehicles.
The system will address prices of brand new vehicles, a depreciation schedule, freight, and insurance.
The policy is yet to be effected.
The policy is yet to be effected.
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