Volkswagen hastens to produce cars in Rwanda

A Volkswagen production line at the Kenya Vehicles Manufactures (KVM) in Thika. The German carmaker plans to spend $20m in new plant and ride-hailing service in Rwanda. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• Cargo clearance, lack of experts delaying plans to set up Kigali plant.
• Volkswagen had hoped to establish the facility in Kigali by June and committed to spend $20 million in the first phase of the production line.
• The carmaker hopes to assemble its first vehicle by the end of June.

By IVAN R. MUGISHA
More by this Author

Delays in cargo clearance and lack of experts have hampered German carmaker’s plans to set up an assembly plant in Rwanda.

Volkswagen had hoped to establish the facility in Kigali by June and committed to spend $20 million in the first phase of the production line.

But with barely a month to the target date, the firm, which has so far spent $6 million on the plant since January, says Custom authorities have been slow to clear machines and equipment it imported.

“We have super support from the government but we have had trouble trying to get the things cleared from customs. Some of the work took longer than we anticipated so this caused delays,” Thomas Schafer, the CEO of Volkswagen South Africa told The EastAfrican at the sidelines of the ongoing Transform Africa 2018 Summit in Rwanda.

“On top of that, everything is so new and most of the people that were dealing with it did not know how it works. But we are pushing like crazy to have this done.”

The carmaker hopes to assemble its first vehicle by the end of June.

The models it plans to make are the Polo and Teramont SUV under its ‘Think Blue’ concept for low emissions cars.

Asked about the unit price, Volkswagen has been coy only saying it will prioritise its new ride-hailing model in Kigali.

The carmaker plans to operate about 150 vehicles for car pooling through the online taxi app that resembles the Uber taxi services in Kenya, Uganda and Tanzania.

“It is not just about the purchase price of the vehicle. First of all we are looking at ensuring that we have everything in place that is important for a vehicle owner, such as availability of spare parts and quality servicing. It means nothing when you sell a car and after two or three years you sell it off because you cannot use it,” Mr Schafer said.

“The most important aspect of the assembly plant is the mobility service, including car sharing. This is the priority that we believe will give people the ability to access the vehicles.”

Pricing

According to industry sources close to the Volkswagen deal who spoke to The EastAfrican, the unit price could be between Rwf15 million ($17,500) and Rwf20 million ($23,300).

The price, stemming from high production costs, is likely to limit Volkswagen exporting the vehicles outside the region, the sources said.

In Kenya, Volkswagen is assembling the Polo Vivo at the Thika Vehicle Manufacturing Plant since September 2016.

The carmaker unveiled its first locally assembled vehicle, retailing at $16,400, in December the same year.

Last year, Volkswagen sold 116 units from its Thika plant, and is now exploring the introduction of a new model, as well as doubling production of the Polo Vivo to about 300 vehicles this year.