Kenya’s automotive industry is on the verge of significant transformations following the passage of the National Automotive Policy (NAP) by the National Assembly in November of last year, three years after its introduction.
The main objective of the National Automotive Policy (NAP) is to establish a favourable environment in the automotive sector and position Kenya as a regional hub for vehicle and part manufacturing.
In an interview with AutoNews Magazine, George Makateto, the Director of the State Department for Industrialisation, stated that NAP aims to promote local assemblers and part manufacturers while preparing the industry for the global market.
“This policy obligates the government to provide necessary support to the local automotive industry. Through it, the government commits to creating a favourable and sustainable environment for vehicle manufacturing and assembly in Kenya,” he added.
Currently, new vehicle dealers in Kenya operate in a market dominated by used imported units entering the country.
Makateto pointed out that NAP will help regain Kenya’s lost glory as a new vehicle market. In the 1980s, Kenya had the capacity to produce 13,000 vehicles per year and had established a thriving parts manufacturing infrastructure. The production of the Nyayo Car in 1987 marked a significant milestone in the automotive industry.
However, today the market is heavily skewed toward used imported cars, which account for more than 85% of all car sales in Kenya. Makateto claims that this situation began in the 1990s after Kenya liberalized its economy and opened the industry to used imported vehicles.
“Local assemblers lost business. Almost all assemblers are currently operating below capacity. They produced approximately 7,000 units in 2019 against an installed capacity of 34,000. The government aims to rectify this situation,” the Director stated.
The reliance on imported units has detrimental effects on the economy. Firstly, vehicles are expensive to maintain due to frequent repairs. Secondly, it hampers domestic manufacturing, denying Kenyans employment opportunities. Thirdly, vehicle importers contribute to an annual drain of Kes 60 billion in foreign exchange resources.
“A vibrant local automotive sector will create jobs and reduce forex losses,” Makateto said. According to data, Kenyans annually import enough vehicles to sustain the local industry. “Once implemented, NAP will spur tremendous growth in the manufacturing sector.”
Establishment of the National Automotive Council
To realize the envisioned growth, the government proposes the formation of a National Automotive Council that will facilitate industry growth and development. This council will shape national automotive policies and handle matters related to the manufacturing and assembly of motor vehicles, motorcycles, tractors, and automotive parts.
The Council, as outlined in NAP, will include members from the government and local automotive sector stakeholders.
However, more support is needed. The government has already implemented measures to promote local vehicle assembly lines with a particular emphasis on the production of commercial vehicles such as buses, trucks, and minibuses. A ban on the importation of these categories of vehicles has already been put in place, with some exemptions.
Furthermore, the government has established vehicle purchase schemes with assembly firms. NAP directs government agencies to “support and collaborate with stakeholders” to enable individuals and businesses to purchase new locally assembled vehicles.
The government has also committed to supporting a leasing policy for the public sector to increase access to new vehicles manufactured in the country. It also encourages automakers and new vehicle dealers to “establish standards for after-sales service, maintenance, and repairs, as well as accredit garages to provide these services.”
Makateto believes that the automotive industry has the potential to industrialize Kenya, citing direct job creation as one of the country’s key benefits. He also noted that new vehicles require less maintenance than used imported units.