Chery Automobile is making moves to build an assembly plant in Kenya to tap East African demand and further strengthen Chinese links with the continent.
“They (Chery) are discussing with the Chinese government so that they can get some $50 million to invest in Kenya through an assembly plant,” said Mr Justus Nguu, the director of Stantech Motors, the Kenya franchise holder of Chery.
Their entry is set to loosen the stranglehold of Thika-based Kenya Vehicle Manufacturer, KVM, the Association of Vehicle Assemblers, AVA, Limited of Mombasa and General Motors East Africa, GMEA, who have come under the spotlight for possible involvement in anti-competitive market practices linked to sale of overpriced goods.
The new assemblers are looking to use Kenya as the launching pad for entry into the regional common market, reaffirming Nairobi’s position as East Africa’s economic hub.
The fragmented economies of the five East African countries had discouraged the auto dealers from setting up assembly plants, but the common market has made it possible for the dealers to capture a region of more than 130 million residents.
So far, the auto dealers ship in built vehicles in what has denied them room to lower prices because of high freight and duty charges.
Duties on locally assembled units are zero per cent against 25 per cent for fully built units.
The truck business is dominated by established players CMC Holdings and the Kenyan unit of General Motors. Chery Automobile, which started selling cars overseas in 2002, and is now China’s biggest auto exporter, aims to set up its plant next year after tasting the market by venturing into Kenya in 2010 through a franchise.
The firm sold a modest 120 cars last year, but aims to produce 1,000 units in 2013 at its plant which will serve Kenya, east Africa’s biggest economy, and other countries in the region. Chery Automobile, China’s largest indigenous car maker, aims to increase auto exports by over 30 percent this year to 120,000 vehicles.
The firm targets developing nations in Southeast Asia, Middle East, South America and Africa. Chery operates 16 assembly plants overseas.
Analysts said proximity to growing markets was the key driver for the firms planning to set up in Kenya.