Nairobi — Simba Corporation, a closely held Kenyan company, is in talks with four vehicle makers, including France’s Renault, about assembling their vehicles in East Africa’s biggest economy.
The manufacturers are looking to tap demand in an industry that’s expected to grow 15% this year, CEO Adil Popat said in an interview in the capital, Nairobi, on Wednesday. Another of the companies interested in making its vehicles in Kenya is Mahindra & Mahindra of India, he said, declining to identify the other two.
The four incoming firms would add to the growing number of car manufacturers targeting Kenya after Volkswagen (VW), Peugeot, CNH Industrial and Nissan Motor announced plans for assembly lines in the country in the past 18 months.
Vehicle production is expected to expand more than 14% annually over the next four years, driven by expanding domestic demand and improving export opportunities, Fitch Group’s BMI Research said in January.
The vehicle makers are looking for assurances from Kenya’s government on tax incentives and a commitment to gradually phase out imports of second-hand vehicles to guarantee the viability of local assembly. “It’s a volume business,” Popat said. “We need to commit numbers.”
A spokesperson for Renault declined to comment and Mahindra didn’t immediately respond to e-mailed questions.
New policy
Kenya’s industry ministry is currently considering a new-vehicle policy that stipulates tax breaks and age limits for imported used cars. Simba expects the new legislation to be in place by the end of the year, Popat said.
Simba owns the Mombasa-based Associated Vehicle Assemblers, a contract assembly plant that produces light and heavy trucks for companies such as Toyota Motor and Hino Motors of Japan, Tata Motors of India and South Korea’s Daewoo.
New-vehicle sales slumped 20% to 11,044 in Kenya in 2017, when a dispute over the outcome of an August presidential election and a re-run in October ground the economy to a halt. While the market has got off to a “slow start”, sales are expected to pick up, driven largely by government orders, Popat said.
Simba’s automotive division makes up 85% of the company’s total revenue, Popat said. The unit includes Simba Colt Motors, which holds the franchises to sell vehicles brands including Mitsubishi Fuso, Mahindra, Renault and BMW. Other divisions are leasing, real estate, and hospitality, where it owns the Kempinski franchise.
Popat said plans to list Simba on the Nairobi bourse are still part of its strategy and will be clearer once an ongoing restructuring of the business is completed by the end of this year.
Bloomberg