The government has rolled out the Kenya National Automotive Policy to revitalize the automotive industry by promoting local assembly and manufacturing.
Trade Cabinet Secretary Lee Kinyanjui says the policy was deliberately tailored to gradually reduce the over-reliance on imported used vehicles.
He expressed optimism that the local automotive industry is headed for better times after the state introduced incentives and tax regulations that were favorable to stakeholders in the local market.
“Interventions such as the duty remission scheme that will now regulate importation of some automotive parts such as batteries, radiators, and brake fluids will go a long way in boosting local industries,” he said.
According to the Cabinet Secretary, this will enhance the use of locally manufactured parts, hence promoting the manufacturing sector in the country.
Mr. Kinyanjui pointed out that the newly approved Kenya National Automotive Policy was a significant step towards transforming the country’s automotive industry.
By focusing on local manufacturing, promoting cleaner vehicles, and fostering a thriving ecosystem, the Cabinet Secretary indicated that the policy aims to create a more sustainable and prosperous automotive sector.
He stated that the government was planning to raise a bond in Japan, which will be restructured so that at least Sh13 billion from the total amount will be used to promote growth of the local automobile industry by availing affordable credit facilities to local players.
Mr. Kinyanjui noted that players in the automobile industry in Kenya who have the capacity to locally manufacture tires, tubes, batteries, windscreens, oil filters, gaskets, bushes, suspension springs, seats, seat belts, oil seals, air cleaner elements, shocks, spark plugs, and mats, among other accessories, will be eligible for funding.
The Cabinet Secretary affirmed that to support the establishment of a local robust automobile industry, the government was fostering a stable policy framework, endorsing business-friendly tax regimes, enhancing the security of businesses and investors, and investing in infrastructure such as roads, water supply networks, and reliable power supply systems.
Mr. Kinyanjui said government interventions in shoring up the automobile industry were targeted at reaping significant dividends in areas of employment creation, technology transfer, and contribution to the gross domestic product.
“The economy is expected to greatly benefit from government incentives in the sector through direct injection of cash and creation of additional employment for local automobile assembling firms and suppliers of parts and accessories to the assembly plants,” explained Mr. Kinyanjui.
He pointed out that local assemblers are also enjoying import and excise duty exemptions for the semi-knockdown kits to promote local assembling.
The local automotive assembly has an installed capacity to assemble 46,000 units annually.
“We need to support the growth and development of local automobile assembly plants and spare part manufacturing entities. Local assembling will also create jobs and enable the transfer of skills,” Kinyanjui stated.
The CS who spoke at the Kenya Industrial Training Institute (KITI), in Nakuru, noted that Kenya was rolling out thousands of graduates annually who would help shape the country’s industrial revolution and innovations.
TVETs, he noted, stand as the launchpad for skilled makers, creators, and problem solvers, the very engine that powers our manufacturing and industrial growth.
He urged artisans to use their skills to build industries, innovate boldly, and write Kenya’s next success story, adding that the future was industrial and dependent upon their creativity.
The Cabinet Secretary said that the automotive industry has been a pillar of industrialization for many economies and a key driver of macroeconomic growth and technological advancement.
Imported vehicles, including the second-hand ones, he noted, attract between 25 percent and 35 percent duty.
Another upswing of this was the creation of additional employment for local suppliers of parts and accessories to the assembly plants.
Current official data shows that Kenya imports an average of 7,600 second-hand vehicles per month, with the average number of assembled units standing at about 430.
Mr. Kinyanjui stated that widespread use of second-hand spare parts in the country was mainly due to non-availability of new parts locally and rampant use of counterfeit and substandard spare parts.
He indicated that the automotive industry has a long value chain, creating both backward and forward linkages.
The backward linkages, he explained, include the design and manufacture of vehicle bodies and other components, besides the fact that the automotive industry consumes steel, iron, aluminum, plastic, glass, carpeting, textiles, computer chips, rubber, and much more.
Mr. Kinyanjui further observed that the industry creates forward linkages through vehicle dealers, garages, leasing firms, insurance firms, and financial institutions, among others.
He urged local assemblers of automotives to utilize locally assembled parts to spur growth in the sector and generate jobs.
Overreliance on imported spare parts, stated the Cabinet Secretary, had constantly diluted growth in the automotive sector, inhibiting the intended impact on the economy.
He, however, said the future was bright after the National Government approved the National Automotive Policy.
The policy is designed to support the growth and transformation of the automotive industry in Kenya into a significant contributor to the national GDP under manufacturing.
“Kenya’s automotive sector is experiencing a significant transformation as technology, environmental priorities, and economic development intersect. To monitor, moderate, and boost this transformation, the National Automotive Policy was proposed and approved to promote automotive manufacturing in Kenya,” Kinyanjui explained.
The policy also aims to drive employment generation and skills development. Statistics from other countries show that local assemblies create more formal jobs on average compared to vehicle import trades, thereby increasing employment opportunities ten-fold across the industry value chains.
“With the Automotive Policy, the automobile industry has the potential to create over 200,000 jobs in Kenya directly or indirectly if the right investment environment is put in place.
When we add manufacture of spare parts to local assembly vehicles, we create formal, quality,the manufacture and meaningful jobs where employees can afford to pay taxes and technology transfer,” noted Mr. Kinyanjui.
The Kenya National Automotive Policy aims to revitalize the automotive industry by promoting local assembly and manufacturing, gradually reducing reliance on imported used vehicles.
This includes a shift towards Complete Knocked Down (CKD) assembly, with the goal of creating jobs and fostering economic growth. The policy also addresses environmental concerns, setting standards for emissions, promoting green initiatives, and enhancing the adoption of environmentally friendly practices.
The policy further aims to support the development of infrastructure needed for the automotive industry, including parts manufacturing.
“Kenya is an advanced economy that can draw a niche in this sector given the level of technology advancement and years of experience in the sector.
As of now, Kenya is only involved in automotive assembly on behalf of Original Equipment Manufacturers (OEMs) such as Toyota, Volkswagen, and Nissan.
by Jane Ngugi and Dennis Rasto
