General Motors East Africa to Double Truck Output Based On Construction Boom

Posted on :Friday , 8th April 2016

NAIROBI (Reuters) - A construction boom in Kenya has fuelled a rise in commercial truck sales for market leader General Motors, which is investing $7.9 million in 2016 to upgrade its assembly plant in Nairobi and more than double output, a senior executive said on Thursday.

GM East Africa Managing Director Rita Kavashe said 20,000 new vehicles were sold in Kenya last year, the highest on record, and 98 percent of those were trucks and buses.

This reflected both the strong commercial sector as infrastructure projects take off, as well as the prevalence of second-hand passenger cars which dominate the clogged roads of the capital Nairobi.

"Three years ago we were producing about 10 vehicles and following upgrades and improvements, creating efficiencies has moved our production to about 22 vehicles a day," she told Reuters in an interview.

"We continue to improve our processes, so we should be able to comfortably get 25 vehicles a day by mid of next year."

The Nairobi plant, one of three GM manufacturing hubs in Africa, is geared towards the commercial bus and truck market and typically builds trucks weighing between 3.5 tonnes and 15 tonnes. GM also has a presence in South Africa and Egypt.

General Motors' total global vehicle sales were 9.8 million in 2015, up 0.2 percent in a third consecutive year of record sales.

Eighty percent of the vehicles sold in Kenya or around 80,000 cars a year are low-priced used vehicles.

"We are advocating for the reduction of age limits for second-hand vehicles to get away from complete dumping," she said.

At the moment only Kenya has a law limiting the age of cars, up to eight years, that can be imported although none of its East African neighbours have a similar law.

GM East Africa also sells its vehicle to markets in Tanzania, Uganda, Rwanda and Burundi - all members of trade bloc East African Community.

An excise duty of around $1,500 imposed by the government from the beginning of the year has helped curb some of the second-hand imports, but has also hurt the new vehicle market and was regarded as a "step backwards" as Kenya sought to become the main automotive hub for East Africa, she said.

Kavashe said the outlook for the market for this year has been tempered somewhat as higher interest rates hit consumers and government reprioritises project spending.

"We are seeing a decline in the auto sector, with January to March already we've seen a decline of 14 percent compared to last year," she said.

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