26 February 2013

Kenya: Toyota in Heavy Vehicles Construction

Nairobi — Heated competition in the region's motor vehicle industry, especially the commercial segment, has forced auto giant Toyota to invest in new plants specifically for this segment.

Toyota will now start producing commercial buses and trucks, starting with a plant in Kenya in what is likely to spark off another war for the highly lucrative regional commercial vehicle segment.

Toyota's move just comes weeks after market leader in this category General Motors East Africa (GMEA) invested over $1.2 million in the expansion of its production plant.

Ordinarily, Toyota is known for its command of the salon cars market leaving the commercial segment to GMEA. however in the recent times, GMEA has also been seen making serious inroads in the salon cars segment with its brands such as Chevrolet and Isuzu. The entry of Toyota into the commercial segment therefore promises another round of cutthroat competition.

"Our entry into the commercial market portfolio has been on the cards for quite some time now. we will build on our huge success and market confidence in the pick-up and salon cars portfolio to beat sector competition," said Toyota's Mr Kazuhiko Watanabe.

One of the main advantages that give Toyota an edge over the rest in the market has been its relatively low pricing model. Whereas GM East Africa is looked at as relatively expensive given that it needs to recoup its local assembly costs, Toyota mostly import finished pieces and therefore lowers overhead costs involved.

The company also announced plans to set up manufacturing plants in Uganda and Tanzania over the next couple of years in what appears to be a well-drawn strategy to take back market share in what has recently been dominated by GM East Africa.

In Africa, Toyota has already established similar manufacturing plants in Morocco and South Africa where in the later, it has partnered with Busmark.

In Kenya, the company will be joining hands with Mombasa based Association of Vehicle Assemblers (AVA) in its engagement in the high capacity segment. The company looks at assembling 40 units every month with a sales target of 1,200 units annually by 2015.

The Kenyan government is currently encouraging most manufacturers to set up shop in Kenya as a way of addressing the runaway unemployment menace in the country apart from growing the countries manufacturing sector.

In doing this, the government has lined up a raft of incentives among them the 25 per cent tax cut on all Completely Knocked Down (CKD) imported for local assembly by motor vehicle manufacturers.

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